This publication recently spoke to a number of wealth management executive search firms about their views about trends in the industry and issues to watch this year.

Late last month, this publication’s sister website, WealthBriefingAsia, carried a roundup of views from wealth management executive search firms looking at trends in the job industry. (See here.) The following comments are from some executive search professionals working predominantly in North America or with clients from this region. If any readers in this sector still wish to add comments here, do get in touch via tom.burroughes@wealthbriefing.com

Conor Hourigan, of David Barrett Partners, New York.

Hourigan predicted “strong market confidence and all firms in expansion mode as it relates to hiring advisors" (less so in the "cost centers" – in other words, functional areas and products/services). He said this confidence has risen now that the “fiscal cliff” and US elections are finally behind us.

Multi-family offices and RIAs are targeting significant growth but looking for candidates who will accept some “skin in the game,” Hourigan said. “There is an increased interest from senior advisors in large firms to consider making such a move,” he said.

“Single family offices continue to grow or be created and interest in this sector from all facets of the market remains strong,” he said. Hourigan said such families are becoming increasingly focused on hiring top-flight investment talent with a track record at another family or a foundation/endowment. However, many such organizations may struggle to attract those from foundations/endowments despite potential higher compensation possibilities.

Hourigan said San Francisco/Bay Area remains a significant focus for wealth management firms to crack, especially the Silicon Valley area. New York is very active once more and Houston remains buoyant, he said.

What are the risks and challenges?

“Wire-houses are still slimming down to become more profitable. Some fear they are cutting too much or have already done so,” he said. He said the lack of up-front compensation/guarantees remains a challenge for RIAs/MFOs to attract top advisors from larger firms.

Hourigan also argued that continued growth of the single family office market will lead to fewer opportunities for advisors at the larger UHNW firms as many wealthy individuals take their investment strategy and manage it in-house.

“While there is a strong flow of IPO activity in the technology and energy sectors which benefit the wealth management markets of Houston and San Francisco enormously, there still remains a somewhat muted level of liquidity events in many other sectors which is not helpful for the rest of the wealth management market as a whole,” he said.

Caldwell Partners. Richard Stein, partner, New York.

“In general, there has been a redeployment of global resources to this [wealth management] specific sector at a time when very few other parts of these [financial] organizations are making any money in investment banking or securities businesses,” said Stein.

Stein said that the mismatch between supply and demand for talent had created a scramble for resources. 

“Clients generally don’t like it when coverage people move around too much. We have canvassed about 400 top clients in the US; for some of the large firms they have noticed deterioration in terms of documentation relating to bespoke coverage. They feel like a number,” Stein said.

Stein spoke about the changing remuneration models at UBS, Morgan Stanley, Deutsche Bank and similar firms in recent years. “They are all very much driven on commission.”

A number of 10-year contract notes are coming up for renewal this year at such firms and may not be renewed, he said.

Geographies?

“The US market is very fragmented…and no one firm has a big share of the market at all. In somewhere like Seattle, say, the firms that do best are boutiques and small firms. It also varies a lot depending on which areas you work in and come from,” he said. “When you come to Texas, people like big, brash firms, with economies of scale.”

“In New York, you have a preference for the larger players. In Philadelphia, there is a preference for much smaller firms, some of which are very old. The same is true in the Boston area. As for Florida, it varies a lot between the east and west of the state. In the west coast, you get a lot of Canadians and people from the Midwest there; on the east side, a lot of people from New York area and they like the firms from there. In California, it varies from the north and south of the state; there are a lot of boutiques in San Francisco. In Los Angeles, you get the larger banks,” he said.

“Certain types of people are in strong demand, such as those who can build up a business from scratch and reinvent investment platforms. There is demand for solutions-driven people with capital markets experience. Some of those leaving investment banks have skills appropriate to wealth management,” he said.

Another trend is the integration of wealth and asset management platforms, he said. (In Europe, this is happening with Credit Suisse), he said.

Monica Vida, wealth and asset management, Sheffield Haworth

What would you say is the most noticeable trend in the wealth management recruitment market at present and for the next 12 months, and why?

“There remains a strong recruitment effort for asset gatherers and revenue generators but there is also a growing focus on financial planning, estate planning and insurance professionals as these parts of holistic wealth management gain client focus and demand. Technology is undeniably important for efficient transparent servicing of clients and creating differentiators at wealth management organizations thus professionals who understand this space are needed,” Vida said.

Which areas of wealth management do you see as offering the biggest opportunities for growth and which areas are the least promising? Again, can you briefly say why?

“I think the market continues to move away from the large, ‘supermarket’-style banks and embrace boutique wealth management firms and RIAs. There is fatigue around the ‘big brands’ and their consistent appearance in newspaper headlines. There is also a perception by clients that these large banks are engaging in ‘product pushing’ more than tailored client management. Additionally, I think we will see more family offices become multi-family offices to leverage shared resources as well as a means to afford/entice talent from The Street. The challenge will be to design compelling compensation models and career growth initiatives while maintaining the unique culture of the organization,” she said.

How and in what ways would you say the wealth management jobs market has changed the most in recent years?

“The market has of course contracted quite a bit. While the financial crisis may have been the driving change, I believe once banks and firms began to examine their organizations, they realized a genuine need to improve efficiencies. Increasing amounts of banks/advisories expect several professionals of a wealth management team to have a sales/marketing element to their position. For example, as a trust officer in the past one may have only been evaluated on their performance of setting up/maintaining trusts but in today’s market there is likely a part of the bonus predicated on business originated or secured,” Vida said.

“For the future, there will likely be a succession planning issue due to the contraction of the job market. This will bring challenges in balancing lean organizations with planning for departures, retirements and underperformers,” she said.

What regions of the world/your local region would you say are the most/least busy in terms of recruitment?

“In the US, I’ve seen more activity in Southern Florida, along the Mid-Atlantic as well as the states of California (LA) and Texas (Dallas & Houston). Asia, of course, remains more dynamic due to greater wealth creation – China leading the pack. While growth in Latin America slowed a bit in 2012 the region as a whole is still on an incline. Brazil and Mexico may slow but markets such as Chile, Colombia and Peru will pick up the pace,” Vida said.