One of the effects of the recent financial turmoil is that commentators and industry analysts are reporting an increasing number of investment managers turning towards the independent route, often using platforms provided for this purpose by large banking groups or specialist providers. This is a well-trodden path in the hedge fund world that is now gaining traction in wealth management.

Some headhunters are telling WealthBriefing that in some cases, introductions for permanent positions within large banking groups are leading to their candidate preferring to gain independent contractor status and using the bank’s services instead. This often involves the investment manager using the custody and investment management platform offered by the bank, along with settlement, accounting, compliance and reporting functions.

The trend to independence is, in part, driven by the desire of members of the investment management community to create capital value in their business. “To truly be independent, the investment manager needs to be able to agree a structure that allows him to have his own business and therefore grow a capital value in that business, to sell or pass onto the next generation at a future point in time,” said Cynthia Poole, director of relationship management and business support of Raymond James Investment Services.

“The investment services provider would ideally offer support in establishing the office. The investment manager will not be experienced in doing this and will need help,” Ms Poole said.

Moving towards independence has, of course, been a feature of the wealth management landscape in Switzerland for some time, as Christian Sulger-Buel, of the eponymous search firm, said.

“The problems that Vestra had starting up in the UK just wouldn’t have happened in Switzerland,” Mr Sulger-Buel told WealthBriefing.

“The Vestra team would have come to an arrangement with UBS to use its platform and everyone would have been happy,” he said. 

WealthBriefing understands that Vestra Wealth is currently using the Credit Suisse custody platform.

“But in the UK both private banks and their clients are terrified in the current climate. It would take a very brave person to start up as an independent business at the moment, although performance in multi family offices has generally been better than their private banking rivals,” said Mr Sulger-Buel.

After some initial concerns about losing fees by introducing candidates who then chose the independent route headhunters are now beginning to adjust their terms of business to accommodate this outcome.

Headhunters will need to develop a more flexible fee structure that perhaps has less of a payout initially, but shares in the success of the practice over a period, says Ms Poole, pointing out that at Raymond James they have this in place already.

“The banks would not make themselves popular if they tried to wriggle out of fees that were perfectly justified. In fact, if they did that to reputable firms, they'd be doing themselves a great dis-service,” said Edward Blomfield-Smith director of Abercromby Appointments who also said that executive search firms should have contracts tailored for such this instance

His thoughts are echoed by Piers Thynne, director of search specialist Thynne & Co. “Head-hunters if they are bright should have a clause in their contracts which involve business introductions which should prevent them being circumvented,” he said.