Head Hunter Suggests Novel New Recruitment Idea for Private Bankers

Contributing Editor

28 June 2006

Wealth managers are having to pay ever rising packages to attract talent, but can often be disappointed with the results when they attract top talent in terms of assets gathered for their firm. Nor is there any guarantee such talent will stay that long. One way of freeing up the current reluctance felt by the hiring firm to recruit top producers and at the same time reward private bankers a salary they feel they deserve is a forgivable loan, says a London-based head hunter specialising in the wealth and asset management area. Mark Somers of the Somers Partnership says a forgivable loan can introduce much-needed liquidity into the hiring process and lower the risk for the hiring firm in terms of future performance of the individual as well as help to retain top performing managers. Mr Somers says that a forgivable loan package works whereby a recently hired asset gatherer would paid the previous year's package which would be paid in the form of a forgivable loan over a fixed period, usually between five and ten years. For example, if a relationship manager was hired for a package worth a percentage of their production, say £400,000 ($729,513) on production worth £2 million, then the forgivable loan would be £400,000, which could be paid over a period of 10 years. No money would be paid back for the period that the relationship manager stays with the wealth manager. Every year the relationship manager stays with the wealth manager £40,000 would be written off. The loan would only become payable if the relationship manager leaves before the period of the forgivable loan – in the above case before 10 years. “The benefits of such a system are that it protects wealth managers to some extent from seeing high performing asset gatherers leaving after a short period after being hired. It also enables wealth managers to structure the initial package necessary to attract high performers,” said Mr Somers. If a wealth manager wanted to hire someone on a forgivable loan package, the firm would have to pay off the loan on top of offering a new package to the relationship manager. Mr Somers, who is about to release his fifth annual Wealth & Asset Management Compensation survey, says the practice is growing in the US and its just a matter of time before it comes across to Europe. “If it’s not more widely adopted here, then it should be.”