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Private banking in Switzerland Private banking in Switzerland

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Private banking in Switzerland a talent market analysis

Private banking in Switzerland

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about spencer stuartSpencer Stuart is one of the world’s leading executive search consulting firms. Privately held since �956, Spencer Stuart applies its extensive knowledge of industries, functions and talent to advise select clients — ranging from major multinationals to emerging companies to nonprofit organizations — and address their leadership requirements. Through 5� offices in �7 countries and a broad range of practice groups, Spencer Stuart consultants focus on senior-level executive search, board director appointments, succession planning and in-depth senior executive management assessments. For more information on Spencer Stuart, please visit www.spencerstuart.com.

about the authorJ. Maurice Zufferey leads Spencer Stuart’s global Private Wealth Management Practice. He is also head of the Financial Services Practice in Switzerland.

Since joining Spencer Stuart in �00�, he has conducted numerous domestic and international searches for all banking segments, with a focus on private banking, institutional asset management, consumer finance, distribution, credit and risk management as well as operations. Assignments have included finding board members, executive and senior line and functional management officers as well as qualified product or sector specialists. Moreover, Maurice has experience in assessment services and benchmark studies and recruits senior positions for clients of the Financial Officer and Professional Services practices.

Previously, Maurice spent much of his career with UBS, first as a corporate finance specialist in Zurich, then as an investment banker in London. In �99�, he served as head of the investment banking division in Frankfurt. In �994, he served as chief of staff, reporting directly to the group executive board, in charge of all management processes related to the bank’s human, financial, strategic, legal, technological and material resources. In �998, Maurice became chief executive officer of Ecole Hôtelière de Lausanne, a top international hotel management school.

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Observers of private banking in Switzerland agree that the

market is presently going through an extremely positive

phase, characterized by sustainable growth, historically

high revenues and an extremely attractive profit/risk ratio.

The following phenomena are currently at work in the private banking market:

Continuous, even accelerating growth: This is happening on a global scale, particularly in the United States and Asia and, to a lesser degree, in Europe; underlying all this is a sustained creation of new private wealth, due to the beneficial economic effects of globalization as well as the current strength of the financial markets. Moreover, Latin America, the Middle East and Eastern Europe are also experiencing an increasing growth in wealth development.

New money: In Europe, the various collective savings systems, whether mandatory or optional, continue to channel significant amounts of new money in the direction of wealth management.

Retirees withdraw their capital: The older segment of the baby boomer generation is beginning to retire, having accumulated wealth over several decades. An increasing number of mainly well-off retirees prefer to withdraw their capital rather than opt for an annuity. This group requires the services that private wealth management is able to offer. In addition, this generation is making more and more use of financial services that offer succession planning and a holistic approach to wealth management, which includes lifestyle balance and enjoying their accumulated wealth.

CONTENTSTrends in the private banking market �The private banking talent market 4Our recent experience in the search for client relationship managers 6Ideal conditions for recruitment 7Important elements of attracting talent 8Expectations, performance and remuneration 9Conclusion ��

About the Private Wealth Management Practice ��


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New financial environment: Financial markets are currently flooded by liquidity in search (often desperately) of appropriate investment targets. On the other hand, globalization and the emergence of new economic powers create immense financial requirements which private savings play an important role in meeting.

Competition between international financial marketplaces: This has intensified over the past few years. London has affirmed its global leadership position. Switzerland, however, has consolidated and even strengthened its place as a global leader in private offshore wealth management, as well as in the services quality and investment performance it provides to individual wealthy customers.

Financial engineering: The banking industry is boosting its financial engineering sector, with products and solutions that are increasingly sophisticated and diversified. For many wealthy individuals and families the revenue from private assets has sometimes supplanted, at least partially, those from industrial or commercial interests.

Client sophistication: At the same time, private wealth management clients have also become more sophisticated in terms of their requirements and financial know-how. Clients now require great flexibility from their bankers, a wide selection of products, the ability to adapt to the changes and trends of the markets as well as an increased level of investment performance (expressed in minimum or absolute return).

