Why wealth firms are throwing cash at veteran talent 19 September 2019

Why wealth firms are throwing cash at veteran talent

With new clients increasingly sourced from rivals rather than the newly-rich, one age cohort is in high demand: the industry veteran.

B Robin Amos, Loukia Gyftopoulou Posted 18 September, 2019


Competition for young wealth talent may be intense, but with new clients increasingly sourced from rivals rather than the newly-rich, another age cohort is also in high demand: the industry veteran.

Over the last two years, all the biggest players have ramped up their targeted hires of industry grandees, with the unifying theme being the need to support growth.

While managers of relatively mature client books are inevitably pricier than the young and hungry, there is a deep pool of academic work suggesting that older employees are also more effective than their younger counterparts on a range of measures. So how should you choose to spend your recruitment budget?

Looking back through company announcements, the trend appears to have accelerated over the last three years, with the appointment of Tim Eliot-Cohen, who moved to Close Brothers in 2017 to develop the firm’s high net worth arm after 16 years at Rathbones. This triggered a raft of other senior departures who followed him to his new employer.

Close chief executive Martin Andrews told Wealth Manager: ‘We are a growing business and are focused on providing the best service and propositions to our clients. To support this, we are always looking for high calibre hires.’

Since Eliot-Cohen’s appointment, firms including Charles Stanley, Tilney, Brooks Macdonald, Hampden and Quilter Cheviot have hired leaders with similar levels of experience – often from one another.

This month alone, we have so far reported the moves of at least three investment managers with over 20 years’ experience each, including Close’s hire of 34 year-long industry veteran Paul Denman from Arbuthnot Latham, as well as Brooks' senior appointments to its Cardiff, Hampshire, Edinburgh, and Taunton offices. 

The talent ‘merry-go round’

Brooks’ head of talent acquisition Rob Thomson said intensifying competition for clients has led to ‘a merry-go-round of talent moving between businesses’ as they ‘have undergone large reorganisations and transformations that have created a shake-up of their personnel’.

WH Ireland head of wealth management Stephen Ford said that a ‘long period of consolidation in our sector driven by the larger players’ has also been a factor.

Charles Stanley senior talent acquisition specialist Mark Shirley said that in ‘an environment where we’re all facing pressure on margins, and where we’re all facing an increase in regulatory oversight, we need the highest calibre of people that we can get’.

Ford said his firm will typically seek to hire employees with asset books of £50 million and above. Shirley said that while Charles Stanley understands that there can be no guarantees when it comes to bringing clients on board, the firm generally expects a successful investment manager to eventually be managing over £75 million.

On the other side of the equation, for those looking to hold onto their biggest rainmakers, what leads such established talent to jump ship?

According to Mark Somers, founder and partner of wealth management recruiter Somers Partnership, the answer has more to do about dysfunctional management at the firms they are leaving as what new firms can offer.

Somers told Wealth Manager that in his experience successful wealth managers tend to be client-centered, as well as ‘naturally quite conservative’ in the sense of being reluctant to move to firms unless they sense instability in a firm or a lack of career development.

‘Most [private bankers and investment managers] would prefer to stay where they are. They’d rather not move unless they have to,’ he said.

Destabilising events such as mergers and acquisitions that fail to enhance a firm’s proposition, or changes to pay arrangements, can prompt them to leave.

‘On the more personal side, we again see organisations where poor management can lead to not allowing flexible working and slightly more modern working practices,’ Somers added. It boils down to the problem of ‘lions led by donkeys’, as ‘good performers leave bad managers’.

This is in line with Thomson’s experience. He said: ‘If someone is 100% happy in their role there is no headhunter who can entice them to leave, something has to have changed in their current role that makes them turn their head to look elsewhere.’

From the perspective of firms, there is agreement that while asset gathering is a factor in hiring decisions, skill in building new relationships is just as important, with firms increasingly successful in defending their business.

Somers said: '[businesses] are looking for the skills that an individual has used to build that book somewhere else to apply them in the new business as well.'

Where defecting managers do this successfully, the impact can be significant. Walker Crips had to warn the stock market in July that its earnings would be hit after a team running £239 million quit the firm.

How firms are attracting old hands

The skew towards more experienced managers in wealth and advice businesses highlights the importance of firms being able to attract and retain experienced employees, with too few advisers moving up the ranks to replace them as they approach retirement.

According to Financial Conduct Authority data on the CF30 designation, there are 31,100 client-facing advisers aged over 45, representing 54% of the industry total of 57,200.

The largest group are the 17,400 aged between 45 and 54 – who together make up nearly a third of the full number – while there is a stark decline from the 11,200 between 55 and 64 to the 2,500 aged 65 and over.

Experienced wealth managers are able to demand higher salaries, but this is far from the only factor that influences their decision to switch businesses. Industry veterans were held to put a lot of store in both their own autonomy as well as their impression of a prospective employer more generally.

Shirley listed a number of questions they will be asking, including: ‘Can I do for my clients what I want to be able to do for my clients – is this an organisation where they’re going to feel comfortable? Is this an organisation where I’m going to feel comfortable? And am I going to get taken care of?’

Offering share options

Ford said that ‘the totally money motivated employee is rarely a joy to work with’. But when WH Ireland returns to hiring, following the completion of its restructure, in addition to a competitive salary it intends to offer share options. He hopes these will prove attractive ‘from such an undervalued starting point'.

He also believes the centralisation of decision-making in larger firms has become off-putting to some older professionals. This has led to some ‘fragmentation’ as they ‘join smaller firms, where they can have more say in the investment strategy and perhaps spend less of their time on new asset gathering and dealing with a one-size-fits-all compliance culture'.

More senior employees are also likely to be thinking about how to plan their retirement and the possibility of working flexibly or reducing their hours. Shirley said that, for this reason, Charles Stanley offers retirement deals under which investment managers may leave the company but continue to represent it in an unofficial capacity.

Treating older employees as individuals and listening to their needs is also key, according to Ford. He said: ‘Whether it’s a sabbatical to pursue other interests, flexible working or different work and holiday patterns, it is important to keep an open mind.

‘This can be critical for the over 50s who might have an eye on retirement and, for example, might want to move house to another part of the country and work four longer days each week to facilitate travel.’