September 18, 2015 – A number of high-level, forward thinking planning meetings took place this summer at Credit Suisse Group. The results of that top-to-bottom review process will be presented to the bank’s board in just a few weeks. All indications point to a massive strategic overhaul: Credit Suisse will likely sell its U.S. private bank and scale back its prime brokerage business. Why dump such a highly-touted private banking practice with $100 billion under management? I’m told by headhunters, who work inside the bank’s C-suite, that CSG’s top brass want to free up capital — and lots of it — to plow into banking products and services for the world’s most wealthy people, especially across Asia. Presumably, this growing ‘asset class’ will one day flood the bank with new revenue streams.
Credit Suisse’s shift in business focus makes sense. So, too, does taking direct aim at the rising financial demands of an expanding monied elite across Asia, as well as EMEA and North America. Reports I’ve read recently all indicate that the greatest wealth creation in the world is happening in Asia — and its happening now. Alongside the banks, executive recruiters are also studying the wealth dynamics taking place across these regions. Everyone wants in on the action, as early as possible. Asia sits at the centre of everyone’s strategy.
Search giant Egon Zehnder has focused like a laser beam on China with an eye on the long term. The leadership development advisor, one of the world’s largest and most prestigious, has called China “our biggest focus” and “a key strategic priority.” If anyone should know about the opportunities presenting themselves in Asia, from a talent management perspective it is Egon Zehnder. The firm is studded with ex-McKinsey consultants. And as its traditional European base has come under regional pressures there, the firm’s managing partners view Asia as a key to its future. Zehnder booked just under $700 million in recruiting-related revenues last year, enjoying a 10 percent rise in fees. It now holds the No. 3 ranking among headhunters on Hunt Scanlon Media’s global rankings. Asia will continue to play an integral part in the firm’s revenue and business growth plans for years to come.
But world’s largest doesn’t necessarily correlate to market dominance — particularly in Asia. Small specialist boutique search firms with a direct focus on the investment and private wealth sector, like David Barrett Partners, are triangulating business between New York, London and Hong Kong, with great effect. Demand for their high-end, high touch talent services is rising exponentially along with the market’s talent needs.
High net worth executives, according to recent studies, are increasing across Asia at double and triple the rates of the rest of the world. A study fielded by Capgemini and RBC Wealth Management found that Asia-Pacific expanded its super-rich population by nearly 10 percent approaching 3.7 million, building wealth by 12.2 percent to $12 trillion.
The Asia Pacific market will continue to have its ups and downs as the region’s economies struggle with untamed growth, but let there be no doubt that Asia will be — if it isn’t already — the world’s largest wealth market by population. Until the empirical evidence comes in, however, North America remains the undisputed king as the largest wealth market. Frankly, whether its Asia or North America doesn’t really matter; just the fact that these two regional powerhouses are in such a neck-in-neck race says everything about the wealth creation environment that’s been bestowed on us so early in the 21st century.
Traditionally, the wealthiest retail clients of investment banks have demanded greater levels of service, product offering and sales personnel than that received by average clients. The massive increase in the number of affluent, therefore, will not only call for more sophisticated financial solutions and expertise, as Credit Suisse is now planning for, but it will trip a significant rise in talented financial professionals who can service, sell, and manage those products and relationships.
So, from a talent perspective, are we ready? The short answer that I give is an unequivocal “No.” When I look at global growth numbers and pair those metrics with the wealth effect happening around the world, I see talent demand far outstripping its supply. The last economic downturn took the tide far out to sea, and with it went the bench strength of most companies. The talent rebuilding process has returned, for sure, but many financial services companies have remained hesitant in training the next generation of professionals and hiring has been woefully slow throughout the sector — all while this new mass of wealthy and affluent have appeared from almost out of nowhere.
When I view the global business landscape today I see nothing but opportunity. It’s everywhere. But recruiting top-flight talent for the financial sector is becoming a challenging and formidable task, given this supply and demand imbalance. David Barrett, the managing partner and founder of the boutique search firm I mentioned earlier, agrees.
“Recruiting top talent in the investment and wealth management space has always been challenging, and it will not get easier,” quipped Mr. Barrett. He said there is often little incentive or reason for investment and wealth management experts to consider joining a rival. “The sector is very high paying already and if someone is successful in it, why move?” He sees candidate identification systems being commoditized with social media technology. “In an increasingly competitive marketplace, the challenge for recruiters is to demonstrate that they have the relationships, the market credibility, and the industry knowledge to not just serve up candidates, but to deliver the right ones.” It is something electronic databases struggle with and will likely never overcome.
So this is the challenge Credit Suisse has before it as it prepares to go head first into new banking businesses around the world. As they prepare for world domination (like all good banks do), CSG might be wise not to save their talent management planning until the end. Without people, the bank’s new businesses cannot run themselves. Where it intends to find this talent is anyone’s guess. Headhunters, to be sure, will be there to assist. But in the end, the supply of talent needs to catch up with the demands that firms like Credit Suisse Group are about to put into play.
Private Banker International, by Scott Scanlon