Wealth Managers Who Can Make It Rain – Overcoming Short Term Thinking

Wealth managers need to think more strategically and tap into the type of change-making individuals who can drive a business forward rather than simply follow suit, a senior wealth industry executive told this publication. executive search.

Much has been made of the need for wealth managers to be more diverse, innovative and able to serve young, affluent clients. And, while there has been movement, the industry is still hobbled by short-term thinking, says one of London’s most experienced wealth management executive search figures.

Wealth management presents opportunities and threats. There are trillions of dollars or the equivalent in intergenerational asset transfer, and it’s already happening.

There is the digitization of operations from front office to back office to create new hybrid ways to better serve customers; new sources of wealth, such as technology; pressure on margins; new business models (opportunities for wealth managers to differentiate themselves in the eyes of their clients) and client disenchantment with banks even a decade after the 2008 financial crash. ‘they perform, but too often compensation and management are skewed towards the average at the expense of the top performers,’ Mark Somers, who runs the executive search and consultancy firm Somers Partnership, told this news service recently. .

Somers Partnership calls the current situation a “defect of averages” as CEOs focus their attention on the often unprofitable “lawnmower” mid-level relationship manager rather than raising expectations to the profitable “Rainmaker” profile. It’s not sustainable with so much pressure on the line, Somers said.

“This industry is still incredibly myopic and thinks in terms of quarterly goals rather than five to 10 years,” said Somers, a former Army officer. He has a keen interest in leadership and retains an enthusiasm for the kind of team ethic that comes with time in the military.

“Surprisingly, many CEOs of wealth management organizations still don’t understand the power of ‘compound talent’ and therefore give that competitive edge to their competitors,” he said.

“Our wealth management clients have a lot to learn from our family office clients who are much more nimble, nimble and fearless. We work with some of the most successful entrepreneurs on the planet and they can teach wealth managers a lot about staying relevant in terms of proposition and purpose,” he said.

The average tenure for a CEO at a wealth management firm today is too short, often just three to five years, he said.

Added to this is that the average age of their customers is older and increasing, rather than being replenished with younger, high-potential customers. “Rather than follow existing customers, they need to future-proof their organizations, prepare for wealth transfer and find new, younger customers,” he said.

Doing so is not easy: “There is a huge transfer of wealth… just to stand still, a bank needs 5-7% net growth. [revenue] bottom line to be in balance: to grow like some of our clients, they need to add 12-20% new assets per year,” Somers said.

“It’s even more of a leadership challenge for CEOs because most bankers are unable to grow their client portfolios at this rate,” he said.

Somers wonders why, for example, there are so few human resources directors and chief marketing officers at the main board level. “CEOs need to step up and equip their high-performing relationship managers to be successful, or they’re doomed to have front offices staffed with lawn mowers rather than Rainmakers, because Rainmakers will leave for their more enlightened competitors,” he said. -he declares.

A skills shortage in many Western countries, partly due to the pandemic, and perhaps also due to aging populations, makes the task of finding talented people for wealth management more urgent. HR, payroll and finance firm MHR International recently said that 90% of some of the UK’s largest organizations are struggling with a skills shortage and are unable to find talent with the right skills to stay on. competitive. (MHR surveyed 504 senior managers across HR, finance, business planning and operations functions at companies with 500 to 5,000 employees and £50 million ($59.9 million) in revenue. ) to £2billion.) The talent shortage issue is one that this news service hears about on a regular basis. (See this interview with Multrees CEO Chris Fisher, for example.)

Dolores W. Simon