Private banks are making hiring mistakes by not testing the strength of client relationships – here are seven questions they should be asking
This article first appeared on our Singapore site.
Hiring good relationship managers in private banking is becoming increasingly an art rather than a science. Private banks that rely on conventional recruitment techniques are finding that their strategies are yielding less-than-desired outcomes.
The typical way of doing things
The conventional method involves engaging with industry contacts to find a private banker who is garnering positive feedback from clients and colleagues. An in-house HR representative or an external headhunter will then make contact. The latter is usually preferred because outright poaching may not go down well with a competitor and could generate legal disputes.
Headhunter or not, the next stage involves assessing the suitability of the candidate, which typically starts with an initial discussion about client coverage, AUM and revenues, and strategy for the next one to three years. The business plan is highly relied upon to document these factors.
Some banks go a step further by involving the candidate in role plays with senior management, and by utilizing psychometric tools to suss out his/her "character."
If the candidate passes the rounds of interviews and tests, both parties discuss terms of engagement. The bank will reiterate the targets and seniority level of the hire, and the candidate will reemphasize his/her ability to meet those objectives. Once they reach an agreement, a job offer is made.
It’s not working out too well
If the above technique sounds too easy; it usually is. Many private banks in Asia are now questioning the quality of some of their new recruits. Cost-income ratios have risen rapidly, while AUM and revenue targets haven’t always been hit.
Firms are therefore seeing several pitfalls in the conventional hiring approach. Most importantly, it neglects client relationships. Although some aspects of relationships are discussed in interviews and during business-plan reviews, little effort is spent ascertaining their strength.
Business plan numbers are only projections, which can be difficult to verify. An experienced candidate knows the right buttons to push during interviews and role plays, and can easily breeze through psychometric tests to land an offer. Ascertaining the strength of client relationships involves asking different questions altogether, as we shall see below.
The most successful private bankers usually have good connections with wealthy families. Possibly by virtue of their own family background, professional exposure and personal interests, they strike an intimate chord with high-net-worth individuals. Close connections and high confidence levels are what make wealthy people "follow" a particular relationship manager. They feel unsure about handling their own finances without the expertise of such a guardian.
Rather than relying on conventional recruitment, private banks should put relationships back into relationship managers. They should ask several critical questions in their selection process which would help determine how strong the banker’s client relationships really are.
1) Is the banker connected to the client or client’s circle of influence in any way?
2) How long has the banker known the client, and under what circumstances?
3) In what capacity has the banker worked with the client, and what are some positive and negative outcomes arising from this? Is the banker able to freely articulate the positive ones and proactively manage the negative ones?
4) Besides numbers, what is the other single factor that the banker can rely upon to bring his/her clients to the new bank?
5) Besides hard financial knowledge, what does the banker know about his/her clients’ family backgrounds, friends, interests, habits, lifestyles, etc.?
6) How effectively can the banker articulate wealth management solutions to his top three clients, with an emphasis on the unique needs of each? This type of case study is always much more effective than a random, generic role play.
7) Is the banker naturally confident and positive about his/her relationships? Or is there some unease or lack of confidence?
Bankers should enjoy it too
An important observation from asking the above questions is whether the banker is happy to have finally found a firm that doesn’t just focus on AUM and revenues, but on the strength of relationships. Truly successful private bankers know they are real rainmakers – not people who are merely good at aceing job interviews.
The above questions can be tough to ask and finding the right answers can be even harder. But instead of risking another wrong hire and wondering how to manage a non-performer, private banks could take active steps to manage their selection process, rather than relying on conventional wisdom, or leaving it in the hands of an inexperienced recruiter.
John Koh is managing director of WMRC Private Ltd (Wealth Management Resource Center).