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Poaching reality: how many clients do managers actually bring over?
by Danielle Levy on May 07, 2014 at 14:46
The art of poaching senior investment managers and teams in the quest for new clients is nothing new in wealth management.
But as employments contracts get tighter, firms are being forced to ask whether the costs of hiring senior staff and teams provide value in terms of the potential assets that can follow.
Hiring has formed the mainstay of many wealth management companies’ growth strategies in recent years. However, Brewin Dolphin’s decision to sue six former senior employees who defected to Charles Stanley over alleged breaches of contracts underlines the difficulties now associated with senior hires.
It is no coincidence that the High Court battle follows Brewin’s decision to alter its growth strategy so that it no longer relies on team hires or buys. It marks a change for the national wealth manager, which has traditionally been opportunistic in its team hires.
The shift is evident elsewhere in the industry. Some firms have had their fingers burnt, hiring senior individuals only to see little money follow them.
Jonathan Polin (pictured), chief executive of Ashcourt Rowan, estimates investment managers typically bring over 65% to 70% of the client bank they promise.
Graham Auld, who recently set up consultancy firm Auld Investment, is more cynical, based on his experience of recruiting staff over a 45-year career in the industry.
‘A lot say they will bring 60-80%, but in reality they are lucky if they get 35%-40%,’ he said.
Nonetheless, he believes senior recruits and team hires are worthwhile over the long term if done properly.
However, the chief executive of a large wealth manager, who preferred to remain anonymous, suggests a figure as low as 20%. As contracts are now so tight, he suggests a shift away from poaching teams has driven M&A activity, as there is a higher chance of locking in the assets. He estimates hiring costs are generally around one times salary when recruitment, set-up and search fees are accounted for.
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