Client Affairs

FEATURE: The Current State Of The “Talent Crisis” In Wealth Management

Amisha Mehta Assistant Editor London 21 October 2015

FEATURE: The Current State Of The “Talent Crisis” In Wealth Management

As the landscape of the global wealth management industry continues to evolve, concerns of an acute talent shortage are mounting. We spoke to recruiters and wealth managers to understand their perspective on the "talent crisis".

London is synonymous with terms such as “financial hub” and “digital powerhouse”. The city overtook New York as the finance capital of the world, according to this year's Global Financial Centres Index, despite concerns about the ongoing march of regulation harming the UK's competitiveness. Still, talks of a “talent crisis” persist in the wealth management industry and the challenge of finding skilled employees is now apparently even shaping merger and acquisition deals. According to a recent PricewaterhouseCoopers global CEO survey, a quarter of M&A activity is now driven by skills shortages as companies are making acquisitions first and foremost to buy the right people.

Mark Somers, who founded the Somers Partnership, a UK-based recruitment firm specialising in the wealth management industry, told WealthBriefing of the talent crisis in private banking specifically.

"The whole industry is rather like a soup bowl – broad and shallow in terms of talent. The private banking sector is growing so fast but it takes time to build value; you need to have been doing it for a long time," he said.

At the Somers Partnership, private bankers are divided into three categories: "the rainmakers" (the profitable ones) who Somers says make up just 10 per cent of the market, "the lawnmowers" (those that are content to manage existing clients and don't go out and get new business) who make up 80 per cent, and "the well poisoners" (active loss-makers who move from bank to bank) accounting for the remaining 10 per cent. The struggle of course, he says, lies in finding the rainmakers.

A culture of compliance has been brewing for some time now. Regulators have widened their clampdown on tax evaders. The UK chancellor, aka finance minister, George Osborne, for example announced in the Summer Budget that the government had set aside £750 million ($1.14 billion) for HMRC to raise £2 billion in its battle against tax evaders.

While more regulation may mean more headaches and drudgery for the wealth managers and financial institutions affected, it has fuelled demand for compliance professionals. Rising demand for compliance skills, coupled with the shortage of talent in this space, has pushed up salaries, making these roles both sought-after and hard-to-fill.

The average salary and bonus for compliance professionals at managing director level in London’s asset and wealth management sector was £107,617 in June 2015, according to data from global recruiter Morgan McKinley, and competitors have been willing to offer strong compliance candidates a salary increase of up to 30 per cent to move.

“Due to adjustments in recent regulation (UCITS V, AIFMD) affecting the asset management space, businesses have had to implement new controls, policies and procedures to ensure the firm remains compliant. After recent visits, the regulator has advised a number of businesses to increase their compliance staff,” said Ben Harris, manager at Morgan McKinley’s compliance desk. “The more niche the policy understanding required, the lesser the supply of that skill set. This simply creates a war on salary and inflates everything.”

In the first half of this year alone, HSBC, which provides private banking among its services, said it added more than 2,200 compliance staff.

“Top bankers who can juggle with ease business development and sharper compliance issues are a scarce resource,” Olivier Deslandes, head of human resources at Lombard Odier, told WealthBriefing.

Gina Le Prevost, chief executive of AP Group, which provides global recruitment services for banking, wealth management and finance industries, also highlighted the predicament, stating that it was becoming increasingly difficult to find suitable candidates to fill roles in compliance, risk and other jobs that involve onboarding of new business. Qualifications in compliance and risk are key now and essential requests from clients, she said.

She also pointed out the impact regulation is having on the appeal of working in the finance industry.

“Some candidates do ask to be considered for other roles outside of the financial services sector purely because the due diligence and risk averse policies that had to be introduced to stop undeclared clients from being able to open accounts have made jobs more ‘intense’ and not so enjoyable. There is so much red tape being demanded by the authorities of jurisdiction, which is to be expected,” she told this publication.

What is also a sign of the times – aside from an increasingly intricate web of regulation – is the impact technology is having on the financial job market. London's tech industry is estimated to pump £12 billion into its economy over the next decade, according to a study.

With clients demanding better digitisation, the more “traditional” wealth management firms have had to up their game and invest in processes and technologies – and the people behind them, meaning those with IT skills usually have better pay prospects. Morgan McKinley recently pointed out that digital skills were pushing up salaries in the marketing field, thanks to the narrowing gap between marketing and traditional front office jobs across the financial industry.

“For years, banks and insurance firms have gradually been growing out their digital marketing teams, but now their asset management cousins have joined the party, resulting in a significant skills gap,” said Jo Stone, associate director of sales and marketing at Morgan McKinley. “Those with a CV that includes digital and social media marketing experience, combined with a broad knowledge of digital marketing tools and platforms, can command higher salaries.”

Technology is spreading far and wide in the wealth management industry, presenting both opportunities and threats. Last year, JP Morgan said up to 76 million accounts had been affected by a cyberattack. A string of recent high-profile hacks has pushed businesses to beef up their cyber-defences to the point where demand for cybersecurity skills now seems to be outstripping supply. Over the last five years, the fastest increase in demand for cybersecurity workers has been in the financial sector where it has rocketed 137 per cent, according to Burning Glass Technologies Research. 

The growing reliance on technology to do business may be good news for the fintech community and those looking to join it but it arguably threatens the security of other financial jobs, particularly in banks' back and middle offices. Global assets under management of robo-advisor services is set to reach $20 billion by the end of this year, according to a report by Swiss company MyPrivateBanking Research. Over three quarters of these assets are expected to be managed by US-based robo-advisors. Given that the raison d’être of fintech is to make financial services more efficient through technology and lower reliance on humans, it is no wonder flesh-and-blood advisors are spooked by this booming trend. AP Group's Le Prevost added that traditional roles such as credit administrators are also at risk.

To stay competitive, investment powerhouses are already opting to acquire robo platforms or weave similar models into their services – something that could well be the start of a convergence of traditional financial services and robo approaches. Pictet Asset Management, for instance, recently launched a fund to invest in robotics and artificial intelligence technologies, while BlackRock has acquired California-headquartered FutureAdvisor, which crafts automated portfolios for investors.

Ultimately, while all this robo talk may make for exaggerated conversations, the value placed on talent and relationships in the wealth management industry is by no means diminishing, as the sheer surge in demand for it shows. The global high net worth population continues to grow and banks are scrambling for professionals to serve them. Asia is often referred to as a battleground for talent in the wealth management industry, which should come as no surprise given that the Asia-Pacific region overtook the US last year, with the highest HNWI population (8.5 per cent) and wealth growth rates (11.4 per cent) across the globe, according to the World Wealth Report by RBC Wealth Management and Capgemini. 

It remains all about the people, even more so as the tectonic plates in regulation and technology continue to shift.

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