A route to growth – hire a team?
Investment Management was actually performing quite well pre-COVID and indeed many leaders are surprised at how well their businesses have transitioned to working from home. They are also surprised, but delighted, at the speed the markets bounced back at. However, it hasn’t all been plain sailing for the investment management market. A financial crisis, a Greek crisis, RDR, increased regulation, and Brexit, made the industry stagnant and low growth for some time. We’ve seen continued consolidation, as firms look for scale and efficiencies, but regardless of this it’s still a large industry and the outlook is positive.
Against this backdrop, a number of firms were on the hunt again for assets by increasing their front office headcount pre-COVID and after a pause many are still keen to hire. Whilst there is still a disconnect between firms not wanting de-risk a hire and investment managers trying to de-risk a move the gap has narrowed to more acceptable levels. Hiring activity is increasing. However, there are still too many firms who want to hire investment managers with books and too few to go around. Why the clamour? We don’t see many firms with a great flow of new clients. Quite often it’s left to individual managers to attract their own clients, or if a firm has a business development team they are trading market share as wealth creation in the UK has been weak. In short a reliable flow of new recruits is still one of the best ways to grown and investment management business. Firms can only trim costs so much and eventually, if firms are ambitious, they need to grow the top line too.
The fastest way to grow any business is via acquisition, but these can be complex and take up too much management time. A whole integration team needs to be created and acquisitons can be high risk but high reward. Hiring an inexperienced team is the cheapest way to grow a business, but it’s slow and again comes with the risk the project fails. Therefore, hiring a team can be a good solution. The team works and onboarding can be easy. They know each other, the clients have already seen their performance for themselves, and hiring them can provide the hiring firm with a PR boost. A good quality team can move the needle for most firms and when working out remuneration packages hirers need to understand that once the bottom of the j-curve is reached, the assets are likely to generate a return for the hirer for many years.
It sounds so easy, but the pre-hiring process is very time consuming and complex. There aren’t that many teams available at any one time and most firms don’t know how to engage them, how to make the deal attractive, and how to manage a team move process. Our FREE webinar gives some advice on how to hire top tier wealth managers. It’s quite focused on financial advisers, but it gives hiring firms an insight to some very useful tips.
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However, the best way to hire a team is to hire an experienced headhunter with network and experience to identify, select, and manage a team move. It can take time and a target of one quality team a year from a headhunter is about right, but done correctly it can really give your business real growth in a low growth environment. It won’t be cheap either, as the search consultant will need to dedicate a significant part of their time to the process, but given the potential revenues over a 7-10 year period it is actually cost effective. There are of course other ways we see to growing assets under management, but we’ll leave that to another article.
If you would like to discuss in confidence anything in this article, then please don’t hesitate to contact us on 01525 864 372 / [email protected]. Learn more about Fram's Wealth Management practice here.
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