Private Bankers Face Hurdles to Switching

You're a private-client relationship manager responsible for $300 million in assets, but your employer is trimming both bonus allocations and back-office resources that support your activities. What are your choices?

If you work for a large institution that's retrenching amid the credit crunch, jumping to a private-wealth boutique could be a viable option. Or, a mid-career private wealth manager whose current business is stagnating might think about relocating to a high-growth area like the Middle East. However, both options present challenges - as does the more conventional path of trading one bulge-bracket bank for another.

A critical question in any move is, will your clients follow you? While this is a problem for client-facing professionals in any business, the particular needs of wealthy individuals and families make it especially acute for private bankers. That's true even when there are no contractual barriers to taking clients to a new institution.

In the Clients' Best Interests

When a client has trusts, major wealth, and complex investment holdings, it's not easy for them to change "platforms" when their banker does, observes private-wealth recruiter Linda Mack, president of Mack International in Chicago. "They're not going to do it multiple times," she says. "So the advisor better have a very good reason for switching. It better not be simply to monetize your client base, or they won't follow you."

On the other hand, clients will follow a trusted advisor to another firm if the move was motivated by problems with the current one, she says, or because the new one is better able to meet the client's needs.

Successful private bankers "want to be advisors. They don't want to be selling a product," observes Jamie McLaughlin, managing director in New York for Convergent Wealth Advisors. That can be an advantage for firms like Convergent, an ultra-high net worth boutique based in Rockville, Md. What's more, the storms washing over Wall Street and Europe's bulge-bracket banks nowadays have eroded the compensation advantage they long enjoyed over small, tightly focused rivals.

A Non-Traditional Migration

"Mid-career wealth management people working for large publicly owned companies are (moving) to smaller boutiques," McLaughlin says. "People call us, they have dialogues with us, and the quality is high. This is about career development."

McLaughlin acknowledges base and bonus in smaller firms remain below bulge-bracket levels. But with demand for private wealth management services still growing, the opportunity for long-term compensation - an ownership stake in the employer - can bridge the gap. "Equity is hugely important for these otherwise immovable objects," McLaughlin says, referring to private bankers who built their business at a large institution. The current crisis on Wall Street, he concludes, "makes a dialogue occur where a dialogue wasn't possible a couple of years ago."

Mack cautions that an advisor mulling a jump from a major bank to a private-client boutique must be mindful of cultural differences. "For the person who is a good fit for the wealth management boutique platform, it's a great opportunity for the boutique to attract them. But only if they're a good fit."

For instance, she says many big institutions built their private client segment around a "broker" model. Brokers view themselves as individuals building their own practice on a platform, rather than bringing clients to an institution. A banker accustomed to that model likely won't fit well with a boutique, Mack continues, because they really don't want to share the relationship. The boutique may have a different compensation formula, emphasizing a team-based approach rather than an individual-practice approach.

So if you work at a large bank that's doing poorly and you need to make a move, a boutique might not be the answer. Instead, Mack suggests you might be happier at a place where you could operate pretty much the same as now - which probably means moving to another bulge-bracket.

Mack's noticing more private-client bankers who aim to physically follow the (client) money to Asia and the Middle East. "They may not be interested in relocating to another part of the U.S.," says Mack. "But they will say, 'I am interested in Dubai.'"