A quick count of the number of private bankers which various chief executive officers have publicly stated over recent months they plan to hire this year alone exceeds 1,000. But surely it is in everyone’s interests to make sure that growth ambitions are realistic and sustainable.
Date: April 16, 2010
A quick count of the number of private bankers which various chief executive officers have publicly stated over recent months they plan to hire this year alone exceeds 1,000.
That is a staggering figure when weighed against the broadly-accepted total of roughly 5,000 private bankers across Asia. (Some industry insiders claim the number to be much lower.)
Perhaps it should be of little surprise, however, given that the region’s potential to create more wealth and a larger number of high net worth individuals (HNWIs) at a faster pace than anywhere else in the world has re-directed the hopes, expectations and resources of international private banks towards Asia.
But surely it is in everyone’s interests to make sure that any growth ambitions are realistic and sustainable?
To dig a bit deeper into some of the numbers, the majority of the leading private banks have made known their plans to grow quickly, and generally in bulk.
UBS has arguably been the most dramatic in its ambitions. In mid-March, chief executive officer Oswald Grübel revealed that the bank plans to hire 400 client advisers in Asia – a 40% increase to its existing 1,000-strong team. Grübel said at the time that he wants to build on the net inflow of new funds for UBS in the region in late 2009.
At Standard Chartered Private Bank, chief executive officer Peter Flavel aims to hire 100 new relationship managers in 2010 to his global team of 400. Two-thirds of the new recruits are slated for Asia, to cover the Indian, Chinese and South-east Asian markets.
While more modest in total number, Morgan Stanley Private Wealth Management is understood to want to hire around 30 client-facing advisers in Asia – but this still accounts for around 30% of its overall salesforce in the region.
And Citi’s private banking unit is targeting around 40 new private bankers and product specialists across Asia Pacific this year, mainly based in Singapore and Hong Kong.
These are just a handful of the many global institutions which, since late 2009, have talked openly about their Asian hiring strategies for the 12 to 18 months to the end of 2010 and into early 2011.
There is a fine line between aggressive and excessive. One which many private banks seem to have crossed.
Perhaps most baffling is the fact that, in many cases, the same senior manager who puts his or her name to these announcements separately admits that the biggest challenge is meeting the far-reaching hiring plans.
An industry dilemma
Two obvious questions to ask at this point are: where will all this talent come from? And are there even enough private bankers in Asia with the skills required to service clients’ changing needs following the financial crisis?
The most frequently-heard answers are: “don’t know” and “no”.
This leads to more questions for the industry to contemplate, for instance: what is the real reason why banks make such dramatic hiring announcements? What impact will the arrival of large numbers of new bankers have on existing staff? Will the clients follow new hires? Will the revenue also follow? And why aren’t banks spending more time and effort training home-grown talent to take a longer term approach to growing their franchise?
If the hiring announcements are made for the benefit of industry analysts, or for senior management in head offices, then this seems to be a short-sighted approach, or at best a gamble.
Either way, it seems to suggest that the banks are continuing to look for short-term solutions to longer term problems.
This is compounded by the fact that management often admits privately that clients are increasingly wary about moving accounts from one bank to the next – in turn minimising the value of such hiring sprees.
A further drawback of aggressive hiring sprees is their potential to have an incredibly unsettling impact on existing relationship managers inside the organisation.
Hopefully new hires are no longer being lured with promises of guarantees, or other mis-aligned incentive structures. But even when that is not the case, managing existing advisers through this expansion process requires a lot of time and consideration to their needs and concerns – otherwise they will jump on the merry-go-round the other way.
Changing skill-sets required
In the pre-financial crisis boom, hiring people on the basis of their relationships and basic understanding of a single, sought-after product served the purposes of what the banks – and to a large extent clients – wanted to achieve.
Now, however, driven largely by the loss of trust across the industry and the changing demands both of clients and regulators, private bankers need a broader skill-set to be successful. They need to provide a consistent and disciplined offering which is also aligned to their institution’s goals and objectives.
Unfortunately for the industry, however, such client-centred skills tend to lie with the more experienced private bankers who have serviced clients thorough market cycles – the type of individuals who are much harder to find in the industry in Asia.
Yet as the growth of HNWIs continues in Asia, more private bankers are required.
That doesn’t mean the solution is poaching them from competitors. Instead, it means dedicating more resources to training them in-house, and at all levels. Or at least being more realistic about growing the platform.
This is even more important given that many chief executive officers admit that around one-third of new recruits fall short of expectations within the first 12 months, and ultimately leave or are pushed out.
And the banks are unlikely to want so much publicity about changes to personnel at those times.
As a result, if there was more effort spent trying to support existing staff to make them more effective and productive, management could give their advisers the opportunities to understand their individual strengths and weaknesses, and put in place more realistic growth plans.
Maybe then the merry-go-round might not turn so fast.