The days of the cushy private banking job have been traded for a demanding role amid growing challenges and mounting expectations for both wealth managers and their clients. The good news is firms are hiring at a rapid clip. As boutiques snap up talent from big banks and firms, the behemoths are tapping smaller competitors as well as direct rivals in a climate conducive to consolidation.
Does the new landscape offer enough reward for those who are eager to expand their skills and take on new struggles?
The industry at large faces a higher cost-to-income ratio, as investors choose capital preservation products, which generate lower fees for managers. Dwindling returns and squeezed assets have diminished trust as clients seek greater returns along with increased risk management and wealth preservation. There is a general aversion to in-house funds as investors flock to lower cost options such as exchange-traded funds. In a digital age, consumers have become more savvy and aware, yet also more wary of costly products.
Regulatory hurdles are bumping even the most coveted private banking locations such as Luxembourg and Switzerland. The Foreign Account Tax Compliance Act (FATCA) will effectively force U.S. nationals to divulge all their investments anywhere in the world. Meantime, the Alternative Investment Fund Managers Directive (AIFMD) and the Markets in Financial Instruments Directive (MiFID) II in Europe, along with the Dodd-Frank Wall Street Reform and Consumer Protection Act in the U.S. will lead to even more scrutiny and changes for wealth managers. All this will lead to greater expenditure on technology needs that can’t be met with the traditional back office.
But those who survive in this changing marketplace will indeed thrive. The 20 largest wealth managers manage about $11 trillion of assets, which is just 10% of the private wealth that could be targeted. The Boston Consulting Group estimates that by 2016, private wealth will reach $151.2 trillion, with an overall compound annual growth rate (CAGR) of 4.2%. That means HNW and ultra-high-net-worth households are expected to flourish at 6% and 7.5%, respectively. There is plenty of opportunity worldwide, with rapid growth forecast for Latin America and in Asia. Just 17% of Asia’s HNW individuals have wealth management relationships with their banks, according to the Julius Baer Group.
A look at hires over the last three months shows a lucrative market for firms that are building out their private banking business in an industry that is ripe for widespread consolidation.
Boutiques across the U.S. are poaching from big banks and firms.
Raymond James recruited Dashboard Wealth Advisors, an independent firm, from Morgan Stanley, where the team managed more than $240 million in client assets and had annual fees and commissions of $1.9 million. Also joining the Jacksonville, Fla., branch of Raymond James & Associates, is Brannam Wealth Management from UBS, where the team managed more than $250 million in client assets and had more than $1.5 million in annual fees and commissions.
Capital Investment Companies, an independent financial services firm based in the Southeast, added five advisors, including one from Wells Fargo Advisors.
F-Squared Investments hired Sharon French as president of its new distribution unit, F-Squared Capital, from BlackRock, where she was managing director and head of private client and institutions. French also served as a member of BlackRock’s U.S. senior management team for the iShares ETF business. Before BlackRock, she spent nearly a decade at AllianceBernstein, where she was managing director.
Fort Pitt Capital Group plucked Jay Sommariva as vice president and senior fixed-income portfolio manager from BNY Mellon in Pittsburgh, where as vice president and senior portfolio manager he managed $50 billion in short-duration ﬁxed-income assets for 35 portfolios. He’s also worked at Northern Trust and Mellon Financial Corporation.
Robert W. Baird & Co nabbed a father-son team from UBS Wealth Management Americas.
Meantime, the big fish are dipping into the smaller seas to grow their businesses.
Richard Glass joined Deutsche Asset & Wealth Management as U.S. head of small- and mid-cap value equities from Lockwell Investments. Asset managers Richard J. Hanlon and Mary C. Schafer moved to DeAWM from Glenville Capital Management and Lockwell, respectively.
And the battle of the titans continues.
UBS Wealth Management America hired Bruce Lanser from Morgan Stanley Wealth Management, where he and his team oversaw $600 million in client assets and $1.1 million in annual revenue production.
DeWAM picked up Felipe Godard as a managing director and head of wealth management, Latin America, from Credit Suisse.
Morgan Stanley Wealth Management grabbed Martin Domres from Deutsche Bank, where he managed $350 million in client assets and produced more than $2 million in annual revenue.
Neuberger Berman Group grabbed Jon Jonsson from J.P. Morgan Asset Management as managing director and senior portfolio manager for global fixed income strategies.
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