During the past two years investment consulting has become one of the fastest growing areas of private wealth management. Coutts was one of the first private banks to pioneer this initiative in the early 2000’s. Individuals suited to this role need experience working in capital markets and with private clients, in order to understand the transition of cash to product. Their participation in client pitches helps convert traditional banking relationships into discretionary accounts.
Currently there is a dearth of experienced investment consultants in the private wealth space. As a result, the challenge is to identify alternative talent pools for this very pivotal role. The idea of becoming an investment consultant may appeal to bankers or asset managers who may be looking to transition into private wealth management.
Is it too cynical to suggest that investment consulting is a clever way to make client assets ‘sticky’ by institutionalizing the client by wrapping more relationships around them?
For private banks with scale, investment consulting is seen as a very effective way of retaining client assets. Benefits and opportunities include:
- Investment consultants can free up resources for relationship managers to bring in more assets and arguably unify the approach to client portfolios and ensure best practices.
- Strong candidates will have experience in capital markets and have also spent time with private clients and understand the transition of cash to product.
- In light of the Retail Distribution Review (RDR), investment consulting enables compliance with new step-change requirements, while retaining existing staff expertise and experience.
However there are weaknesses:
- Projections indicate that a majority of CRMs will not pass the PCIAM set by the FSA by 2012, given the 20 day minimum revision period.
- The cost of providing wealth management services will increase.
All private banks, even those who have been badly tarnished during the credit crisis, have bounced back and are unilaterally determined to grow. Top producers are expensive and are looking for greater incentives to move more than ever. If banks bring in mid level individuals and pair them up with an investment consultant, arguably they create an equally valuable asset for the firm.
In order for a global firm to be successful in hiring investment consultants, banks would be advised to partner up with a dedicated wealth management team, who could utilize their extensive network across diverse candidate populations including wealth management, investment banking, asset management and family offices.