Private banks of all sizes in Asia – from UBP to UBS – are looking to recruit this year, but at the same time they’re increasingly putting their current relationship managers under the microscope. If you underperform, your job has never been more at risk, say industry experts.
Credit Suisse is ahead of the game. In 2017, the number of relationship managers in its APAC private bank fell from 650 to 590 year on year, according to its financial results. But assets under management and productivity (AUM divided by headcount) both increased, suggesting that it retained its best RMs and that some of the departing ones were underperformers. The average RM at Credit Suisse in APAC now manages CHF333m in assets, compared with CHF260m in 2016 – a rise of about 28%.
Headhunters expect more private banks to reshuffle their headcounts in 2018, weeding out RMs who are missing targets, while retaining and recruiting more rainmakers. While millionaire and billionaire populations are rising across Asia, revenue pressure on banks is growing. Pre-tax profit margins in Asia Pacific private banking are 21 basis points of assets under management, compared with 25 to 26 basis points in Europe, according to Boston Consulting Group. As a result, several firms – including Coutts, Barclays, ABN Amro and ANZ – have recently exited wealth management in the region.
“All private banks in Singapore and Hong Kong will let go of more non-performing bankers this year, having given them time to build a business,” says Rahul Sen, a former Merrill Lynch private banker, now head of wealth management at search firm The Omerta Group.
“The bottom 5% to 10% of performers are now being put on red alert because of various factors: clients not suitable for the bank’s platform, client overlap with other RMs, overestimating client flow, and the previous bank being able to defend its books,” says Sen. “Unfortunately, there will be bankers who won’t make the cut and will have to look for jobs elsewhere.”
Most tier-one banks in Hong Kong and Singapore emphasise AUM over revenue as a performance indicator for newly recruited RMs. “Failure to deliver minimum AUM expectations could result in termination,” says ex-private banker Liu San Li, now head of banking at BTI Executive Search. “Revenue targets, on the other hand – at about 0.50% to 0.75% of AUM committed – tend to be more generous for new RMs.”
After two years of employment, however, banks’ measurement of performance “shifts heavily” toward revenue, says Liu. “AUM – mainly measured in yearly increments of $20m to $40m, depending on seniority – is still a KPI, but is much less important. Revenue is now crucial. Your return on assets will need to be at least 1% or more,” adds Liu.
As base salaries surge in Asian wealth management, private banks are also stepping up their performance-related job cuts to ensure they are getting “reasonable” returns from their expensive RM workforces, says Sen. As we noted in November, boutique private banks such as LGT, VP Bank, EFG, and Safra Sarasin are offering salary increments of between 30% and 50% to new joiners. Pay rise for large firms (the likes of UBS and Citi) are still generous at 20% to 30%.
While performance redundancies may be on the rise this year, those who get axed won’t always struggle to find new work. Skill shortages mean that unemployed private bankers in Asia face a less brutal job market than out-of-work investment bankers. “The old bank’s client segment or product platform might not have been suitable for the RM, so they had genuine reasons for not being able to move their clients across,” says Sen. “If the new bank understands this, it opens up the possibility of another job.”
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