The right mix
Private banking requires new skills
The 2008 financial crisis shook the banking world in ways the industry had never seen before. In private banking, new business models have emerged that require institutions to re-examine their human resources.
Leaders in the field say investment managers in this new world order must be excellent team players with exceptional people-management skills who have a commitment to stay in the industry for the long term.
Shun Pang Shun-tak, managing director and head of private wealth management for Hong Kong at JP Morgan, concedes that finding the right talent that fits the bill is not easy. "The issue of human capital is what keeps me up at night," Pang says. "Is it the right talent? Is it the right character? There are some people who are very good with markets, but they don't have client-handling skills."
Pang acknowledges that finding investment managers with the right personality is the most difficult part. While new graduates coming into the industry can easily learn the technical skills in anywhere between one and three years, "the most crucial skill that can't be learned is people-handling skills," he says.
The importance of this personality trait is manifold, and lies fundamentally in the way private banking as a sector has changed in the post-financial-crisis era.
For starters, Pang explains that clients today are more risk averse, and are realising the importance of having their core wealth in portfolios that are more diversified. In other words, clients want stable investments.
The implication for those working in private banking is that those who have stronger asset-allocation skills and mindsets are in increasing demand, rather than those who have more of a booking style, which was the traditional hire. "This talent to allocate has to be in the blood, and it doesn't happen overnight, but it is what institutions are looking for," Pang says.
Advising on generational money is another area that is growing rapidly. As clients age, advisers must position themselves to evolve with a family's financial needs and changing demographics. How an adviser handles family wealth from one generation to the next requires someone who is able to execute various implementation tools that respect the different interests, lifestyles and buying behaviour of parents and their children. Hence, longevity and trust-building become crucial.
"If you don't have the commitment to stay in this industry for at least five years, you're just not going to get anything out of it. This is because we are handling the owner's money, we are talking to people, not financial controllers, and in order for people to get to know you, you need time to build that relationship and trust. If you don't have the commitment, you won't go anywhere," Pang says.
Yet another growing trend is that clients are now starting to value a team-based approach, rather than depending on one person's views.
"It's always better to work with a consensus view," says Pang, who also notes that as clients have become more careful with their money, they are exercising greater due diligence on fund teams. This means that having the right talent in place is more important than ever. "You don't need to have all shining stars, you don't have to have the best of the best people - sometimes you just need the right mix and that's what makes the team work," he says.
New wealth regions are another factor contributing to sector growth. Clients in these regions tend to be acquiring wealth for the first time, so the role of asset manager has to change to include that of an educator.
"It's important to educate clients on various products, market cycles and the need for asset allocation," Pang says. "Many have gone through the stage of building wealth, but getting them to sustain wealth is the next stage for the new wealth region."
A growing area in relation to new wealth is the potential conversion of business assets to liquid ones. Many new businesses in new wealth regions may not be ready for an IPO, but mergers and acquisitions can lead to forms of liquidation requiring private banks to facilitate the process and provide sound advice.
Pang says prospects in the sector remain bright, as "there is enough wealth waiting to be managed". He emphasises that the client continues to be the real asset, and turning a profit means relationship management with a long-range plan is crucial.