Strategy
Wealth Managers Who Can Make It Rain – Overcoming Short-Term Thinking

Wealth managers need to think more strategically, and bring in the kind of change-making individuals who can add momentum to a business rather than just go along for the ride, a senior figure in the executive search industry tells this publication.
There has been a lot of talk about the need for wealth managers
to be more diverse, innovative and able to serve younger wealthy
clients. And, although there has been movement, the industry is
still hobbled by short-term thinking, one of the most experienced
wealth management executive search figures in London argues.
Wealth management has opportunities and threats. There are
trillions of dollars or equivalent in inter-generational asset
transfer, and this is already underway.
There is digitalisation of operations from front- to back-office
to create new hybrid ways of serving clients better; new sources
of wealth, such as from technology; pressure on margins; new
business models (opportunities for wealth managers to
differentiate themselves in the eyes of their clients), and
client disenchantment with banks even a decade after the 2008
financial crash. There is pressure on firms to perform, but
too often compensation and management is geared towards the
average at the expense of high-achievers, Mark Somers, who runs
the Somers
Partnership executive search and consultancy firm, told this
news service recently.
Somers Partnership terms the current situation as the “Flaw of
Averages” as CEOs concentrate attention on the often unprofitable
mid-level “Lawnmower” relationship manager rather than
raising expectations to the profitable “Rainmaker” profile.
This is not sustainable with so many pressures in play, Somers
said.
“This industry is still incredibly short-sighted and thinks in
terms of quarterly objectives rather than those for five to 10
years,” Somers, a former Army officer, said. He has a keen
interest in leadership and retains an enthusiasm for the
sort of team ethic that comes with time spent in the military.
“Astonishingly, many CEOs of wealth management organisations
still do not understand the power of ‘Compound Talent’ and so
give this competitive advantage away to their competitors,” he
said.
“Our wealth management clients have a lot to learn from our
family office clients who are much more nimble, agile and
unafraid. We work from some of the most successful entrepreneurs
on the planet and they can teach the wealth managers much about
staying relevant in terms of proposition and purpose,” he
said.
The average tenure of a CEO in a wealth management firm today is too short, often merely three to five years, he said.
Added to this is that their average client age is elderly and increasing, rather than being replenished with younger high potential clients. “Rather than follow existing clients they need to future-proof their organisations, prepare for the wealth transference and find new younger clients,” he said.
To do that isn’t easy: “There is an enormous transference of
wealth…merely to stand still a bank needs 5 to 7 per cent growth
for the net [revenue] result to be in equilibrium: To grow like
some of our clients they need to be adding 12 to 20 per
cent new assets per annum” Somers said.
“That is even more of a CEO leadership challenge because most
bankers are incapable of growing their client books at that
rate,” he said.
Somers wonders why, for example, there are so few HR directors
and chief marketing directors at the main board level. “CEOs need
to step up and equip their high performing relationship managers
for success, otherwise they are doomed to have front offices
staffed by Lawnmowers rather then Rainmakers as the Rainmakers
will leave for their more enlightened competitors,” he said.
A skills shortage in many Western countries, partly an overhang
from the pandemic, and possibly also due to ageing demographics,
makes the task of finding talented people for wealth management
more urgent. HR, payroll and finance firm MHR International
recently said that 90 per cent of some of the UK’s largest
organisations are struggling with a skills shortage and are
unable to find talent with the appropriate skills to remain
competitive. (MHR polled 504 senior managers across the HR,
finance, business planning and operational functions within
businesses with 500 to 5000 employees, and with a turnover of £50
million ($59.9 million) to £2 billion.) The talent shortage
problem is one that this news service hears about regularly. (See
this interview with Multrees CEO Chris Fisher,
for example.)
Making it rain
"Among the Rainmakers in a firm, their total compensation,
relative to the revenues they bring, against those of the average
relationship manager, doesn’t make sense to them as reward is
geared to the average Lawnmower rather than a high performer,"
Somers said.
In frustration, the highest performers will leave. And a desire
for independence from impoverished leadership also explains why
managers go to independent shops, Somers said. His experience
over two decades is that “Lions are not well led by
Donkeys,” and “that ‘Rainmaker’ talent leaves `Lawnmower’ or
‘Well Poisoner’ management and joins organisations where there is
an aligned vision, purpose and proposition for their best
clients.”
The trend of departures of some managers is clear. (This is a
phenomenon that this publication has seen in the continued move
by bankers to Swiss external asset managers, or EAMs in
Singapore, registered investment advisors and MFOs in the US, and
various independent business models in the UK.)
So who is making a difference?
Somers argues that contrary to any idea of them being rather
stuffy, amateurish organisations, family offices have quietly
professionalised and are often at the forefront of innovation and
adaptability. Mainstream wealth firms should learn – and learn
quickly, he said.
“Family offices are leading the way in this, and they are much
nimbler. They are future-proofing their businesses and benefiting
from compound talent that the private banking industry doesn’t
understand,” he said. (“Compound talent” refers to how a firm
that attracts high-achieving people will attract like-minded
ones, building a positive business momentum that is greater than
the sum of its parts.)
With all too many wealth managers, they are “okay, but not that
great,” Somers said.
Somers argues that his firm can back up his views on the state of
the industry by hard data. It produces a regular compensation
survey on the wealth industry and works with US-based family
office compensation specialists Botoff Consulting, to launch its
2022 Global Family Office Compensation Survey. Somers says the
survey is the first survey of its kind, focusing on family office
salaries, bonuses and benefits, for C-Suite and front office
executives and non-executives.
Family offices have also risen in prominence and are less
below-radar than they used to be, and not just in the US. They’re
becoming better known, as in the case of when tech billionaires
such as Michael Dell and James Dyson set them up. Coverage is
increasing. WealthBriefing is exclusive media partner to
Highworth Research, a UK-based data and research group producing
detailed figures and commentaries on what single-family offices
around the world do, such as investments. (See
a story here.)
Somers’ experience in executive search means that he has a
ringside seat and often a seat at the table, on the kind of
issues wealth managers come up against. As already mentioned,
diversity – not just gender – is a major concern. Many inheritors
and owners of wealth/businesses are women, and those who may not
have a pre-existing relationship with their parents’ banks and
advisors, he said.
Firms must tailor their talent management accordingly. “To
improve the talent bench, you need people who are
super-sophisticated in their EQ, who are aware of the changes.
The industry is still male dominated. They [firms] have had a
decade to work all this out,” Somers lamented.
Finally, this publication asked Somers about the actual role of
independent executive search organisations in an industry where,
at times, firms have tried to do it in-house.
“In-house recruiters don’t understand the market and are there
because they are cheap. The HR and finance departments are
complicit in this. Rainmaker CEOs see the need to step in
and take back control….as recruiting is too often treated as a
cost issue rather than as an investment,” he said. “Impoverished
recruiting, where too many `Farmers’ are recruited instead of
`Hunters’ accelerates the organisation’s slide towards
`Farmergeddon’ and oblivion,” he added.
(The Somers Partnership was awarded the “Outstanding Contribution
to Thought Leadership” Wealth Briefing Awards 2021.)