View the article online at http://citywire.co.uk/wealth-manager/article/a646536
Trainees v experience - which offers the best growth avenue?
by Danielle Levy on Dec 20, 2012 at 07:00
However, as one headhunter estimates that investment managers historically only bring over 20% of their client bank, the short-term expected benefits of hiring in experience can disappoint.
Mike Levy, a director at benchmarking group ComPeer, explained: ‘Over the past few years, one of the key issues in the wealth management sector has been how to find good new blood, so there is always an argument for good trainee schemes. But what happens with a lot of firms is if they can poach, they will take people with assets,’ he said. ‘However, the percentage of assets that people bring over is often not what they thought. They often think the relationships are stronger than they are, so the percentage they end up with is lower.’
It could be argued that the main issue is a lack of investment in organic growth. ComPeer estimates that marketing expenditure across the wealth management sector stands at only about 1.8% of turnover. This contrast with other firms that target high net worth investors – such as luxury companies – that spend between 5% and 10% of turnover.
Levy’s sentiments are echoed by Nick Holmes, managing director of Brooks Macdonald Asset Management. He supports a balance between having an established trainee scheme and bringing in experienced hires to fill certain gaps.
Nonetheless, he agrees there is a tendency for incoming managers to overestimate the strength of their relationships with clients, alongside ‘the fight that other firms are willing to put up’ to keep clients.
‘A lot of companies have non-compete clauses, so if the manager can’t act for you for six months, it gives the firm a long time to see the client,’ said Holmes.
While Brooks keeps an eye out for teams that can fit culturally, it prefers to cherry-pick individuals, particularly where they are looking to bring in a certain skill set.
The firm’s graduate scheme launched in 1996, with Holmes starting out as its first trainee, and has now evolved into a formal programme, with around five taken on each year.
Trainees work across different areas, including stints in the back office, as the firm feels it is important for them to understand all aspects of the business and ensures they have a knowledge of the history of the industry.
‘Forty years ago people were just left making tea and wandering around. You have got to be much more structured now. We see trainees as our future growth,’ said Holmes. ‘It is an opportunity to mould them into the individuals they want to be in their personal life and professional career, therefore it is incumbent on us to make them feel they have made the right choice.
News sponsored by:
Ian McVeigh and Steve Davies, managers of Jupiter's UK Growth fund, talk about their predictions for the UK equity space. Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.