Many relatively healthy wealth management businesses, fenced into a restrictive ‘one-bank’ structure with their underperforming investment banking colleagues, have been contaminated by the damaged reputation of their parent institutions, amidst the widespread mispricing of risk at the heart of the credit crisis.
So what has been the impact on recruitment for the huge private banking sales forces, which play such a pivotal role in the growth of the business? Have smaller, independent but seemingly safer, boutiques become more appealing to client advisers? How are large integrated banks fighting back in the war for talent?
“This is a better time for some of the smaller players to attract people, who might otherwise be in bigger organisations,” notes Michael Maslinski, a consultant in the private banking and wealth management sector.
Investment banks have mismanaged their own money so badly and conspicuously that, especially in large integrated firms, this has heavily affected perceptions of private banking divisions, although these tend to isolate themselves as much as they can.
Major global banks can go bust. Clients’ confidence has been undermined; this together with cost cutting and a “scary environment” in many of the big banks, has shifted the balance in favour of small organisations, says Mr Maslinski.
Radan Statkow, head of business development at family owned Bordier & Cie, a Geneva-headquartered private bank, confirms that since the start of the financial crisis in summer 2007, the pool from which they source relationship managers has definitely grown. “We see a flow of people coming from the larger institutions, this is for sure,” he says.
The Swiss private bank manages around SFr10bn (E6.2bn) and employs 40 advisers. “With a kind of opportunistic approach, the game for us is to try and pick good candidates amongst all the ones available on the market,” says Mr Statkow, explaining that hires from large institutions were recently made in Switzerland and Paris.
Growing the client base
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“But what we must examine carefully in a new candidate is his ability to set up his own business,” says Mr Statkow.
It is important to differentiate between those advisers who, in large institutions, just inherited a portfolio of clients, perhaps from another manager leaving, and were in charge of retaining and serving them on a daily basis, and those who were able to set up their own book of business. A proactive and independent person will flourish in a small firm, which is a “more human” type of organisation. The adviser does not have to bear, for example, the pressure to reach a fixed daily or weekly target, which is often found in large organisations, he says. “In small banks you do not have a lot of politics; it is really about just focussing on your clients and growing the client base.”
The turmoil in the financial industry has increased the supply of people wishing to embrace the career of financial adviser, as private banking is widely considered as one of the areas with significant long term potential. While the collapse or shrinkage of the so-called ‘bulge-bracket’ banks has fed the market with an unprecedented number of investment bankers, they have not necessarily proved the most attractive candidates for private banks interested in managing long-term money rather than pursuing a transactional culture.
“We have no interest in hiring investment bankers because they do not have a network of contacts, although perhaps they have relations with institutions,” explains Mr Statkow. “For us the appeal of that kind of profile is quite low.”
While private bankers from rival institutions may be one of the best sources for client advisers, according to Reinhard Krafft, head of private wealth management at Sal. Oppenheim, the Luxembourg-headquartered private bank which manages E150bn of assets, investment bankers, lawyers, tax experts and other specialists are also in demand. Asset management firms are also a potential hunting-ground for recruiters.
“Investment bankers know how to pitch a deal, they know how to make things happen,” says Dr Krafft. “I would not hire a pure securities trader, because he does not have that long term view, but a M&A or a corporate person does and they fit our organisation well,” he says.
Sal. Oppenheim’s client base comprises mainly entrepreneurs and SMEs (small and medium companies), explains Dr Krafft. A sharp focus on the entrepreneurial side of the client is therefore requested. “When the client shows the adviser his factory, his balance sheet, the private banker immediately needs to get a feel for the business, so that he can discuss on an equal peer level with his client. That requires more corporate banking, corporate finance and M&A background than a standard private banker might have.”
