When so-called relationship managers (read sophisticated financial planners) leave a firm, so do some of their biggest clients. So it’s obviously in the interest of the private banking and wealth management firms that employ them to make sure they stay on board. Funny thing, though: It’s not compensation but service and brand that matter most when it comes to recruiting and retaining talent.
According to a Private Banking Quick Poll conducted by SEI, which surveyed 70 senior-level executives from leading private banking organizations worldwide, two thirds of organizations, which had over a 10 percent turnover rate for relationship managers, lost client assets under management as a result. And 42 percent of this same group lost at least one of their relationship managers’ top 20 clients.
So what determines whether the relationship manager will stay or go? SEI’s survey found that compensation came in dead last among factors that help recruit and retain relationship managers: Only a fifth of respondents judged compensation to be a key factor. But 80 percent said a strong wealth management platform is critical; 73 percent said brand and reputation are most important; 69 percent said culture and workplace environment; and 51 percent said the institution’s strategic business direction.
In case it wasn’t clear, relationship manager is just another term for financial planner or financial advisor, but one frequently used by private banking and wealth management firms. He or she is the person who brings in new business, manages interactions with a client, helps to draw up a financial plan, and offers fee-based advice built upon the recommendations of the firm’s investment and research teams. After bringing in the new client, he/she turns the actual asset management over to the portfolio manager, but continues to manage the relationship, says Stephen Winks, principal of PCT Research & Consulting, which publishes Senior Consultant. Typically he or she is held to a fiduciary standard of care.
So having access to a strong wealth management platform with a broad product and strong service offering is essential to the advisor’s ability to successfully serve clients. “The stronger the platform, the more value you add, the more competitive you get, the more likely you are to win clients,” Winks says.
And more clients means better pay. Compensation for relationship managers varies from firm to firm, but is primarily based on salary and some form of incentive. That incentive may be based on retention of assets and growth of existing business or new assets brought into the firm, says David Campbell, a spokesman for SEI.
The survey found some difference between small and big firms regarding what matters most to a relationship manager. Among smaller institutions, respondents say a firm’s culture is the primary driver in recruiting talent, whereas larger institutions feel brand and strategic business are the most important factors.
In terms of which components of their wealth management platforms firms feel are most important to retention of relationship managers, 41 percent of respondents from smaller institutions say having the necessary administrative and compliance resources is most important. Campbell explains that smaller institutions have more limited access to tools and staff than larger institutions. Some 42 percent of large institutions, by contrast, found that customer relationship management software is most essential to a strong wealth management platform.