As a headhunter and former private banker, I’m used to taking calls from relationship managers in Singapore looking for new opportunities – but these days RMs aren’t always keen to stay in banking.
In fact, compared to just 12 months ago, I’ve seen a 50% increase in enquiries about jobs at the independent boutiques of the wealth management world – external asset managers (EAMs).
Moreover, RMs are contacting me about EAM roles in Singapore on their own initiative – last year it was mainly me getting in touch with them.
This dramatic increase initially surprised me, but having spoken to quite a few RMs I’ve now identified some of the reasons behind it.
A major factor is the well-known rising burden of compliance, which impacts the ease of doing business, the onboarding of new clients and the acquisition of net new money.
There are so many stringent rules now that RMs at the big banks are getting frustrated – they feel like their arms and legs are tied and yet they still have AUM and revenue targets to meet.
Although basic pay is still attractive at private banks, total compensation is suffering – as profit margins tighten, bonuses are falling at some banks. RMs are essentially working just as hard for less money.
At an external asset manager, however, the way your remuneration is calculated is more straightforward and the money is shared more equally with you.
You get a set percentage of the revenue you bring to the EAM, usually between 30% and 50% (some EAMs even offer up to 80% for high revenue generators).
When a deal is done with a client, the bank pays the EAM, and the EAM pays you. You don’t always need to wait until annual bonus time to get your cut – some firms pay quarterly or every six months.
At a private bank you might be ‘compelled’ to sell certain products in order to meet the firm’s objectives.
The bank might also control the type of clients you are allowed to take in. It might, for example, rule out any clients from a particular market or industry, even if you have established good relationships with them.
This isn’t because that country is on any international sanctions list, but because potential compliance issues could crop up down the track and the bank doesn’t want to give people the benefit of the doubt.
By contrast, EAMs don’t care about clients’ nationality as long as they adhere to MAS regulations and they don’t come from sanctioned or blacklisted countries.
EAMs typically also offer a non-bureaucratic culture and have simple reporting lines within flat management structures.
RMs at external asset managers can potentially acquire all the AUM their clients have invested across multiple banks, if the EAM works with these banks. They’d need to convince clients to give them the legal mandate (power of attorney) to manage their AUM at each bank.
The recent rise in private bankers wanting to work for EAMs is well timed.
EAMs are increasing in number – my rough estimate is that there are probably around 200 of them in Singapore, each with about two to four relationship managers – and they are hiring more than they were last year.
EAMs mainly want to recruit private bankers, but because of their rising need for front-office staff, they are increasingly open to investment bankers and corporate bankers who have strong networks with wealthy people in Asia.
Of course, there are downsides to joining an EAM – and I always point these out to bankers.
Job security and career progression are still better at private banks, for example.
Because EAMs are so small, your career is virtually set in stone. The only progression you might aspire to is a slightly higher corporate ranking and better pay/profit sharing, all of which absolutely hinge on your sales revenue.
And if you join an EAM in Singapore, you must face the fact that wealthy people in Asia are not so used to the concept of external management as their counterparts in Europe and the US are. It’s an emerging industry here.
Clients of an EAM actually still have their assets held by banks – the EAM just manages these assets on their behalf. But a mindset change is needed in Asia because some clients still need convincing that their money is indeed still booked with Credit Suisse or UBS, for example, and the products they buy still come from these banks.
If a banker tells me they’re interested in an EAM role, I won’t just start looking for them right away, I’ll first give them a proper career consultation. It may be that they’re actually better off not moving.
I ask them about their client breakdown, which other banks their clients use, and what products they invest in. If their clients require corporate banking and investment banking products, for example, joining an EAM may not be a good idea.
Crucially, I ask how receptive their clients are to an EAM model (would they give them authority to manage assets across several banks?). If they don’t know, they need to find out exactly how many clients are ready to sign up to an EAM.
It’s important to establish whether RMs are really ready for such a big career change or whether they’re just looking to escape the pressures of private banking.
Liu San Li is a former Coutts private banker. He is now client director in private wealth management at search firm EMA Partners in Singapore, providing recruitment and career consultation services for mid to senior-level bankers.
Image credit: Martin Barraud, Getty