Code Updates: Balanced portfolio set to default investment type.

Following feedback from users, we previously created a new savings vehicle option when using Career earnings/Profile mode called ‘Balanced Portfolio’.

For those individuals who have a net worth over 1m, it is likely they will invest in a diversified portfolio as opposed to holding all of their wealth in one asset class (such as cash).

Following research we have established a typical asset allocation for wealthy individuals and created a proprietary returns profile that better reflects the returns that an individual with a diversified portfolio receives. We have called this “Balanced Portfolio”

Following additional research and feedback we feel this is the most applicable default investment type for all prospects. This has now been updated to be the default investment type in career earnings and profile mode.

You can still tailor your results by changing the investments type to the other options (such as property, bonds, equity etc) where required.

Any questions please ask!
Jon

Code Updates: Mid tier / Boutique Inv-Banking Roles

Following client requests received in recent 1-2-1s, a number of potential prospects work at investment banks outside the bulge bracket ones (i.e. Goldman Sachs, JP Morgan etc).

We have therefore added the full suite of roles listed for bulge bracket banks, for mid tier/boutique ones to ensure comprehensive coverage across investment banking.

Banks such as Evermore and Jefferies are in this mid tier category and additional guidance will be provided when key insights goes live hopefully next month.

One interesting thing to note is that whilst salaries for these banks are generally lower, some of the bigger mid tier banks actually pay more than bulge bracket banks, especially at the more junior end of the scale. This might not show in  calibrated average, but it is something to keep in mind and where applicable utilise modifiers.

Thanks,
Jon

Code Updates: Investor relations Roles

Following requests from a few users we have now added a new category of specialist roles: Investor relations.

Investor relations in a large firm is a crucial role as they act as an interface between investors (shareholders and debt holders) and the board. Their job is to manage expectations, ensuring open communication channel are present and responding to requests.

Investor relations roles are not focused on investing funds, making strategic decisions nor involved in operations. Whilst such roles are predominantly present in listed companies, some large private companies do establish such roles where they have a range of diverse stakeholders or might be planning on accessing capital markets (debt or equity) for additional / new funding including an IPO.

Directors of investor relations normally operate just below the main board level.

Data on investor relations roles is now available for Australia, UK and US.

Thanks,
Jon

Code User Group Blog: March 2024 Holding Companies

As spring approaches (well in the UK and US) we tackled the rather tricky topic of Holding companies. As global organisations, private equity and even hedge funds utilise a variety of complex corporate structures, understanding the principles of a holding company and why they are used helps us identify, analyse and track wealth and wealth creation moments.

Whilst I appreciate that in the US and Australia accessing reliable company information is almost impossible, there are still sources where you can gain an insight into corporate structure and financial performance. In the UK we are certainly lucky to have companies house (which is soon to be integrated into Code) which gives us a breadth of information to support prospect research. Whilst initially this might seem the answer, understanding and sifting through such complex structures and information sets presents a challenge.

I initially put forward that a holding company is a king of investment vehicle established to hold the shares of other companies. The holding company itself doesn’t actually generate any products or services and creates no or minimal revenues / costs. There are many reasons for the establishment of a holding company and these centre on:

• Risk management

• Tax

• Business strategy / international operations

• Wealth planning

It is important to note that a subsidiary is a company within its own right and a holding company can own a vast array of subsidiaries either wholly or partially. These subsidiaries might operate strategically to deliver the aims and objectives of a group (Tesco is an example) or be a disparate range of organisations operating as a conglomerate such as Berkshire Hathaway.

When viewing holding company accounts the consolidated accounts is a sum of all the financial elements of each subsidiary. Obviously foreign exchange rates impact this consolidation process but we don’t want to get into the weeds of IFRS standards and hedge accounting! Therefore the consolidation income statement can be seen as the sum of all the holding companies subsidiaries turnover, costs and profits. The same concept applies to the consolidated balance sheet. When analysing the value of holding companies it is the consolidated accounts that you need to focus on.

We then analysed how an individual could be a shareholder of a holding company and a shareholder within a subsidiary. Whilst this is a little confusing and complex to initially understand, it is important to note a shareholder is an owner. Therefore anyone can own part / all of a holding company and also part / all of a a subsidiary and holding company. We discussed the implications this has upon dividend payments and the sale of companies.

Overall throughout all 3 user group sessions, we had some great discussions and questions, albeit perhaps I was slightly distracted due to the egg-citement of getting some easter eggs.

