Continental agencies lack London's specialisation skills

In its 2002 report on the global market for executive search, the Economist Intelligence Unit describes the City of London's headhunters as Europe's most sophisticated and segmented. Even in the current downturn, there are innumerable search firms focused on specific product areas and specific levels of seniority.

However, continental Europe is rather different. In Paris, Frankfurt and Milan, headhunters may be as sophisticated as their counterparts in London - but specialised they are not.

The headhunter who places a regional head of fixed income today, could place a vice-president in utilities M&A or a real estate banker tomorrow. Moreover, he or she will invariably do so under the auspices of a large international search firm. With the exception of Frankfurt, continental financial services specialists are relatively few.

Size has played a part in suppressing local specialists. Diane Segalen, a financial services recruiter at Heidrick & Struggles in France, says the Paris market for banking hires is small. "There is no need for boutiques that specialise in certain areas," she says.

Denis Marcadet, founder of Vendômes Associés, one of a handful of Parisian financial services boutiques, explains: "The French market is very concentrated and centred around big agencies. Whenever there is a pitch we are against Heidrick & Struggles, Boyden and Spencer Stuart. It's like a club."

That club extends across Europe. Five international search firms are ubiquitous in the Continent's financial centres: Egon Zehnder, Heidrick & Struggles, Korn/Ferry, Russell Reynolds and Spencer Stuart.

Andrew Lowenthal, head of financial services search at Egon Zehnder, claims the firm is "the biggest headhunter in Europe". Egon has some 30 offices on the Continent, more than any of its rivals, and half of its revenues derive from continental business, according to the Economist Intelligence Unit. Local boutiques, such as Milan's Management Search, find it hard to compete with this kind of firepower, or that of rival Korn/Ferry, whose European turnover was in the region of $130m (€131m) in 2002.

The international search firms explain their success by pointing to the internationalisation of the financial services market. Giulia Belloni at Korn/Ferry in Milan, says: "Local companies tend not to focus on investment banking. Because banks require international searches, you need to be international in scope."

The larger Frankfurt market appears better able to sustain financial services search boutiques. Frankfurt-based companies such as MB Consulting Executive Search and Banking Consult concentrate entirely on the investment banking market.

Jürgen Merkel, managing partner at MB Consulting, estimates that there are around 100 Frankfurt search companies working in financial services. Most are one- or two-man operations staffed by former bankers, he says. With few Frankfurt offices currently hiring, they are trying, and failing, to go back to their former careers.

Germany's boutique financial services headhunters work alongside the country's generalist firms. HR consultancies such as Kienbaum Consultants International are among those with search divisions operating in the financial services sector. Kienbaum was formed in 1945 and is one of the oldest search companies in Europe. In addition to financial services, it places staff in consumer, not-for-profit, and public sector positions. Anne Dörseln, the company's communications consultant, says: "Market conditions are rather difficult."

Korn/Ferry's Belloni sounds a more positive note about headhunting in the Italian financial services market. Italian banks have taken advantage of redundancies in London and hired corporate financiers and fixed-income specialists, she says: "It has not been a booming year, but neither has it been a dead market in Milan."

Established firms are not feeling the full benefits of Italian hiring. The banking downturn has released a slew of would-be headhunters onto the market, says Alberto Gavazzi, head of financial services recruitment at Russell Reynolds in Milan.

Gavazzi says that some Italian banks are offering headhunting mandates to departing staff as part of their redundancy packages. Departing HR practitioners in particular, are often safe in the knowledge that they will be called upon to headhunt at least 15-30 new staff members in the future. Such arrangements can last for several years.

"They are not direct competitors, but they are competitors," says Gavazzi. "There are some searches that I could have done, but am not doing because these other people are doing them."

Using departing staff members as headhunters should at least ensure inside knowledge of the Italian market. Gavazzi says this is important to banking recruiters. "Italian clients want people in Milan, based in Milan and demonstrating knowledge of the Italian marketplace from the inside," he says.

Awareness that this is the case has driven UK-based financial services firms to boost their continental European presence.

Longbridge and Sheffield Haworth have both recently opened offices on the Continent.

Segalen at Heidrick says most of the new entrants to the Paris headhunting market are London based firms opening a French office.

However, building a continental presence can be risky, particularly during an uncertain market. For this reason, six local financial services specialists have formed a new network: Financial Services Search Alliance (Finsal).

Comprising MB Consulting in Frankfurt, Vendômes Associés in Paris, and four other representative firms in London, Brussels, Frankfurt, Amsterdam and Luxembourg, Finsal can access much of the European market.

Marc Hamel, managing director of Financial Assets, the Finsal member in Amsterdam, says the alliance is a good method of finding product specialists in continental Europe. London-based headhunters may claim to know the continental market, but their knowledge fails when it comes to identifying the right people for very specialist positions, he says. "Only people on the ground can distinguish between the gossip, what people claim to be doing, and what their role really is."

Hamel says the alliance of specialists in financial services is a more potent combination than the generalist offices operated by international firms such as Russell Reynolds and Korn/Ferry.

"The big firms have big offices everywhere, and very high overhead. They are reliant on a strong stream of high-paying top management positions," says Hamel.

Instead, he says the financial services market is increasingly focused around the specialist positions that suit Finsal. He adds: "As a small focused firm with European links, we are far more of a threat to the likes of Spencer Stuart and Heidrick & Struggles than we used to be."