Attracting Quality Wealth Managers is More Than Just a Question of Money

Emma Rees

8 May 2007

Private banks have been around for hundreds of years and whilst pay structures have been influenced by the investment banking parents of some large private banks, many are still quite traditional in the way they pay. With increasing numbers of private banks and wealth management firms vying for quality staff, WealthBriefing asks what factors influence key players to join particular firms and whether attracting staff is as much about the different structures and ethos at various wealth management firms as it is about remuneration? According to Piers Thynne, from headhunting firm Thynne & Co, it very much depends on the individual: "If someone is confident and entrepreneurial, then they are not necessarily going to be worried by the basic salary, as they will be able to achieve healthy revenue streams from the business they bring in." Dudley Edmunds co-owner of wealth management recruitment firm Culliford Edmunds Associates says: “Old school regular client relationship managers tend to be happier with a base salary and a formulaic bonus. However, younger people coming up through the ranks are still looking for a base, but are probably less pedantic about whether the bonus is formulaic or something more discretionary.” There is little correlation in remuneration structures amongst firms which have similar client entry level criteria. Merrill Lynch, UBS, Citi and Credit Suisse are all in the $1-5 million space and have differing remuneration models. Goldman Sachs and Morgan Stanley both focus on clients with $10-15 million liquid investable assets or above, yet the former has half discretionary and half brokerage remuneration system and the latter a hybrid discretionary model. And it does not necessarily follow that those private bankers and wealth managers that deal with ultra high net worth individuals make the most money. In the ultra high net worth space, clients squeeze on fees whereas volume in the $1-5 million space can be extremely lucrative. "Private bankers are like anyone else and want to be paid fairly for the job they do, says Mr Thynne. “If the bank is wobbly and the clients frustrated, all the money in the world doesn't compensate for the hassle. Often salary is the second or third most important consideration after a strong platform free from politics and first class reporting and back office support to keep their clients happy." Mr Thynne also notes that in some instances highly experienced private bankers are being lured to either big banks or to the boutique multi family offices or fund of hedge fund and if they go to the latter it is for cash and equity. According to chief executive Michael Kerr-Dineen, Cheviot Asset Management is the only independent partnership-based investment manager of any significant size in the UK. The firm’s capital partner has covered fixed costs up until 2008, which means Cheviot can give its partners 100 per cent of revenues for the first two years. After that time, it will return to a more traditional equity partner basis, with a share in the profits from the partnership based on assets under management and dividends on partnership shares. Mr Kerr-Dineen says: “It is the nature of investment management that the people in the industry are bright, solid, sensible and have a deep loyalty to both the firm and clients. The value lies in the people and the client has a relationship with the individual, not the firm. This is not reflected in the remuneration structures of many big banks, where it is the shareholders that benefit when an investment manager succeeds on behalf of the client.” Mr Kerr-Dineen believes that the Cheviot’s partners are attracted by the ability to do the best by clients, free from the constraints of bureaucracy and investment conflicts of interest: “A partnership structure is the time-honoured way of ensuring that clients’ best interests are synonymous with those of the investment managers. We tend to attract entrepreneurial individuals, who are not content with being ‘peas in a pod’ at a big global bank. Our partners work extremely hard in an environment where they can satisfy their professional ambition, personally have fun and, if they get it right, are well paid.” Mr Edmunds notes there has also been a shift in definition about what a private banker is and does: “Fifteen years ago, if you said private banker people knew what you were talking about. Now it can mean anything from an equity analyst, a private client investment manager, a broker or relationship manager." Industry insiders note an upward trend in salaries in the last 24 months, mainly driven by big retail houses buying talent from the big American investment banking houses. In recent months there have been rumours of wealth management firms paying inflated salaries to new staff. “Whilst salaries have gone up by an additional margin over what might be expected, the margins are not huge,” says Mr Edmunds. “One private bank at director level would have paid £65,000 basic a few years ago and is now paying £165,000 , but the firm in question has just made a leap from being a low payer to being a high payer. Money is not necessarily the driving force. For a middle ranking private banker in tier two or three private bank, if UBS want to talk to you, one of the last things you talk about is the money.”