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Equipment Finance Industry Compensation Continues to Rise
Compensation in the equipment finance industry increased in 2014, representing the fifth consecutive year that the industry has seen a year-over-year increase in overall compensation. Although the increase was modest, according to the 2015 Equipment Leasing and Finance Compensation Survey from the Equipment Leasing and Finance Association (ELFA) and McLagan, the steady annual rise in pay also parallels a fifth consecutive year for year-over-year increase in new business volume, which is linked to the increase in overall compensation.
The Survey measures compensation rates for the 2014 fiscal year as reported by more than 70 equipment finance companies representing a cross section of the equipment finance sector, including independent, bank and captive leasing and finance companies. Firms provide data for more than 90 executive, front-office and support positions, including a breakdown of salary (for 2014 and 2015), incentives (including cash bonuses and commissions), long-term awards and total compensation by company type. The survey is a collaborative initiative between ELFA and McLagan, a performance/reward consulting and benchmarking firm for the financial services industry.
Highlights from the 2015:
Total Compensation
On a “same-store” basis (constant incumbents in multiple survey years), total compensation was up 3% at median for key origination functions from 2013 to 2014. Infrastructure (middle- and back-office staff directly supporting the equipment leasing and finance sector) received comparable increases at ~2% of the median. Notably, the direct origination function fared better than the other functions with the highest total compensation increases. There were meaningful differences by firm, function and individual due to the impact of firm, divisional and individual performance and competitive compensation positioning. For example, the “head of” position experienced the greatest year-over-year variability, with many individuals receiving decreases of ~10%, while others received increases of ~7%.
Salary
Salary budgets remained very tight across financial services, including the equipment leasing and finance sector. Across the sector, salaries increased by only 2.8%, with larger increases granted to infrastructure staff vs. originators.
Differences by Firm Type
Generally, banks awarded higher levels of compensation relative to captives and independents. At more junior levels in infrastructure and origination roles, however, total compensation and salary rates tended to be comparable (' 5%).
Long-Term Award Eligibility
The majority of firms in the study had long-term award programs ( e.g. , restricted stock, deferred cash) in addition to annual cash incentives. On a firm-by-firm basis, ~70% of banks paid long-term incentives, significantly higher than ~60% of captives and ~30% of independent firms.
Supporting Data
In support of the industry's compensation growth, the ELFA notes that in 2014 cumulative new business volume rose 8% over 2013 according to the ELFA's Monthly Leasing and Finance Index (MLFI-25). Overall, U.S. commercial lending performed well in 2014, with top-line originations rising for C&I, equipment leasing and finance, commercial finance and commercial real estate finance. Nonetheless, the banking sector continued to experience pressure from the low interest rate environment, which put pressure on margins, and from regulatory scrutiny, which resulted in increased compliance costs and litigation expenses. Despite an increase in loan loss provisions, overall portfolio quality remains strong as measured by the low levels of net charge-offs.
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Compensation in the equipment finance industry increased in 2014, representing the fifth consecutive year that the industry has seen a year-over-year increase in overall compensation. Although the increase was modest, according to the 2015 Equipment Leasing and Finance Compensation Survey from the Equipment Leasing and Finance Association (ELFA) and McLagan, the steady annual rise in pay also parallels a fifth consecutive year for year-over-year increase in new business volume, which is linked to the increase in overall compensation.
The Survey measures compensation rates for the 2014 fiscal year as reported by more than 70 equipment finance companies representing a cross section of the equipment finance sector, including independent, bank and captive leasing and finance companies. Firms provide data for more than 90 executive, front-office and support positions, including a breakdown of salary (for 2014 and 2015), incentives (including cash bonuses and commissions), long-term awards and total compensation by company type. The survey is a collaborative initiative between ELFA and McLagan, a performance/reward consulting and benchmarking firm for the financial services industry.
Highlights from the 2015:
Total Compensation
On a “same-store” basis (constant incumbents in multiple survey years), total compensation was up 3% at median for key origination functions from 2013 to 2014. Infrastructure (middle- and back-office staff directly supporting the equipment leasing and finance sector) received comparable increases at ~2% of the median. Notably, the direct origination function fared better than the other functions with the highest total compensation increases. There were meaningful differences by firm, function and individual due to the impact of firm, divisional and individual performance and competitive compensation positioning. For example, the “head of” position experienced the greatest year-over-year variability, with many individuals receiving decreases of ~10%, while others received increases of ~7%.
Salary
Salary budgets remained very tight across financial services, including the equipment leasing and finance sector. Across the sector, salaries increased by only 2.8%, with larger increases granted to infrastructure staff vs. originators.
Differences by Firm Type
Generally, banks awarded higher levels of compensation relative to captives and independents. At more junior levels in infrastructure and origination roles, however, total compensation and salary rates tended to be comparable (' 5%).
Long-Term Award Eligibility
The majority of firms in the study had long-term award programs ( e.g. , restricted stock, deferred cash) in addition to annual cash incentives. On a firm-by-firm basis, ~70% of banks paid long-term incentives, significantly higher than ~60% of captives and ~30% of independent firms.
Supporting Data
In support of the industry's compensation growth, the ELFA notes that in 2014 cumulative new business volume rose 8% over 2013 according to the ELFA's Monthly Leasing and Finance Index (MLFI-25). Overall, U.S. commercial lending performed well in 2014, with top-line originations rising for C&I, equipment leasing and finance, commercial finance and commercial real estate finance. Nonetheless, the banking sector continued to experience pressure from the low interest rate environment, which put pressure on margins, and from regulatory scrutiny, which resulted in increased compliance costs and litigation expenses. Despite an increase in loan loss provisions, overall portfolio quality remains strong as measured by the low levels of net charge-offs.
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