These are some of the main conclusions of a joint report by Oliver Wyman and JP Morgan Asset Management about the future of European wealth management. Overall, a net 23% of wealth managers (increase minus reduce) expects to take on extra staff. This is in sharp contrast with European retail banks, many of which have recently engaged in reorganisations involving substantial staff cuts.
Overall, wealth managers in Europe expect to realise growth of assets under management of 9% and profit and revenue growth of 7% per year. “The higher growth prospects and profitability of wealth management compared to other parts of the banking sector is expected to lead to increased competition”, JP Morgan AM’s head of strategy for Europe Jean-Claude Kurzo told Expert Investor Europe. “In order to keep attracting new clients and retain their current ones, wealth managers have to improve their value proposition and invest in specialised staff who can engage with clients on their investment portfolios.”
Client demands prompt staff increase
Since the financial crisis private banking clients have started to demand more information about their investments, a trend which isn’t showing signs of abating. “The trust lost during the crisis hasn’t been regained. Clients now want to understand better what products they are invested in. To meet these demands, wealth managers need to employ more client-facing staff”, Kurzo says. A net 33% of wealth managers expect to hire more relationship managers in the years to come.
Tim Peeters, head of securities portfolios for the Belgian wealth manager Portolani, was somewhat surprised by these findings. “I had not expected such a spike in hiring of relationship managers and bankers”, he says. “But maybe it is due to the fact that clients aks for a second opinion much more often since the financial crisis.”
Wealth managers also feel a pressing need to employ more staff to deal with the increasing regulatory burden which follows from legislation such as Mifid II and the recent crackdown on tax evasion and money laundering by European governments. The expected staff increase for control functions is even higher than that for client-facing staff at a net 45%.
Cuts on the back side
However, as a consequence of cost pressures, expected consolidation in the sector and increased automation, most wealth managers plan to cut jobs in their middle- and back offices, just like most retail banks actually. More than in nine in 10 of the 159 interviewees their industry will undergo ‘structural change’. Some 85% of interviewees expects large wealth managers to acquire smaller peers, while 73% sees smaller players consolidating.
Fund selection and portfolio construction are not likely to be hit by the aforementioned job cuts, says Kurzo. “Not a single of our respondents said their fund selection was a target. Much of the redundancies will follow from the introduction of more advanced IT-systems.”
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