See you in a few weeks for the next user group, which will be focused on board roles.

Thanks,
Jon

Code Updates: Sector Performance

We see considerable impact of different economic/business conditions on the financial/business performance of sectors. 

For example we currently see Aerospace and Defence sector performing well, driven mainly by issues in Ukraine and an increase in global Defence spending. 

At the other end of the scale Housing/construction companies have seen considerable downturns due to interest rate rises accompanies by car manufacturers who have seen falling volumes and growing competition impacting sales. 

To take account of this we have sourced global data and used our own insights/analysis to update the sector performance tool on Code-FI.

To simplify things, we have categorised sector performance into 4 categories: 

1. Booming
2. Affluent
3. Stable
4. Challenged

The attached info graphic also provides a visual snapshot across all of the Pyro sectors:

If you have any questions please let us know.

Thanks,
Jon 

Code Updates: Biotech Specialist Roles

A quick note that we have now changed the categorisation of the new Biotech / Life Sciences roles.

As you know we recently added a large range of additional roles in this sector. In order to make it easier to navigate between these roles we have re-categorised them into 3 sub categories:

• Clinical

• Non-Clinical (ie managerial and admin roles)

• R&D

Thanks,
Jon

Code Updates: Career Earnings

Following a period of deep research and statistical analysis we have today updated the algorithm and data for the implied saving rates used within the career earnings / profile mode tool.

Savings rates vary by sector, age, earnings level and remuneration type (Salary, Bonus and Dividends).

Given economic challenges, cost of living crisis, political events etc there has certainly been a strain put on the finances of most individuals. We have therefore reflected this in our updated saving rates that have broadly seen a decrease in the savings levels of individuals.

Please also note the savings returns remain unaltered. The returns data we use and is the basis for compounded returns, is based on annual market rates in equities, fixed income, commodities, interest rates, property etc.

If you have any questions let us know.

Thanks,
Jon

Code User Group Blog (UK and US): IPOs

This months user group focused on IPOs. We have seen in the last few months, increased speculation about forthcoming IPOs and hopes that the IPO market turns around following a few years of minimal activity.

We initially discussed how business owners, in our view, are the primary source of major gifts, yet the nature of company ownership is very illiquid.

Whilst owners will continue to receive dividends/salaries (if they are also an executive director), the main way in which this wealth is crystallised is via:

• Trade sales (i.e. to other companies operating in the same sector)

• IPO’s

• Private equity purchase

• Liquidation (where the business is closed and any remaining assets paid out)

The session then explored what an IPO is, why companies undertake an IPO and what funds are raised from an IPO (ex fees and tax!).

In the US user group we also discussed the popularity of different share classes and how this enables founders to continue to retain a controlling interest.

I presented a number of data sources and forecasts of that speculated which companies will undertake an IPO in 2024 such as Reddit.

We also noted typical fees are 5-7% of the IPO proceeds and as such there is a trickle-down effect when the IPO market is strong. Investment bankers, legal advisors and consultants all benefit from an IPO as well!

A good point was raised about how directors will also benefit from an IPO. Whilst they might not be listed a person of significant control, some will still have a small shareholding in the business.

We closed the session looking at signs a company is planning an IPO along with the key submission forms to the SEC and LSE.

Thanks,
Jon

Code Updates: New US Biotech / Life Sciences Roles

We have now added a comprehensive range of new US Biotech / Life Sciences roles to Specialist roles. This supplements the range of Biotech roles added for the UK at the end of 2023.

These roles were requested by users last month.

Hopefully this new data supports the research being undertaken in this field. If any further roles are required please let us know.

Thanks,
Jon

Code Updates: Investment Banking Salaries

We have now updated the investment banking salaries for US, UK and Australia for the latest 2024 bonus season.

Also please note we have also made changes to the sector name - renaming it it Finance: Investment Banking (Bulge bracket) . 

Currently the Investment Banking data in Specialist Roles relates to the top tier/bulge bracket investment banks (i.e. Goldman Sachs, JP Morgan etc). We will be supplementing this data with remuneration data for mid tier firms soon and so we have made this change to differentiate them. 

The data we are working on for mid tier investment banks is very interesting. Some organisations such as Evercore pay more than the bulge bracket banks in some instances!!!

We will notify you when this data is available on Code.