On the behavioural side, the shock following the 2000–2002 stock market crash has been largely forgotten, or at least relegated to the collective subconscious.


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trends in the private banking marketPrivate wealth management in Switzerland is therefore in excellent shape. Financial players (banks, financial companies, independent asset managers, etc.) are intensifying their efforts to maintain or improve their competitive positions. Given the circumstances described above, we observe a number of trends:

Increased recruiting activity: All banks, without exception, are currently in a sometimes frantic growth phase and are vigorously recruiting portfolio managers and client relationship managers (Crms), financial engineers and business developers (actively seeking out new business and clients).

Consolidation: In Switzerland and abroad, mergers and acquisitions in the private banking area have undoubtedly contributed to a certain consolidation in the banking industry. However, the creation of a significant number of new boutique institutions, independent asset managers and specialised market players has offset this consolidation by widening — and splitting — the wealth management offer. We observe that these newcomers are so far doing all right and, in general, are successful.

Global banks offer flexible solutions: During the current economic and financial cycle even global banks have greatly streamlined their organisational matrices so as to be flexible for their clients in the products and solutions they offer. Their solutions are appropriately focused on the real needs of clients and are sometimes extremely creative as well. These institutions try to maximize their “one-stop shop” advantage for the benefit of affluent, high net worth and ultra high net worth individuals.

Smaller banks specialising: Medium-sized or even smaller financial institutions are playing their advantages to the full. These are mainly personalized services for clients; a product architecture that is truly open; often credible specialisation in a particular investment style; and sometimes a high degree of sophistication in wealth management, particularly for ultra high net worth individuals.

Signs of overheating: Generally speaking, the private banking market is showing clear signs of overheating that are typical of a bullish cycle or of the peak of a long growth phase. The constantly increasing recruitment campaigns, high remuneration levels and audacious risk taking are evidence of this.


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the private banking talent marketThe changes described above affect recruitment, retention and talent development in two important ways:

�. Growing talent shortage. Switzerland is increasingly losing its ability to provide the private banking industry with sufficient talent, whether junior or senior, on account of the country’s demographics over the past twenty years. It is commonly accepted that a growing gap is developing between the demand for, and supply of, Swiss professionals on the market. This gap will continue to grow in the future.

�. Complex regulatory environment. The Bilateral Agreements II with the European Union have slightly improved the situation, particularly when it comes to importing talent with the required professional qualifications, linguistic skills, cultural experiences and personal qualities. However, these agreements can only marginally improve the number of talented people able to master the regulatory environment of Swiss banking. The Swiss regulatory environment is unique and extremely sophisticated, and can only be reliably navigated by individuals after a few years of working in Switzerland. This gap between the requirement for knowledge of regulations and the available foreign talent is further widened by the continued reinforcement of the regulatory framework for private banking in Switzerland which differs from the regulatory frameworks of countries such as Germany, France, Italy, Spain, the United Kingdom and the United States.

We observe that for both portfolio management and institutional asset management, the quantity of banking talent available in Switzerland is still acceptable because it can be covered relatively easily by foreign professionals, mainly from France, the United Kingdom and Germany. The same holds true for product development and management.

Conversely, there is a genuine crisis in the sector of Crms, where there is a huge gap between demand and supply. We estimate that the market for Crms could probably absorb 20–30% more people if they existed.

The Swiss market for Crms has been further drained because the country’s banks, having discovered in the recent years the extraordinary upward potential of private banking in Asia Pacific and the Middle East, tend to export some of their most talented people to these regions in order to build up or reinforce their private banking structural backbone there. This has created a not insignificant number of expatriates.

Furthermore, the private banking business model does not feature a leverage effect. The personal interaction between a given Crm and his or her clients is fundamental for


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acquiring, retaining, and creating loyalty with, clients; a Crm can only carry out a limited number of daily interactions. This means that an increase in client business can only be realized through an increase in the number of Crms.

