This year will be tough for the wealth management headhunters but there remain bright spots in the industry, recruiters say.

The wealth management sector has so far been able to avoid the worst of bloodletting on the job-loss front but head-hunters expect recruitment to be slow this year, albeit with some bright spots.

With margins under pressure, wealth management firms will focus their job recruitment on hiring people able to bring in strong revenues and keep clients on board, executive search firms say.

“The emphasis has shifted away from organic growth towards more strategic hires where there is a good business case to do so and a good chance that revenues will follow,” Edward Blomfield-Smith, who runs Abercromby Appointments, a London-based executive search firm, told WealthBriefing.

“The last six months have seen a fall in these sorts of [strategic] hires but now there seems to be a renewed sense of optimism that markets will pick up this year, and if so, this will get things going again,” he says.

In general, the recruitment market will be tough in the short term and may favour smaller, more nimble headhunter companies with relatively light overheads, Mr Blomfield-Smith says. “Their flexibility will enable them to react quickly to changing conditions and those who genuinely know their market will be better positioned to identify opportunities as they arise than those heavily reliant on external research,” he says.

Another recruiter in

London, who asked not to be named, says the job-search market has become tougher especially for positions where people manufacture products for private banks, such as the structured products that use complex derivative strategies. The credit crunch has hit this market and reduced the need for people to work in it in the short run, he said.

No Clear Trend

So far, it has been difficult to spot a trend as to whether recruitment is continuing to rise overall or whether job recruitment at some firms is being offset by cuts elsewhere. On the one hand, Swiss-based AIG Private Bank said it would cut up to 120 of its 420 jobs worldwide. UBS, meanwhile, is cutting about 500 jobs from its

US wealth management division. Citi is reported to be cutting wealth management jobs in its
Asia ex-Japan region.

On the positive side, Deutsche Bank’s private and business clients division said last year that it will create 2,500 advisory positions across

Germany and European core markets over the next four years. UBS has also recruited a swathe of relationship managers in the

US. Meanwhile, Bank of China recently opened a private bank in

Geneva. EFG is taking on 150 client relationship officers this year; BNP Paribas is also continuing to hire aggressively in

Singapore.

As the examples suggest, some of the hotspots for recruitment remain in the
Far East. So hot, in fact, that last year, a report by PricewaterhouseCoopers, the accountants, said that a skill shortage could derail wealth management in

Singapore. The Asian market has not escaped the chill winds of the financial crisis but it remains a growth market.

Some headhunters are cautiously optimistic, such as Nick Dogilewski, head of the private wealth management unit at the Omerta Group, an executive search firm.

“Wealth management is still showing signs of growth, making it one of the last or even the last sector to still be expanding,” said Mr Dogilewski.

Certain vacancies are relatively difficult to fill, Mr Dogilewski said. “There are certain markets in the

UK that are limited with regards to the potential number of candidates within; such as the NRI [non-resident Indian] or Emerging/Eastern European markets. The easiest roles could always be considered to be bankers in their home country,” he said.

Recruiters also named Latin America, central and Eastern Europe and the
Middle East as areas where recruitment remained relatively busy, although likely to be at a slower pace than in recent years.

On other areas of detail, recruiters said they did not expect firms to be able to insist on even tougher contract terms – such as restrictive covenants – than in the past, as contracts have been relatively tight already.

“I think it is unlikely that employment contracts and restrictive covenants will become any more stringent than they are at present unless a new precedent is set in the courts,” Mr Blomfield-Smith said.

Last year, the issue of restrictive employment contracts reared its head in a legal row between UBS and Vestra Wealth, the

UK start-up, after a team of more than 50 staff defected from the Swiss wealth management giant to Vestra. Last autumn, Vestra lost a High Court ruling in

London and was forced to accept that no UBS staff not yet at Vestra can begin work there until 5 April this year.

Elsewhere, Mr Blomfield-Smith notes that revenue-sharing has become “increasingly popular” as a way of hiring high-performing CRMs although regulators such as the UK’s Financial Services Authority may crack down on this practice if it is deemed to interfere with impartiality of a CRM’s client advice.

A London-based recruiter, who asked not to be named, says it has become tougher to get bonus agreements signed for CRM clients. “There will be targets increasingly attached to bonuses,” he said.

The new year will see widespread changes to bonus and incentive plan structures as the market seeks to address the perception that earlier bonus practices contributed in part to the financial crisis by encouraging excessive risk taking, according to Mike Eckes, reward partner at professional services firm KPMG in the UK.

These changes will include the implementation of “clawback” and other similar provisions, intended to align the reward timeframe to the underlying trades and activities to which the reward relates, as well as innovation in overall incentive structures, a reshaping of asymmetrical bonus structures and more intrusive regulation, he says.

As for recruiters themselves, the market this year could be tough as the number of headhunters working in the wealth management space has increased considerably in recent years, a reflection of the boom in wealth management, said Mr Blomfield-Smith and Mr Dogilewski.

“I think it is likely that a fair number of head-hunters whose revenues have dried up from investment banking will look to move into wealth management where there is a general perception of earnings stability,” said Mr Blomfield-Smith.

“Despite phenomenal growth in the number of wealthy clients out there, I estimate that the actual number of wealth management firms in the

UK has halved in the last ten years. Consequently the market has become more competitive as the number of wealth management companies to act for has reduced and so has the pool of companies from which one can recruit,” he said.

Mr Dogilewski said: “Over the last few years more firms have stepped into wealth management calling themselves 'experts'. I think this will increase again next year. As for the approach to recruitment, the banks have and will be looking to partner with search firms, to make sure the right story and approach is performed. This will offer the smallest amount of cross-over when approaching bankers and specialists.”