Thanks,
Jon 

Code user group blog: Investment Banking

Apologies for the slight delay in postings a summary of the January user group discussions. We have been focused on the completion of the UK companies house data project (more on that soon!).

In the January user group we focused on the role and remuneration of investment bankers.

Given the level of their remuneration and career trajectory, investment bankers are often a core focus of prospect researchers. However, based on our data and insights, Investment bankers only typically become donors in the latter part of their careers. This is especially the case as those in the analyst to VP roles are often younger and focused on spending their money! As such developing relationships with them early (for example inviting them to undertake guest talks if alumni etc) is a good way of ensuring continued engagement.

Investment banks are focused on providing financial services to organisations (along with very wealth individuals). Therefore, their operations are significantly different to retail banks.

 As a reminder, bulge brackets investment banks consist of:

·      Goldman Sachs

·      JP Morgan

·      Barclays

·      Citi

·      Bank of America

·      UBS (who recently acquired Credit Suisse)

·      Deutsche bank (just!!!)

Whilst these are the most commonly recognised investment banks, those mid-tier banks such as Wells Fargo, Jefferies etc have considerable clout in financial markets and remuneration is often similar to that in bulge bracket banks, especially at the very senior levels.

Whilst there is no definitive list of investment banking operations, for the purposes of remuneration we have split activities in to 5 key areas by order of typical remuneration)

·      M&A

·      Underwriting

·      Sales, trading and corporate finance

·      Asset management

·      Research

When undertaking research on a prospect, being able to identify which of these categories an individual’s role Is focused on is important. We worked through a series of examples to support this identification process. We are here to help though if needed!

The career of an investment banker will usually take a fairly structured progression route, centred around progression every 3 years. Whilst some banks have different names the titles are typically:

·      Intern

·      Analyst

·      Senior analyst / associate

·      Vice president (VP)

·      Senior vice president (SVP)

·      Managing director (MD)

 It is important to note an MD is not a typical managing director operating at board level. Instead they are an MD of an operation  / unit etc and might lead a team of 10-20 staff. During the session we discussed the term role inflation in relation to this!

It is important to note that many will ‘top out’ their progression at VP level with only those who are seen as rainmakers progressing further.

The rest of the session we explored the need to review recent investment bank league tables (i.e. to identify which banks are doing well in the big ticket fee earning deals), along with going over the typical month and timing of bonus payments for the main banks (this can be seen in the slides circulated).

I hope this short recap provided a reminder of what was discussed and can be used as a quick reference point if needed in the future.

 Thanks,
Jon

Code Updates: AUS Investment Banking Salaries

Following the end of the main investment banking bonus season, we have now updated the typical salaries for Investment bankers in Australia.

You can find the updated data in Specialist roles

Similar updates are currently being made for the US and UK and we will notify when the new data is live.

Thanks

Jon

Code Updates: Singapore SIC Codes

Hi

As we continue to expand our international data set, we ave now added Singapore SIC codes to our Sector Map.

Based on the Singapore SIC code, you can now use the sector map to choose which is the equivalent Pyro Sector to use.

Thanks

Jon

Big upside for Lawyers in the Musk Pay award Court Ruling

I wanted to alert you to a few interesting developments with Tesla. 

You are likely to have seen that Elon Musk’s pay has been voted down by the courts in Delaware and this has obviously made waves. On Tuesday, courts ruled his potential 56bn pay award was excessive and voided it. This has also resulted in Musk now asking shareholders to vote on Tesla incorporating in Texas!

However, if you delve below the headlines that are focused on Musk, there is actually quite an interesting sub story that sheds light on an interesting practice in the legal sector. 

In certain cases, the legal team representing shareholders are able to make a case to the courts to take a proportion of the settlement that shareholders have received. The proportion can be as much as one third of the benefited conferred. 

There are multiple cases against Tesla for other issues so watch this space including a $900m shareholder settlement for a similar issues on board remuneration!  

In the case of the pay award for Musk (potentially a miserly 56bn!) - as this was to be paid in stock based on performance and legal share of such an amount may well be difficult to prove!  However, lawyers (Bernstein Litowitz) will be putting in their claim shortly .

Another example is last year where the lawyers representing shareholders of Dell received over $250m. Whilst that fee is in the process of appeal, it does highlight the potential upside for legal firms in such high profile corporate cases. 

Tracking these corporate legal issues and identifying the legal firms that represent shareholders and other organisations might also highlight potential windfalls! 

I will cover this idea in more detail in a future user group - likely to be in the second half of the year.

