A route to growth – hire a team?

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If I had to choose one word to describe the investment management market in the last 12 months it would be “stagnant”. Beyond the continued consolidation, something I expect to continue, the industry has struggled to find any meaningful growth. Fortunately, the equity market has performed well in recent months and that perhaps masks that many firms have struggled.

The second Wealth of Opportunities report – a joint research report by the British Bankers Association (BBA) and the Wealth Management Association (WMA) – concluded that wealth management and private banking firms costs totalled nearly £4.5 billion in 2016 . It’s against this backdrop, and the added uncertainty of Brexit, that many wealth management firms have struggled to increase their profits.

However, many are keen to grow and believe in their long term business model, but few have increased their front office headcount – despite there being lots of investment managers looking for a new role. There’s a real disconnect between what investment managers can bring to the table (often intellect and good people skills) and what clients want (assets).

It used to be that an investment manager with £50 million of AuM would hope to transfer £10 million and would have a number of firms keen to hire them – this wouldn’t happen now. Firms have got better at defending assets, or putting a team around a client, and quite simply £10 million of AuM isn’t enough to be attractive any more. At this level an investment manager isn’t going to cover their costs, there isn’t enough new business to top them up, and £10 million isn’t enough to move the dial sufficiently to take on the risk (the risk being the manager doesn’t transfer anything).

We’ve ended up in a stagnant world where too many investment managers want to join a firm where they can take on existing clients, and too few books to go round.

However, what happens if there’s an opportunity to add £100 million of assets to your business in a short space of time, or £150 million? This can happen when you hire a team. The other benefit being that you can tell your clients and competitors that you’ve hired a highly experienced team. I think most firms would find that attractive and would find the risk/reward trade off attractive. That’s what hiring a high quality team can do, and the other derivative benefit? They often end up attracting other high calibre colleagues from their previous firm to your business.

It sounds so easy, but it’s not that easy to do. 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: Webinars It’s quite focused on financial advisers, but it gives hiring firms an insight to some very useful concepts.

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. There are 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.

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