industry insights
TRANSCRIPT
INDUSTRY INSIGHT
GROWTH IN EAMS PRESENT NEW JOB PROSPECTS FOR WEALTH MANAGERS
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Multi-family offices (MFOs) are gaining in prominence, as the external asset management (EAM) market expands alongside the number of ultra-high-net-worth individuals (UHNWIs) and wealthy individuals seek a more individual and concentrated relationship with their wealth management professional. Savvier clients are taking a renewed interest in wealth management practices and what products and services are available to them, leading to an evolution in the industry.
Savvier clients are taking renewed interest in wealth management products and
services, leading to an evolution in the industry
The lure of external asset managers (EAMs) lies in the deeper understanding clients receive and the more bespoke solutions provided for their wealth management needs. Rather than a focus on
pitching products and services as was the practice of banks in the past, EAMs are client-focused. Such offices can provide products and services from numerous banks to their clients, providing a holistic and more diverse choice – MFOs take this approach to the next step offering bespoke lifestyle & concierge services - traits highly prized by the new breed of UHNWIs that are entering the market. This results in a better alignment of interests between clients and financial advisors.
EAMs provide clients with a deeper understanding and more
bespoke solutions
The UHNWI MarketAs the latest Wealth Report from Knight Frank indicates, the number of UHNWIs grew by around 5,200 last year alone, meaning a total of 65,335 people have been classed as an UHNWI within the last ten years. The number of billionaires
reached 1,844 last year ; an increase of 82% from 2004.
The number of UHNWIs grew by around 5,200 last year
Knight Frank
In the US, the popularity of EAMs has grown with a number of larger firms supporting expansion into this area. This has been described as a “genesis” by Forbes, as well-established banking organisations seek to expand into this lucrative new area and benefit from the increase in prized UHNW clients.
A “genesis” of well-established banking organisations seeking to expand into the EAM Market
Forbes
GROWTH IN EAMS PRESENT NEW JOB PROSPECTS FOR WEALTH MANAGERS
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In the EU, particularly Switzerland, thousands of EAMs have been set up. But it is not the case that EAMs are enjoying a windfall of business just in these more traditional wealth hubs, emerging markets such as China, India and the South Pacific are also housing more UHNWIs than ever before. Asia overtook North America as the region with the second-largest number of UHNWIs in 2014, the same Knight Frank report discovered.
UHNWIs in Asia now hold net assets of $5.9 trillion. By 2020, it is predicted that UHNWI assets in the Asia-Pacific region will reach $22.6 trillion and a further 20,127 individuals are likely to see their wealth increase to $30m-plus in this region within the next decade. The number of ex-bankers moving to the Asian market because of this will result in managed assets in the region increasing to $70 billion by the year 2017.
MFO RegulationsAs the number of UHNWIs and MFOs increase, more regulations are coming into force. Traditionally EAMs are subject to less compliance than other banking sectors, but as an article on Bloomberg published earlier this year notes, more focus is being given to the legislation and regulation of such offices. Financial intermediaries such as EAMs are feeling the grip of stricter rules and as such the candidates considered for these positions require knowledge and experience of these changes.
More focus is being given to the legislation and regulation of
EAMsBloomberg
In Singapore, the government has been striving to carve the city out as a leading wealth management centre for UHNWIs within the last decade. In 2011 the Association of Independent Asset Managers (AIAM) was created to help ensure the region stands out as an ideal business location for MFOs and EAM practices. While the number of EAMs within the market is still low compared to the EU and Switzerland, the movement of EAM pioneers within the last few years has helped to establish the region as a pioneering area for investment and the AIAM has helped to increase understanding of EAM opportunities and set guidelines for these practices.
As the number of entrants to the market and the number of clients increase, the need to appear competitive is driving forward more regulatory requirements. The aim of the AIAM is to “establish, preserve and increase the reputation and professionalisms” of the EAM profession and MFOs in Singapore. The Dodd-Frank act passed in the US in 2010 and the Alternative Investment Fund Managers Directive (AIFMD), adopted by the EU in 2011, also offer a similar
level of regulation to EAM and MFOs in these markets. The AIFMD in particular imposes pan-European regulations on alternative investment fund managers to report and disclose information on clients to the relevant authoritative bodies.
What this means for recruitmentEAMs looking to expand in what is a growing market are having to comply and actively invest in the expertise required to remain competitive and attract and retain the wealthiest of clients. High-quality, experienced professionals are being recruited to help oversee and facilitate growth and remain compliant, with a focus given to a candidate’s client portfolio and their ability to connect with UHNWIs.
EAMs looking to expand have to comply and actively invest in the expertise required to
remain competitive
As a result, the barrier to entry into EAMs is lower but more emphasis is placed on the future growth of client relationships. As modern UHNWIs seek less restrictive relationships with their wealth management professional than affluent individuals of the past (the prominence of entrepreneurial-gained wealth is far more prominent now than
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inherited wealth, and as such these clients have more of an interest in how their assets are handled), flexibility is a highly desired trait within such offices.
The barrier to entry into EAMs is currently relatively low – more emphasis is placed on the future
growth of client relationships
This is a selling point for candidates looking to move into this area. Not only is there less segmentation than within traditional banking departments, but there is flexibility within the role (the ability to work from home, set specific working hours and be more autonomous) and more options for relationship development with clients. The bonuses offered in EAMs are often more generous as well, as they are tied into the revenue generated by an individual; this increases the incentive to maintain positive working relationships with UHNWIs.
As both well-established banks and independent financial advisors seek to benefit from the rise in UHNWIs and the emerging prominence of MFO offerings, recruitment opportunities in the sector are increasing.
This guide has been brought to you by Carlton Senior Appointments, part of the Phaidon International group.
Carlton Senior Appointments is a specialist provider of Wealth Management recruitment solutions across Europe, the US, Asia and the Middle East.
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