Although 2006 and 2007 saw a seemingly inexhaustible demand for relationship managers commanding six-figure pay packages, 2008 looks to be a year of consolidation and quality control in the recruitment process, leading bankers indicate.
Barend Janssens, head of ABN AMRO Private Bank, Asia, says that generally 2007 was a very good year for private banking. He said: “Therefore, people are expecting good bonuses – payable in February and March 2008. Markets are cautious, as the subprime issue is not over. The market’s view is that there will be more writedowns – the impact of which will become clearer when the banks release their 2007 results in February or March. This will clearly have a ripple effect on markets, clients and then on hiring.”
If the first quarter is positive, he believes it will be “business as usual, which points to a generally good year to be a private banker. If there is more caution, then junior- to mid-level private bankers will find the going tougher. Seasoned bankers have ridden this through so they will have the tenacity and experience to ride through another bumpy year.”
At Julius Baer, Wilfried Kofmehl, head of South-East Asian operations, cautioned that private banking revenue growth in Asia may slow this year due to volatile markets. Nonetheless, Baer, which has just hired six bankers from UBS, is staying with its expansion plans in the region, which includes adding another 100 staff by 2010/11. Its UBS hires include Michael de Santiesteban, who becomes Baer team head and managing director, marketing, for South-East Asia.
For many banks, Asia-Pacific is still seen as a key area for growth of wealth management, particularly at a time when the US economy looks as if it will slide into recession and Europe could slow as well.
Mark Morgan, head of human resources for Citi Global Wealth Management, International, said: “We expect to continue growing our Asia-Pacific business in strong double-digit percentage terms in the short to medium term and we will therefore continue to recruit the appropriate talent in order to match our business expansion and growth needs.”
Headhunting firms are also confident of a bumper crop of recruitment targets, especially after the bonus season. Roger Wilson, managing director for Boyden Global Executive Search, said: “We’re still in a hot market – everyone is buying anyone that has private banking capability. People express preferences but no one is going to turn down a good quality younger banker. There is still a huge talent shortfall so you can’t be too fussy and want only ten years of experience if someone has only eight years.”
Wilson declared: “Markets that are lopsided on either the supply or demand side are very attractive for executive search. But if either the buyer or seller has too much power, deals are difficult to do. At the moment, the seller is king. Sellers are spoilt for choice and have multiple alternatives that they can keep as an asset bank.”
Roman Scott, managing director of Calamander Capital, a consultancy, contended that the private bankers “are still talking bullish because everyone wants to keep up the momentum. They do not want to sound the alarm bells that there will be a slowdown and so have to maintain an air of bullishness.”
He continued: “We remain concerned but not worried. If you are worried you would be firing people, but if you are concerned you are probably not hiring. For those banks that are exposed to China and India, they can be more ‘gung-ho’ and say that they are still growing, but the classic private banks are cautious.”
No more blank cheques
Although this year’s bonus levels are likely to reflect the boom that marked 2007, there has been talk in the market that next year’s remuneration will not see the double-digit growth that relationship managers have enjoyed for the past two to three years.
Scott points out that the cost base of the private banking industry is heavily weighted towards the expense of people. He said: “Somebody has to deflate the relationship manager price bubble. It was getting out of control with everyone paying more and more. After the bonuses are done, there will be a cool down – enough is enough. Wages cannot grow 20 percent year-on-year. I would not be surprised if at the end of 2008, people will be taking home about the same about as they did in 2007.”
But Wilson insisted: “There are plenty of buyers (for talent) out there and I don’t really expect them to ‘haircut’ too much on offers. There must be some subprime collateral impact but if you offer 20 percent less than what they are expecting you may be disappointed. Many bankers are likely to be in touch with headhunters already and/or have headhunters swarming around them!”
Rahul Malhotra, Merrill Lynch’s head of global wealth management, Asia-Pacific, agreed: “As in the past, you are going to have to pay for the big performers and the level of quality they bring to the table. And this will continue to be the case this year as well.”
Talking to PBI, he said he is bullish on the hiring outlook though his optimism comes with the qualifier that is often heard across the industry. “Merrill Lynch Global Wealth Management will focus on its continued ramping up of hiring, given our robust outlook. While we cannot speak for other banks, we predict hiring will continue across the region, perhaps not as aggressively as before,” he said. “What we have seen previously, over the past two to three years, has been more of mass-scale hiring within the industry. Going forward, we are looking generally at banks hiring on a more selective basis.”
ABN AMRO’s Janssens maintained: “The days of hiring big teams are minimal. Most banks have done this over the past year. The pressure is on for teams to start producing.”
The banker said he is hearing from the market that some banks are “beginning to realise that they over-hired”. He said: “Smaller private banks will feel the pinch more because of the lag effect as they hired on the curve close to the apex. With the market less rosy now, they are feeling the pressure and are reacting with more caution.”
Calamander’s Scott believes that, in fact, the smaller, boutique private banks stand to gain from the current market tumult but are not marketing enough. He said: “If you’re a smaller bank, you would have previously faced an uphill battle in market awareness as these global giants are everywhere. But they should now be going out and saying that ‘we only do private banking and will never be caught with our trousers down with [collateralised debt obligations]’.”