Private Client Investment Management –
Understanding who you need to hire

WRITTEN SEPT 2020

I first started recruiting for the private client investment management industry in 2007. The world was booming, the industry was incredibly vibrant with space for everyone. The large firms were hiring like crazy, there were some fast growing boutiques with excellent levels of AuM per IM, ROA’s were good and confidence was sky-high, as was pay. The deals negotiated then with sign-on bonuses, guarantees, and earn outs that had the potential to make people millionaires, seem like a lifetime ago. We all know what happened next, but if you need reminding: the financial crisis, the Greek crisis, RDR, the Scottish referendum, the Brexit referendum, and now a pandemic (although, ironically, I think this “crisis” may invigorate many wealth managers – that’s another article).

It wasn’t a diverse industry either. In fact, despite clients sometimes mentioning in passing they would like more female investment managers in their team (as we looked over a room of men), there wasn’t any serious programmes to improve diversity. It was a very male, very middle class profession, where marketing was often limited to word of mouth or the occasional advert in the Telegraph. It worked though, but mainly due to brand equity, technology not being where it is today, and in short most industries perform well in a rising tide (real incomes grew by 18% between 1997-206 in the UK). Roll on nearly fifteen years and the industry is very different. Pay isn’t anything like it used to be, margins are compressed, these things called “robo advisers” exist, and firms are generally struggling to define their purpose (please visit our article on Wealth Management post COVID).

However, whether it’s 2007 or today, the industry always had an underlying problem that I feel is a barrier to their organic growth and I think it could be “some private client investment management firms don’t fully understand the team they have, the people they hire, or the team they need”.

The world of wealth management today is far more competitive. We’ve had low growth in the UK for a long time, but markets have been okay and dividends generous, and if these were reinvested returns probably look quite good. However, wealth creation has been weak. Do professionals save and invest as much as they used to? I don’t think so. Are there as many IPOs? There is, however, a huge amount of inheritance passing between generations, but most wealth managers dread a transfer of wealth as money “leaks” out of investments into paying off mortgages or school fees. So what we’ve seen is that firms are trying to poach clients off each other, they are trading market share, and this is mainly done via hiring investment managers.

Hiring is done in a number of ways:

  1. Staff referrals
    Typically to have close relationships with clients, somebody needs to have been in the industry circa 10 years+. Investment Managers are encouraged to speak to former colleagues with a potential client base, but this generally reinforces the lack of diversity, despite us knowing that the client of the future is likely to come from more diverse backgrounds, as well as female, and possibly millennials (Accenture has some good research on this).
  2. Internal recruitment teams
    These can often be relatively inexperienced with small networks and from anecdotal evidence sometimes submit what they have. They send the hirer anyone that meets the criteria, because they haven’t slept for weeks, having struggled to identify anyone.
  3. External recruiters
    Despite being “talent” businesses, too many investment managers rely on contingent recruitment arrangements that allow them to commit to little as a client, but also deliver very little for the business
The real problem

Whilst all of the above could be improved upon, I think there are some fundamental tensions that inhibit growth. Most investment managers enter the industry to be the next Warren Buffett, but they are increasingly asked to sell. Their first love, though, is investing. Investment processes are increasingly centralised, marketing is getting much better, but many firms are still quite passive in this area, and for most firms, their salesforce is the investment managers. I suspect many investment management firms, if they performed psychometric tests, would find that they have a number of people in their front office who are highly conscientious (and therefore who will sell if asked to), who have a healthy relationship with risk, but who may also score quite a bit higher on introversion than your traditional salesperson. This may not be the most natural blend for someone who is increasingly being asked to sell in a very competitive market.

private client investment management - growthIn today’s world, we can find out quite a lot about peoples’ competitiveness, team skills, and working styles from testing. C-suite execs need to first understand the blend of their workforce, then hire to mitigate any areas of weakness, hiring personalities (as well as books) based on the criteria required to fuel organic growth. After nearly fifteen years recruiting in this field, I still get excited when I meet that rare person who I think has a well-rounded skill set. The intellectually curious person, who is technically strong, competitive, an extrovert, and a team player is a joy to interview. Why? I know they will go on to build a great client base. Most importantly, I know that they will continue to build a client base once the initial hit of transferring assets from a previous employer has faded.

We’ve seen firms try to adopt a more private banking inspired structure, with hunters and farmers, but many don’t, and again much is built on gut feeling and teams are quite similar in their make-up. I feel that by building more diverse workforces, who represented the markets investment management firms will operate in over the next five years, and by focusing as much on the personality types they are hiring as much as the books they want, many investment management firms will see accelerated growth – particularly if they improve their marketing presence.

About Fram Search

Fram’s Wealth Management Practice was established by Simon Roderick in 2010. Simon is a Law graduate from the University of London and he has 20 years buy-side recruitment experience. We work with clients across the UK and internationally and these include: Family Offices (both single and multi-family offices), Investment Managers, Wealth Managers, and Private Banks. We offer both retained an contingent search, and we also offer psychometric testing.

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