Throughout the past few years, Asian markets have risen to great significance - wealth creation has followed suit. A new class of wealth has emerged, driving private banks and wealth advisories to grow their businesses in the East. While the amount of wealthy individuals has increased, the amount of trained and experienced wealth advisors and private bankers remains fairly unchanged. This challenge has been met with management and personnel moves from other global centres to Asia.
Several firms have relocated the heads of their private wealth businesses to Hong Kong or Singapore. Firms such as HSBC and JP Morgan have moved leaders from New York or Los Angeles into the Asian markets where they can manage growth more directly and effectively. Swiss firms, such as UBS and Julius Baer are also eyeing Asia as the new profit centre for their private wealth businesses. While a limited number of wealth management professionals are willing to relocate to Asia, the question remains, how do firms answer the demand for these talented individuals?
This year alone revenue in Asia is expected to grow 18%. Global demand for client relationship managers is expected to rise 13% over 2011 and 2012, while growth in the Asia Pacific region will be double that, according to PricewaterhouseCoopers LLP. Perhaps the answer is to invest in developing human capital for the long-term. Hiring more junior level individuals and training them to become trusted advisors is one solution. Some organizations are hiring and others considering internally transitioning investment or corporate bankers into private banking roles. These approaches require significant time and money, both of which are in short demand at the moment. Meanwhile the more seasoned wealth managers are continually being pursued by other banks. The lure is compensation and the result is the creation of some of the largest packages ever seen in the industry.
Retention, therefore, is a key factor most banks will need to effectively utilize in order to manage turnover. By offering better training and top resources, including system reporting, risk controls, operational support, enhanced product development capabilities and more competitive compensation schemes, these banks can contend with the talent war they face.
Many firms publicize their ambitious recruiting goals;
- Deutsche Bank plans to add 30 relationship managers annually while boutique firms such as EFG aim to double Asian headcount to around 800 over the next 3-5 years.
- However, the complexity of the market precludes most from reaching these goals within the reasonable timeframe. Banks such as HSBC, Citibank and JP Morgan, have internally relocated Wealth Management leaders to the region in recognition that they must have key decision makers in local markets with access to local pipeline.
- RBC’s Asian wealth arm continues to seek small to mid-sized asset management firms for acquisition in an effort to increase regional presence and market share, they are simultaneously hiring or relocating talented bankers and investment professionals from developed, mature markets.
Since relocation of private wealth professionals is a viable option, a growing compensation gap is appearing between Swiss and US private bankers and their counterparts in Asia. The key is finding the right talent as well as striking a balance with compelling compensation packages and cost control.
Local search specialists estimate that the premium to attract somebody new in Asia is approximately 20% to 30% of their base compensation. According to PricewaterhouseCoopers, in Singapore and Hong Kong, only 25 % of relationship managers are able to bring more than 60 % of the assets they manage to their new employer.
It is clear that possession of superior market knowledge and expert advice on human capital will play a significant role in differentiating private banks and how they handle the challenges that lie ahead in Asia.