The number of wealth management job recruiters will fall with only the fittest and most experienced players surviving in the tough economic environment, recruiters predict.

Like a high-quality private banker, recruiters will need to have established a multi-year track record of work in the industry to succeed in what will be a tough year, they say. They say that new entrants who treat the wealth sector as a safe haven compared with the hard-hit investment banking sector will face a shock. 

“The private wealth space is being viewed very much now as a safe haven, a harbour for some to weather the torrid times brought about by the recession,” Sophie De Ferranti, head of international private banking for executive search firm Carpenter Farraday, told WealthBriefing.

Her views echo those of recruiters who told Wealthbriefing earlier this month that they expect a tough year ahead although with some remaining hotspots. While a number of firms are still hiring, the start of the new year has also seen cuts, such as at AIG Private Bank, which is shedding just under a third of its workforce.

Another recruiter, Dudley Edmunds, of Culliford Edmunds Associates, predicts some headhunters who have recently expanded into wealth management may even go back into investment banking because the latter sector, although ravaged by the financial crisis, was generally more lucrative as pay scales for positions were typically higher than at private banks.

"The recruitment market in global wealth management is not as profitable as it is in investment banking and some [wealth]recruiters will be retrenching," Mr Edmunds said. "The differentials [between wealth management and investment banking] pay is not as large as it used to be but it is still quite big," he said.

And another recruiter, Stephen Heal, of HB International, said the industry would see a shakeout of weaker, new arrivals to the wealth management job-recruiter sector. There are a limited number of good relationship managers to recruit all of which take time to develop relationships with and fierce competition to get into this market, he said.

"The types of individuals we cover all those who can hit the ground running in terms of moving assets and revenues. There is demand for that type of person but there is limited supply," Mr Heal said.

After wealth management was relatively unscathed in the first few months of the credit crunch, the financial fallout has begun to have some effect. Earlier this month, for example, AIG Private Bank, based in Switzerland, announced job cuts. Barclays Wealth, the UK's largest wealth firm, is to cut 500 positions in a review of its UK operations over the next few months. By contrast, Deutsche Bank's wealth management division is expanding its central and eastern workforces.

Given this backdrop, Ms De Ferranti says the influx of recruiters into the wealth space has yet to halt: “The mass migration of recruiters from the corporate finance arena into private wealth management is well underway, with inexperienced consultants attempting to capitalise on panic-stricken investment bankers looking for quick-fix career solutions. Many will fall foul and there will undoubtedly be many small consultancies who are forced to close their doors. The simple reason being: private wealth is relationship critical, not deal driven.” 

“2008 saw significant fluctuations in hiring activities, more then ever experienced during the investment banking and corporate finance booms. This has been fuelled largely by the market crash in the latter half of the year, and over-accelerated growth of emerging markets such as
Brazil,
China and

Russia,” Ms De Ferranti said.

She continued: “A private banker will traditionally need to establish at least a five-year enduring relationship with a client before the client loyalty is established. A private banker’s golden ticket to success is his book of clients.  An established book of portable, trusty clients with sizeable assets is the basis on which a private bank assesses the commerciality of a hire. Recruiters who do not mimic the relationship approach with their own candidates, and who lack that highly developed network of enduring relationships, will find the shift extremely challenging.”

She said that survival this year will depend more heavily on the quality and depth of candidate care provided.  The traditional client focused approach, seen in the corporate world, of aggressive business development is a “thing of the past”, she said.

Mr Edmunds agrees that wealth management should and cannot be seen as a place where there easy pickings. "There will be a change, as people will realise that wealth management is a hard sector, and it will be harder for a new company, that is not experienced, to break in and be profitable. The market is in the doldrums at the moment and people are slowing down on what they are going to do. We are busy working, harder and smarter, in the assignments that we do," he said.

Ms De Ferranti said a lot of chatter in the industry centres around the emergence of newly established single and multi-family offices as stricken hedge fund managers, private bankers and investment specialists join forces to capture the wealth of the wealthiest.

As for potential and current hotspots for recruitment, Ms De Ferranti cites emerging financial centres such as Rio,
Sao Paulo,
Taiwan and

Beijing.

“They are economically and technologically far more developed than we think, so much so that the 2020 forecast for emerging market countries to outperform the US economy has accelerated two-fold,” she said.

“Latin America is very much a favoured private banking over-spill, together with its attractive tax incentives and more affordable infrastructure, for the ambitious and less risk averse
Western HNW investor.  The leading wealth managers and international private banks have already cemented their stakes in these growing economies. Boutique style family offices and smaller private banks are sure to follow suit and jump on the bandwagon after the Tier 1 banks have dipped their toe in the water to test the appetite from their investors, she says.

As for more traditional wealth management centres, Ms De Ferranti said
Switzerland and other independent states such as
Monaco and
Liechtenstein may “always remain heavily insulated against economic downturn”, although she says the outlook for these centres could be affected by continued pressure on offshore centres about their bank secrecy laws and tax policies.

On the other side, she said Central Eastern Europe and the Baltic States “appear to have gone off the boil slightly in the latter six months of 2008”, in part due to concerns about geopolitics, such as Russia’s clash with Georgia last year, the sharp pullback in the price of crude oil, and the fact that these regions have already risen rapidly and may be due for some consolidation.

“It goes without saying, there are of course still significant wealth streams to tap into, however the Tier 1 private banks seem to have applied the handbrake on their growth plans for CEE in the immediate term,” she said.

The role of job recruiters has become more challenging, she said: “Undoubtedly there will be a much higher expectation than ever before on our client’s part. Hefty placement fees, particularly those seen in the boom time years of the early 2000s, will be suppressed.”

“Search consultancies will have to be more entrepreneurial in securing retained mandates. Perhaps a swing to more of a tendering process will occur, particularly for senior level assignments", she said.

"All in all, 2009 is going to challenge even the best of us. It’s all about survival of the fittest. That is, of course, those who choose to stay in the game and plant their stake firmly in what will be a mastermind test of relationship management, sector expertise and pure determination to succeed," she said. 

Employment contract terms will change in the harsher environment, she said. “Almost certainly. The levels of bonus guarantees enjoyed in previous years will be scarce, if non-existent. The majority of the private banks are now leaning towards a 100 per cent  production/performance-based reward structure and are incentivising private bankers on their ability to business develop and bring in net new assets,” she said.

She also reckons that non-compete clauses are likely to become lengthier, more tightly worded and more heavily enforced with more involvement from lawyers in final stage contract negotiations.