Other factors characterise the market for private banking Crms:

A credible strategy: Following the 2000–2002 crash, Crms approached for an open position have been mindful of the strategic considerations surrounding their potential future employer. In markets that are still on the upswing, or at least stable, the credibility of a strategy is an important motivating factor — all the more so given that between 2000 and 2003 numerous banks either greatly modified or gave up their strategic beliefs according to short-term circumstances.

Employer differentiation: With the sustained boom in the markets and the general success of private banking institutions it has become difficult for employers to differentiate themselves in the eyes of their candidates. Numerous Crms no longer trust the claims of employers regarding the unique aspects of the service they provide to clients, the flat hierarchies that facilitate decision making, or their competitive positioning in the market.

Independent asset managers: This segment has been very successful over the past few years, whether it be established third-party asset managers acquiring and retaining clients, or newcomers opening asset management boutiques. For the time being, the latter seem to be holding up well. Independent asset managers create real competition for banks when it comes to attracting talent, as they are often able to offer an interesting combination of lifestyle and professional revenues.

It seems characteristic of the current state of the private banking industry that even small financial institutions (i.e, those employing less than eighty persons) are just as active on the talent market. Some small banks and financial institutions are now taking up private banking activities in markets (in particular the Middle East, Latin America and Eastern Europe) that they have never targeted before.

In the eyes of many Crms, numerous private banks seem to lack convincing arguments in their attempts to attract Crm candidates. What they describe as their “unique selling proposition” in making Crm positions particularly attractive is in fact often limited to flat hierarchies, quick decision making, open product architecture, the freedom to travel for business purposes, an entrepreneurial corporate culture, modern information systems, or a good track record of investment performance. Each of these arguments (or sometimes all of them) may be true for any given bank. However, they often fail to truly influence Crm candidates looking for a career move.

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Our reCent experienCe in the searCh fOr Client relatiOnship managers Since the beginning of 2005, Spencer Stuart has worked on numerous search assignments in Switzerland aiming to recruit Crms or heads of private banking teams. Our experience seems to be representative of what is going on currently in this segment of banking professionals.

An analysis of our assignments in private banking reveals the following:

The average duration of our executive search assignments for Crms has been well over twice the average duration of any other type of executive search assignment, for a series of reasons which are outlined below.

For Crm searches, the average number of candidates identified and directly contacted has been well over 100.

The average number of Crm candidates who could be presented to clients (after identification, informal validation and development of candidate motivation) has been by far less than 50% of corresponding numbers for other types of executive search assignments.

When initially contacted by us, most of the candidates presented to clients were experiencing significant structural changes at their current employer, or were in a seriously demotivated state, due to lack of responsibility or freedom of action. The timing of our contact has always played a determining role in our success.

In recent years, demands over remuneration have proven increasingly aggressive. Only on rare occasions have we had to deal with candidates for whom remuneration was not a key issue in considering whether to change employer.

It is very difficult to transfer French-speaking Crms from Geneva to Zurich, or German-speaking Crms from Zurich to Geneva. Generally speaking, private banking Crms are extremely attached to the financial centre they work in, mainly due to the attachment of their clients to the booking centre site of their bank.

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ideal COnditiOns fOr reCruitmentAccording to our experience in search assignments as well as our observation of the market, being successful in recruiting Crms or heads of private banking teams requires the following conditions:

Patience in searching, bearing in mind the extent of the general demand for Crms as well as the delicacy inherent in every search process in this talent segment.

A stable strategic and operational context at the prospective employer that creates confidence in the future.

A credible commitment on the part of the future employer towards its private banking strategy, its organization and the open position.

The quality of the future employer’s name and brand, with a good positioning and a proven reputation of the open position in target client markets. To this should be added, if applicable, a smooth relationship between the prospective employer and its majority shareholder.

