Like for other sectors, the current crisis has both short and medium-term impacts for the private banking and recruitment industries The idea here is to give an insight into these impacts through the eye of an external recruiter.
Before going into detail, it seems quite useful to take a step back to examine the trends that we have already observed in the wealth management sector before the current situation. For the past ten years, the sector has been depressed and attacked from all sides with increasing pressure on margins. The disappearance of banking secrecy, the cost of compliance, the rise in IT costs, historically low-interest rates, increased competition, poor portfolio management performances, reputational risks (various scandals or the impact of U.S penalties on foreign private banks) are all factors that have resulted in a decrease in revenue.
It appears that a significant number of actors (banks, independent managers and multi-family offices) currently lose money in all the various countries we cover in Europe, the US, Latin America and Asia. This situation has led them to review their strategy by looking for external growth, repositioning their product range, fine-tuning client segmentation, developing external partnerships and looking for internal synergies. Furthermore, we have seen actors entering the market to threaten traditional banks, especially fintechs who use their technological advantage which often compares favourably with the legacy systems of their more established competitors.
The abrupt decline in the financial markets in mid-March (despite a rebound since) and the prevalent anxiety have led to a drop in assets of around 10/15% on average and probably more in revenue. The travel ban for private bankers who are not able to meet their clients, the reticence of their clients towards investments, margin calls and the sudden disappearance of deals-flow from M&A activities have all served to put additional pressure on revenue.
On the recruitment side, we have already noted for the past several years a strong demand for functions such as “hunter” profiles or senior private bankers who can bring in assets and develop strong revenue streams. Other functions have become less sought after apart from specialists in very specific fields. We have also seen restructuring that has led banks to significantly “lighten” their staff. The aforementioned trends have also led to a drop in the level of compensation over the past few years, especially for support functions.
Previously, recruitment had two essential components: physical interviews with candidates and the increased use of internet recruitment tools, notably job boards but also some social and professional platforms such as Linkedin, Xing, and Twitter. With the arrival of the pandemic, the above-mentioned phenomena have intensified as the coronavirus crisis serves as a catalyst, accelerating pre-existing trends.
There are also positive aspects to the current situation. Panic from some clients in specific markets such as Spain, Italy, or even France have led to a transfer of assets to Switzerland and other safe havens. Some small Swiss banks or boutiques have taken advantage of this opportunity to open new accounts and strengthen their asset base. In addition, private clients who were previously invested in cash have sometimes taken the decision to invest in the markets and some bankers have used remote technology to strengthen their bond with their clients by accompanying them closely through the crisis.
In terms of recruitment activity, we have noted that many clients initially cancelled or postponed certain assignments while others have maintained their searches and some have even looked to take advantage of the inaction of their competitors to gain market share (especially smaller banks and boutique players). On the candidate side, we have seen mixed reactions. Some have put their job searches on hold whilst others have become more active, reflecting the behaviour of clients. This quieter period has also allowed us to interact more easily with our candidates who are often more available and happy to exchange thoughts with us through Zoom and similar tools.
In the medium-term, this pandemic will have a lasting impact on the world of private banking. To face tomorrow’s challenges, financial institutions will need to analyse their strategic positioning in some detail. For example, in Switzerland the increased difficulty to travel to certain markets in Europe, combined with the fact that Swiss banks don’t have a European “passport”, will certainly encourage many banks and independent wealth management companies to strengthen their presence in domestic markets. Smaller players will not be able to face tomorrow’s challenges on their own and will have to merge with other institutions. The current situation will only lead to an acceleration of market concentration and to a decrease in levels of staffing, especially in support functions.
It seems clear to me that the number of actors within the wealth management industry will decrease sharply in the next five years and that the survivors will be either those that develop an industrial approach with powerful technology tools (AI and block-chain), or specialised players with a boutique approach: flexibility, proactivity, a more developed advisory approach and client centric. Indeed, refocusing strategy on the interests of the client seems an essential strategic component to survive in the future.
On the operational level, we should witness the development of remote working, relocation away from large cities for certain functions and the use of more efficient IT tools for both employees and clients. In this competitive environment, the hunt for talent will play a central role and necessitate a creative and proactive approach. Recruitment methods will have to adapt as it has already started to do. We will need to respond quickly to the requirements of our clients to identify the best candidates in the talent pool and convince them of the benefits of joining one institution as opposed to another. Artificial intelligence will certainly have an increasing impact on talent identification, but it will be the role of the recruiter to focus on the seduction and conviction phase. Trust and bonding, uniquely human values, will still be necessary to “close the deal”.