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Poaching reality: how many clients do managers actually bring over?

by Danielle Levy on May 07, 2014 at 14:46

As a result, he prefers to focus on people who can support the growth of the business in other ways. To minimise costs, his firm seeks out individuals for senior roles themselves, cutting out recruitment consultants.

So at what point do hiring costs become viable? Ashcourt Rowan’s Polin suggests a minimum of 50% of a promised client bank is the cut-off point.

‘They have got to be able to properly secure 50% of assets to make it worthwhile. If you have got a team that is running £250 million, I would probably be happy if we got £100 million coming through the door,’ he said.

Watch your client bank

A recruitment consultant who specialises in wealth management suggests a conversion rate of 20% to 50% is typical.

He said clients can be deterred by a lack of alignment between the investment manager’s old and new firms. Paying close attention to the nature of the client bank is important.

‘Clients can have more of an association with institutions than investment managers think. If an investment manager inherited their client bank, the clients are very unlikely to come over with them. But if they have been with the investment manager for a long time, they are more likely to follow.’

Hiring costs depend on the business model but are generally more than one times salary.

The industry’s historic preoccupation with attracting new clients also begs the question: have firms lost sight of the costs associated with losing existing clients? The recruitment consultant suspects so, arguing that remuneration that is skewed towards generating new business has a role to play in this.

His sentiments are echoed by Brooks Macdonald chief Chris Macdonald, who said: ‘I think it is absolutely fundamental to look after existing clients first. It is an old analogy, but there is no point holding a bucket up if it has a hole in it. From our perspective, it is critical to look after your clients and get growth that way. They are your best marketers.’

Polin believes a focus on attracting new business and looking after existing clients have to go hand in hand. ‘You don’t want to lose your existing profitable clients, but it is incredibly hard to engender organic growth in the sector. Also, the dynamics of our business is you have to get new clients because you have an elderly client base,’ he added.

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1 comment so far. Why not have your say?

former employee

May 07, 2014 at 15:49

Restrictive covannants should be banned by the FCA if firms arent good enough to reatin senior staff then they and their cleints should be allowed to go un inhibbited. The trouble is this industry seems to want to protect the weaker firms by allowing these sorts of restrictive practises .

Other well known platforms who speak of allowing individual adisers to leave freely taking their clients with them do things in a more subtle but equally restrictive manner by charging clients fees to move each of their stocks .

If the FCA had any real concern for clients well being these would be banned too .We should adopt the US approach wherby a firm which is instructed to move a clients assets to another broker has 5 days or it is fined. That would shake the City up and be in the best interests of the investing public.

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