A transparent and clearly articulated business and investment plan, especially regarding the personal and financial resources available.

Added value in portfolio management (on the part of the prospective employer). This generally covers a well defined investment policy, well structured investment processes and a good track record in investment performance, at least consistent with market benchmarks.

A highly professional compliance service, ensuring not only full regulatory environment compliance, but also speed and flexibility in handling special cases, client profile analysis and account opening.

Reasonable performance expectations set for potential Crms. A certain number of employers require their final candidate to produce a plan for the transfer and development of clients and assets for the first two to three years of employment; this is not always well accepted by Crm candidates.


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Good quality of support service, in particular regarding personnel (assistants, portfolio managers, investment consultants, etc.); operational support (budget for costs, expenses, disbursements, travel, etc.), technological support (computer platforms and systems for account opening, client management, client reporting, asset booking, middle-office execution and risk management); and financial products and services (teller service, foreign exchange, mortgage and lombard credits, credit cards and other types of lending).

The personal chemistry between the candidate and the future employer’s closest and/or most important representatives is also important.

impOrtant elements Of attraCting talentBeyond the items mentioned above, the ability of private banking institutions to successfully attract Crm candidates or team leaders through search are mainly dependant on :

the quality of Crms already in place in, or near, the target client markets of the open position;

the availability of portfolio managers to actively support Crms in their work with clients;

the density of information exchange internally;

the geographic proximity of the client asset booking centre as well as of portfolio management

the flexibility of information tools in the workplace and on business trips

administrative and hierarchical structures; Crms greatly appreciate having the most direct possible reporting line to a member of general management, or to their employer’s highest divisional head — or in any case just having access without being required to follow a tedious hierarchical route.

Moreover, Crms are keenly aware of whether they are welcome in a given financial institution. The term “welcome” covers emotional and other somewhat vague factors relating to personal well-being, the recognition of a job well done, the atmosphere of collegiality, the sense of a community linking different levels of hierarchy, the feeling of

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working for an employer of reputation or quality that one may be proud of, and the sense of freedom in structuring one’s daily work.

It can happen that a newly recruited Crm is disappointed by his or her employer during the first year of employment Most of the time, the reason for such disappointment arises from inflexible portfolio management constraints, a particularly restrictive compliance department, or the employer’s inability to serve industrial or commercial interests of its clients, in addition to their wealth management interests.

expeCtatiOns, perfOrmanCe and remuneratiOnIt goes without saying that the remuneration packages of Crms are closely related to the performance expected of them. An empirical and systematic analysis of our observations in this field suggests the following:

Generation of net new assets (nna): expectations amounting to Chf 30–50 million for a first year of employment, and similar amounts for the second year, are rarely disappointed. Targets of Chf 50–100 million per annum are achieved in approximately 50–60% of recruitment cases. Targets of over Chf 100 million per annum are seldom realised, and if they are, this only occurs in very special cases.

Annual fixed salary: For a Crm with a profile of 5–10 years’ experience in private wealth management in Switzerland, with the benefit of good training and a relatively smooth career development, the annual fixed salary proposed by large banks and other market leaders is in the Chf 180–230,000 bracket for 2006–2007. Most banks and financial institutions (including independent asset managers) can, however, offer as much as Chf 200–280,000 for this type of profile.

Bonuses: these obviously depend on performance and are often measured on nna or return on client assets (rOa). For generating nna amounting to Chf 30–50 million in the first year of employment, bonuses are often fixed within a range of Chf 80–140,000, and are always guaranteed in the first year. For a similar performance in the second year, they tend to rise to Chf 100–160,000.


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Methods for calculating bonuses are varied: Most bonuses are now paid out on a discretionary basis, even if they have been discussed beforehand in the context of individual annual objectives. We nevertheless observe an increased practice of bonuses being calculated using a mathematical formula, for example from 1.5 to 3 per thousand of nna within a given year. We also see calculations based on the rOa, where bonuses represent 20 to 30 basis points of rOa. Certain institutions calculate and allocate their bonuses on the basis of a coverage ratio, i.e. on gross revenue generated by the Crms during a year, less direct costs related to their activities and those of their team. Some banks would even allocate recurring bonuses, i.e. amounts based on the rOa of a given year repeatedly paid out over up to three years, however in reduced amounts.

