eFinancialCareers

Combining diplomacy with product knowledge.

As their name suggests, private wealth managers help very rich people manage their money in private, far away from the prying eyes of the gossip columnists and paparazzi.

They fall into two categories:

1) Private bankers, who help clients invest their money wisely and avoid any risks that might reduce the value of their assets. They also offer tax and pensions advice, help clients develop a strategy for charitable giving and advise them on bequeathing their wealth to the next generation.
2) Private client brokers, who assist their clients to buy and sell financial products, particularly equities or stocks (hence the term 'stockbroker'). They also offer advice on the best products to invest in.

The clients of private wealth managers can be anyone from company chief executives to property tycoons, investment bankers, footballers, pop stars or members of privately run family businesses. Private banks typically look for clients with at least AU$1m to invest, but many deal only with clients whose financial assets (so not their houses and yachts) are worth more than AU$30m.

Trends

As big banks become involved in both private banking and private client broking, the two categories are merging into the single category of wealth management. At the same time, the job is becoming increasingly complex. Wealth managers need an understanding of financial products – from basic stocks and bonds to complex financial derivatives. An increasing proportion of their clients’ wealth is now also invested in hedge funds.

With rich people getting richer, business is booming. “The sector is definitely hot and all the banks are trying to get a piece of the high-net-worth-individual action,” says Peter Whitely, senior analyst at Thomson Financial. “Some concentrate on wealth-creation strategies, others on specific areas such as property, listed trusts and so forth, so it is not one size fits all; what one bank offers, others might not.”

Ken Allen, senior advisor with UBS, says wealth management is the most important new sector in the banking world. “As the population ages, and accumulates more wealth, there is not only an enormous potential for private banking growth, but a genuine need for wealth managers. Australia has highly sophisticated financial services and should be positioning itself to offer those services at least to the Asia-Pacific region.”

The private client broking market has benefited from rising stock prices. In 2006, the market value of companies listed on the Australian stock exchange rose 21% to more than AU$1.3 trillion, encouraging individual investors to invest money in the markets.

Key players

Citibank leads the league for managing the wealth of the super rich in Australia, followed by Credit Suisse, UBS and Deutsche Bank, but local banks and fund managers outshine them in the size of retail funds under management, predominantly because of Australia’s compulsory superannuation regime.

Roles and career paths

If you work as a private banker, you can expect to perform one of three broad categories of job: investing money for existing clients, building relationships, or managing back-office functions such as human resources and accounting.

People working on the investment side of private banking either invest their clients’ money themselves or offer their clients detailed advice to help them invest their own money. They are typically product specialists, who are expert in a particular asset class, including fixed income, equity, structured products of any kind or investments in the private equity and hedge funds sectors.

People working on the relationship side are effectively sales people who spend their time cultivating links with clients and selling the bank’s services. This can involve a lot of travelling and close contact with interesting, unusual and demanding people. When a relationship private banker has established a client’s needs, investment specialists are brought in to put a more detailed solution together.

A decade ago, most private bankers combined the investor and relationship role. In some organisations, they still do. But in most banks, investors and relationship managers are now separate, another symptom of the industry’s growing complexity.

Most Australian banks are actively seeking graduates for sales roles. Thomson Financial’s Whitely says regulatory and compliance burdens are now so high that banks no longer employ simple sales people; they recruit heavily in universities for well-qualified graduates. “The compliance burden is extremely exhausting and onerous and is the same whether you are selling a $50k investment or a $5m one.”

All banks offer graduate training programmes in compliance and regulatory codes to overcome the shortage of qualified employees, says James Wheaton, consultant at recruiter Michael Page. “It is a real struggle to find graduates for product management in financial services. We can fill the most senior levels, but we don’t have a pipeline of graduates coming through,” he says.

But graduates who fail to win a place on a wealth-management training programme can still seek such positions if they are compliance-trained. It is also possible to move into private banking with a background in corporate finance or, more particularly, fund management.

If you work as a private client broker, you will have to develop relationships with (usually) wealthy individuals, who will turn to you when they want to buy and sell financial products. There are two types of broker: those working on discretionary mandates, in which wealthy clients communicate their general investment strategy and the broker buys and sells the financial products they think appropriate; and those working on advisory mandates, in which the broker advises the client what to invest in, but needs their permission before making a move.

Junior brokers are more likely to work on advisory mandates. However, making a first move can be challenging, with few brokerage firms offering graduate training courses.

Pay

Private bankers don’t earn the mega pay packets enjoyed by some in the investment banking industry. But they don’t do too badly. Victoria Biggs at recruiter Jon Michel, says first-year analysts earn between AU$90k to AU$105k and can get bonuses of anywhere between 50% and 75%.

While private bankers are typically paid a base salary and a bonus, private client brokers prefer to earn a fixed percentage commission based on the revenues they bring in. Commissions are not as common in Australia as in Europe, but there is strong pressure from brokers to adopt the system rather than be dependent on discretionary bonuses, says Alexandra Goodfellow at recruiter Heidrick & Struggles.

Skills

It’s no good going into private banking if you have a taste for gossip and celebrity intrigue. Private banking recruiters stress that discretion is a key attribute of people in this sector.

• JPMorgan says it looks for “excellent quantitative and analytical skills; strong accounting, finance, quantitative and business writing skills; sharp eye for detail; good at multi-tasking; excellent interpersonal and communication skills.”

• In a graduate’s early years, the positions are mainly behind the scenes, administration, auditing, compliance, help-desk and strategy. “The skills they need are numeracy, attention to detail, strategic thinking and financial nous. It is several years before they actually come face to face with clients,” Whitely says.

• “We look for graduates in economics, business management or marketing and they really need to have six months’ work experience under their belts to be appealing, if they haven’t done a graduate training programme,” says Michael Page’s Wheaton.