A prominent executive search firm in the Asia-Pacific region reflects on the state of the employment market in the private banking, external asset management and other wealth management sectors.
The Asian private banking sector produced mixed fortunes in the employment market last year, with many firms starting 2018 with aggressive hiring strategies before pulling back as market headwinds forced them to change course, according to executive search firm Huddleston Jones.
The front office segment of private banks was a “candidate-driven” market but this segment has changed, with active candidates putting client requirement and platform capability ahead of personal needs or gains, Danny Jones, chief executive at the firm, said in a note.
“Continued consolidation, and the client ‘cannibalisation’ ongoing throughout the industry has increased pressure on relationship managers to provide value outside core day-to-day capabilities. Extensive candidate engagement last year leads us to believe that a large proportion of front office movement in 2018 was actually instigated by client demand versus internal push or external pull factors,” Jones said.
The large Swiss banks, such as UBS and Credit Suisse, or regional players, have not dominated hiring activity: “In fact, we witnessed a resurgence of major international houses that have stood dormant in their hiring activities following the 2009 ‘Global Financial Crisis’”, he said.
“It is these same players that have stolen the headlines in 2018, with transformational hires to re-establish themselves as competitive forces within the Asian private banking sector. This has positively changed the competitive dynamic on the war for talent in Asia, with historic hunting grounds transforming into platforms of choice in the eyes of candidates, ultimately moving emphasis away from `usual suspects’ in terms of hiring,” Jones continued.
External asset managers
Jones struck a cautious note about the external asset manager sector that has seen growth in recent years (see a research report by this news service on the sector here.)
“Challenging economic outlook in major global centres and political instability has created continued market fluctuations, leading to the dramatic dampening of enthusiasm towards the external asset management proposition in comparison to former years,” Jones said.
“The EAM sector spiked in 2015, with a surge of interest from relationship managers eager to explore the benefits of EAMs, with an underlying assumption that the model circumvented rising regulatory pressures surrounding client onboarding and reporting,” he said.
“Last year, we noted a significant fall in candidate inquiries relating to EAM models, with the majority of candidates gravitating towards more traditional private banking platforms. It is our belief that candidates will remain indifferent towards EAMs going into 2019. However, the emphasis will likely switch in the favour of boutique wealth managers that have shown increased growth, appetite and commitment in Asia throughout 2017 and 2018,” Jones continued.
“Market coverage has continued to be an unfavourable factor reducing candidate movement, with various leading market sectors facing country specific slumps due to domestic political policies influencing their financial sector”.
“Examples such as the Indonesian Tax Amnesty, Malaysia’s 1MBD and China’s tightened capital controls impeded revenue consistencies across three of the major wealth management markets in Asia last year. In turn, this has affected movement in what are typically deemed key growth areas for private banks in the region. In attempts to counter-balance market shortcomings, a number of private banks moved away from traditional hiring processes in 2018 by relaxing their expectations to achieve their targeted business growth,” Jones said.
Jones added that there has been a shift towards ‘first year business plans’ as opposed to the traditional three-year commitments expected by hiring managers, with the goal of achieving an 18-month break-even milestone with new recruits. “We sense this was positively received by bankers,” he said.
“The hurdles faced in core Asian markets have subsequently opened the doors to secondary and emerging markets in Asia - including the Philippines, Thailand, Australia and South Asian community - which are gradually moving upwards as primary market focuses”.
“For a second year running, hiring continued into the months of November, December and January which are typically considered as cool-down months in the wake of budgets, bonuses and seasonal festivities. The pace of hiring has continued unabated with employment offers still being produced and approved at a global level, and demand from banks to meet front office candidates kept precedence”.
“Despite strong human capital demand from banks, we still predict that the hiring will remain stagnant throughout the first and second quarter of the year, with interest in external opportunities spiking later in the calendar year when geo-economic tensions resolve and domestic political agendas (1MBD, Tax Amnesty) conclude – encouraging active mind-sets versus passive. The major pull factors that enticed passive candidates to move in 2018 revolved around capability, with two fundamental areas including ‘capital markets synergy’ and the ability to ‘collateralise domestic shares’. In addition to this, stable management, positive brand image and a pro-business approach to account opening remained high on the agenda of candidates,” he said.
Jones concluded by noting that internal consolidation, including the streamlining of costs in supporting functions, was at the forefront of CEOs’ minds last year in major Tier 1 international private banks.
Smaller tier two banks and mid-sized Tier 1 firms, however, used 2018 as a year to develop and enhance product capability and platform processes, embracing technological trading advancements to digitalise their capability in efforts to remain relevant and compete for the next generation of wealth in Asia.
“Private banks went beyond traditional talent pools in 2018 to upscale internal expertise across their product coverage, leveraging from an influx of talent made available through downsizing of investment banks and capital market divisions in Asia. We anticipate a rise in competition for capital market specialists transitioning from product focused roles within the corporate and investment bank into the private bank, fuelled by ongoing displacement. Whilst it is likely CIB candidates will receive salary reductions in comparison to their existing compensation, salary benchmarks within the private banking sector will naturally increase to accommodate talent acquisition at this level,” Jones said.