Unscathed by the credit market meltdown, wealth management groups are gaining headcount and influence among global banks.
Wealth management has become the fastest growing sector in financial services, as it delivers rapid profit growth with less perceived risk than investment banking.
Some of the same institutions taking an ax to trading and deal-making divisions after more than $30 billion of industry-wide write-downs continue to expand their wealth management businesses. They include global wealth management leader UBS, along with Bank of America, Merrill Lynch, Citigroup and Morgan Stanley. Morgan Stanley recently gave its wealth management chief joint responsibility for strategic planning for the entire company, while B of A tapped its head of wealth management to revive the fortunes of its troubled investment banking unit.
The moves confirm that wealth management - also called private banking - is set to see an upswing in career opportunities. The greatest demand is for client-facing roles that place a premium on people skills, breadth of life experience and an affinity for tackling unique problems that arise when substantial wealth is concentrated in a narrow activity, such as a family-owned business.
"Private wealth" is usually defined as the next level of wealth beyond the $1 million liquid-assets minimum that defines "high net worth" clients. Each bank has its own criteria, which may start at $3 million, $10 million or more.
What Makes Private Bankers Special
Sector leaders say private banking calls for a type of person distinct from those who serve institutional accounts. These managers aren't obsessed with hiring MBAs or even business majors, candidates in their 20s or early 30s, or specialists who hewed to a single well-defined career path. Although investment knowledge is essential, the qualities that determine success are empathy, strong communication and listening skills, self-reliance and emotional maturity. Unlike research or trading, this is a role best suited to people who enjoy observing and figuring out other people, says Alec Haverstick, executive director at Morgan Stanley Trust N.A.
Consulting firms have long urged banks to step up efforts to recruit and train more private wealth managers to meet the needs of an exploding worldwide population of high-net worth and ultra-high net worth clients. By early 2007, both U.S.-based and European institutions were already moving in that direction. Now, the trend looks to accelerate as banks refocus from proprietary trading and structured finance businesses to private wealth, which is viewed as both more profitable and less risky.
Who's Been Bulking Up
Although much of the growth is occurring overseas, U.S. private banker headcounts are on the rise, too. For example, Bank of America reportedly added more than 225 positions to its private banking unit in 2007, including 41 in August alone. Bolstered by B of A's July acquisition of U.S. Trust from Charles Schwab, the unit saw its revenue grow 24 percent in the third quarter, and accounted for about 10 percent of company-wide net revenue and 5 percent of net income.
In late October, Morgan Stanley named James Gorman, head of its global wealth management division, to the additional post of co-head of strategic planning for the parent company. Gorman was credited with raising Morgan Stanley's revenue per adviser since coming over from Merrill Lynch in 2005. "He has made senior appointments to win business at the upper end of the wealth market, where Morgan Stanley was under-represented," according to Financial News. Several private wealth advisers were hired away from Goldman Sachs in Europe and Latin America. A recent research report by Bear Stearns found that Morgan Stanley's average revenue per adviser grew 21 percent since 2002, compared with single-digit growth for most other private banks.
The same report pegged aggregate profit growth for the 10 biggest wealth management units at 60 percent over the past two years - faster than any other area of financial services. At the same time, private wealth headcounts at the 10 largest banks grew between 4 percent and 9 percent annually since 2005, according to the report.