November User Group Blog (AUS)

In the last user group of 2023 I gave you a quick update on our progress in delivering new features (such as salary modifiers) and data and plans for 2024.

We discussed the new modifiers and how these were in response to requests to provide more guidance on when to use the lower or higher end of the salary ranges on Code. Just to reiterate my point from the session -if you are unsure please ask us!

We quickly discussed consultant pay and some new data added to Code on Partners. We differentiated between the big 4 and those companies where they don’t have a partnership model like Accenture.

The main focus of the session was then on property. I highlighted the different types of property (residential, commercial and land) and their different uses and characteristics. We discussed some of the ley drivers for property prices and how recent interest rate rises impact process and activity in the property market.

It is important to also note the different ways property is held i.e. individual, within a company, trust, family office etc.

Finally we discussed some of the challenges in gaining insights into profits generated from property development. We walked through the new model we have created.

I appreciate this part of the session as rather technical – however I will be sharing the model with you very early in the new year with some notes on what it does and how. You can then tailor / update the model as you see fit. I am happy to take further questions or support additional development of it if/when required.

As a reminder there is no user group in December, but we will be back in January!

For those who celebrate it, have a lovely Christmas and new year (feels weird saying that at the beginning of December!!)

Jon

November User Group Blog (UK and US)

In the last user group of 2023 I gave you a quick update on our progress in delivering new features (such as role modifiers) and data. 

We also discussed fund managers, their core role and how there are different types of funds (Unit trusts, mutual funds, investment trusts, OEICS etc) yet the fund managers for these different funds essentially all have the same role.

Pay is made up of base salary plus an annual bonus (based on fund performance), paid out normally the month after year end (of the fund not the calendar year end).

It is important to note that ETFs and ETCs (i.e. tracker funds) fund managers have a different role and remuneration structure and that REITS are focused on property as opposed to other funds that invest in equities, bonds and derivatives.

One of the interesting elements that came out from discussions is how to identify a fund manager from a hedge fund manager. The key advice was; if you can find information on the fund manager or fund (i.e. aum, what they invest in etc etc) then it is not a hedge fund! Hedge funds are very secretive and as such information is scarce. Also utilising websites such as trust net, morningstars or yahoo also enables you to confirm they are an investment fund, not a hedge fund.

I also highlighted the importance of these websites as a source of information to confirm fund performance (i.e. better performance = better bonuses) and assets under management (the bigger the Aum the higher the pay).

Further good sources of information include the FCA register, IAD and broker check website s(anyone involved in financial services must register with the appropriate authority) and also forms ADV, 13D,  F and G (US only).  

As a reminder there is no user group in December, but we will be back in January!

For those who celebrate it, have a lovely Christmas and new year (feels weird saying that at the beginning of December!!)

Jon

Code Updates: US Actuary Roles

Following a request made via the US user group, US Actuary roles have now been added to specialist roles. The salary figures can be assumed to comprise of base plus bonus.

We have actiary roles for different qualification levels and for different sectors such as pensions, health, property etc.

Any questions let me know

Jon

Code Updates: Specialist Roles

Following requests some additional specialist roles have been added:

• Legal Counsel

• Partner (Business Consultancy - Australia)

• UK Director / Associate (Division / Region) Real Estate

Please note we have plans to add a number of new specialist roles in early 2024. If you have any requests please contact us.

Code Updates: Asia Fund Sizes

Following requests, we have now added guidance on sizes of funds and private equity firms in terms of indicating what constitutes a small, medium and large fund in terms of assets under management.

This change should give you more confidence in selecting the correct fund size.

Code Updates: Board and Specialist Role Modifiers

We have made live a significant update to Board roles and specialist roles tools by adding in modifiers.

Previously when searching for board / specialist role remuneration you will have seen a range showing a calibrated minimum, average and maximum.

Whilst this range is helpful, users have requested more guidance and tools to enable them to decide which figure within the range they should use, especially when they are aware that their prospect is either a high flyer or working in a company that is not performing well.

To support a more accurate estimation, modifiers have been introduced that enables you to tailor inputs and derive a bespoke result. Guidance via tool tips have been added to the modifiers to provide support, noting that modifiers enable you to use your own judgement and additional research to tailor the results.

I will demonstrate these new additions in the November user group quickly as well. But if when exploring this new feature you need additional support, please ask during the user group, drop us an email or book in a 121 with me!