BDM bonuses vanish as fund flows dry up… but not in every sector

Not all fundies are bringing home a smaller bonus this year, according to Kaizen, with BDMs in the alternatives space doing better than those in the more traditional equities and fixed income asset classes. The big trend, however, is that the most in-demand BDMs are now the ones that can sell to investment consultants as well as advisers.

While distribution professionals remain well paid, many are struggling to bring in enough capital to secure big bonuses according to new data from financial services outfit Kaizen Recruitment.

Business development management across the investment spectrum remains a relatively lucrative profession in Australia, with a retail head of distribution earning a gross salary of up to $280,000 to $350,000 (including super). An institutional head of distribution, charged with bringing in higher levels of capital, earns a base salary of between $330,000 and $450,000.

A mid-weight retail business development manager (BDM) earns between $160,000 and $190,000, with their institutional counterpart taking home between $170,000 and $200,000 according to Kaizen’s Funds Management Distribution Salary Guide Market Update 2024.

Even the first rung on the ladder – a junior BDM associate – earns a robust $75,000 to $90,000 (retail) or $80,000 to $100,000 (institutional), the report states.

While the base salaries look attractive, however, most BDMs receive a large part of their remuneration – up to 100 per cent of their standard salary – in the form of bonuses, but only if fund flow targets are met.

Those targets are now being met with less frequency as pockets of the industry, in particular equities and fixed income managers, wrangle with decreased flows due to lagging performance, increased competition from low-cost exchange-traded funds, and the general move towards internalised investment teams at superannuation funds.

“External market pressure on funds management firms, especially those with traditional strategies, has [made it] tough to raise capital,” the report states. “We noted a trend where several distribution professionals, unfortunately, were not able to meet their targets, hence bonuses in some cases have not been as lucrative as previous years.”

Kaizen says there has been a tilt towards alternative strategies this year, with BDMs operating in this sector having more success in reaching their bonus benchmarks. “Despite the challenges, quite a few distribution professionals that received 80 per cent to 100 per cent of their base salary as a bonus in 2024, although this was reflective of high performing funds and alternative strategies in private markets.”  

Total remuneration packages have been much more inclined to increase for BDMs in the alternatives space than elsewhere according to the report’s author, Kaizen associate director Jack Brown.

“Some salaries have gone up ten to twenty per cent, but it’s been a really tough market for equities and fixed income managers so the increases aren’t really happening there, especially in the institutional market where investment teams are being internalised.” he tells The Inside Adviser. “The growth in FUM and salaries is more so happening in private credit and other sectors in the alternatives space.”

The new captains of capital

Part of the reason fund management teams in traditional sectors like equities are experiencing decreased flows is that the capital allocation decision-makers are less and less likely to be the financial advisers that they have existing relationships with.

With the advent and popularisation of managed accounts, it is the investment consultants that sit on investment committees and decide which funds to put into model portfolios, rather than the financial advisers, that BDMs need to sway.

This development is also affecting the way that fund managers recruit according to Kaizen, with many firms actively looking to hire BDMs that have the experience, contacts and gravitas to specifically target investment consultants and researchers.

Brown says there has been a “sharp rise” in engagement with asset consultants for BDMs in both the wholesale and retail distribution channels.

“There’s a real need for consolidation in that space,” Brown tells The Inside Adviser. “We’re seeing fund managers actually employing BDMs to target asset consultants, especially in the wholesale space, because there are so many asset consultants that hold influence over dealer groups.

“It’s not so much a factor in the institutional space,” he continues, “because a lot of the funds are internalising their investment teams now. But definitely in the wholesale and retail sectors it is the asset consultants that hold influence over what goes in the model portfolios so they’re the ones that fund management teams want to connect with.”