For truly senior crMs, annual salaries may reach up to Chf 300,000, while bonuses may be at a level of Chf 200–400,000.

Top performers are always special cases. In light of their achievement record, they are able to demand important bonus guarantees for the first one or two years, as well as a bonus calculation formula fixed in advance, often tailored to the nature and specificity of their client base.


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COnClusiOnThe private banking industry in Switzerland has been doing extremely well since 2003. All banks, without exception, are currently in a sometimes frantic growth phase and are vigorously recruiting. In general, it can be said that the private banking market is now showing signs of overheating that are typical of a bullish cycle or of the peak of a long growth phase. The constantly increasing recruitment campaigns, high remuneration levels and audacious risk taking are evidence of this.

Switzerland is increasingly losing its ability to provide the private banking industry with sufficient talent, whether junior or senior, on account of the country’s demographics over the past twenty years. It is commonly accepted that a growing gap is developing between the demand for, and supply of, Swiss professionals on the market. This gap will continue to grow in the future.

There is even a genuine crisis in the sector of Crms, where there is a huge gap between demand and supply. We estimate that the market for Crms could probably absorb 20–30% more people if they existed.

This is reflected in search assignments. At Spencer Stuart, the average duration of our executive search assignments for Crms has been well over twice the average duration of any other type of executive search assignment, whereas the average number of Crm candidates who could be presented to clients (after identification, informal validation and development of candidate motivation) has been by far less than 50% of corresponding numbers for other types of executive search assignments. In almost all cases, the timing of our contact with candidates has always been a determining factor in the success of a search.

Remuneration packages for Crms and team heads have gone up markedly since 2003 to levels which can now be considered high. While good performers continue to deliver on expectations and thus justify their demand for compensation, the recruitment market is not immune to disappointing performance from quite a number of Crm candidates regarding their capacity to generate nna.

In general, searching for Crm talent requires patience, bearing in mind the extent of the overall demand for Crms as well as the delicacy inherent in every search process in this talent segment. At Spencer Stuart, we strongly advise our clients to think thoroughly about their search strategy and agree on a timetable that fully allows for hard search and validation work, but that is not overambitious regarding the speed of assignment completion.


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the private Wealth management praCtiCe As a part of our Financial Services Practice, comprising 22 percent of Spencer Stuart’s worldwide client base, the global Private Wealth Management Practice is guided by a dedicated team of 15 core practice members. They conduct searches for senior-level managers for a range of organizations including, but not limited to, private banks, wealth management firms, private banking units of financial institutions, independent financial advisers, family offices, as well as endowments and foundations. Our consultants have access to more than 88,000 senior finance executives and specialists through personal contacts and a global network that provides up-to-the-minute intelligence.

The core members of the global Private Wealth Management Practice are:

aSiaFabrice Desmarescaux — singapore [email protected]

Hypatia Kingsley — hong Kong [email protected]

Tsuji Jun-Ichiro — toKyo [email protected]

Malini Vaidya — singapore [email protected]

EurOpEYvonne Beiertz — franKfurt [email protected]

Marcus Hanbury — london [email protected]

Susana MacEachen — roMe [email protected]

Ignacio Maza — Madrid [email protected]

Andrea Pecchio — roMe [email protected]

Dominique Potiron — paris [email protected]

Nico Schrijen — aMsterdaM [email protected]

J. Maurice Zufferey — Zurich [email protected]

LaTiN amEriCaPablo Taussig — buenos aires [email protected]

NOrTh amEriCaSarah Burley — new yorK [email protected]

Liz Fisher — san francisco [email protected]


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