Why Are Financial Services Firms Looking to Wealth Management Leaders?

In an environment of margin compression in traditional financial services profit centers, such as investment banking and pension plan recordkeeping, more and more financial services firms are viewing their heritage as potential drivers of future growth.

“Wealth management is becoming increasingly important,” says Mike Wunderli, managing director at Echelon Partners. “It’s the most stable part of the business and the most valued part of the business because it’s recurring and transparent.”

In contrast, the investment banking business is highly profitable, but less predictable and less sticky, says Wunderli.

“I think there’s a paradigm shift in the importance of wealth management in all of these investment bankers or the international diversified financial services company,” adds Wunderli. “Many of them see perhaps a future that shifts to a greater focus on wealth management, and they want their leadership to come from that space and help direct it.”

As wealth management becomes more important to financial services companies, the leadership and perspective of wealth managers becomes increasingly important. This has led to an increasing number of wealth management professionals moving into senior management positions.

Recent movements

When UBS recently announced that Iqbal Khan would soon take over as sole chairman of the organization’s global wealth management business, CEO Ralph Hamers said in a press release that the global business of The company’s wealth management and its Americas region, in particular, were strategically important.

“Both offer significant growth opportunities for us,” Hamers said. News reports suggested that Khan’s promotion had put him in the running to possibly succeed Hamers as CEO of the company, although this was not addressed directly by the company at the time.

Competitor Credit Suisse, for its part, announced in July that it had chosen Ulrich “Ueli” Körner as the new group CEO. Körner was previously CEO of Credit Suisse for Asset Management and spent six years heading UBS’s asset management division earlier in his career.

“With his deep industry knowledge and impressive track record, Ueli will drive our strategic and operational transformation, building on existing strengths and accelerating growth in key business areas,” said Credit Chairman. Switzerland, Axel P. Lehmann, in a statement.

A statement from Credit Suisse announcing the appointment, which was part of an extensive review, said that one of Körner’s goals would be to help the company transition to a “business focused on advice”, the objective being a more constant performance.

Citigroup CEO Jane Fraser, who assumed her current role in 2021 after leading its wealth management and retail banking operations, also cited wealth management as a key driver of the company’s growth. His plan is to combine the firm’s private banking and wealth management businesses to create a more streamlined experience for customers, and one that can serve a wider range of consumers.

Beyond the banks

The focus on wealth management is not exclusive to banks. Voya has announced that Heather Lavallee, CEO of its Wealth Management Solutions business, which includes the pensions business as well as a growing retail wealth management channel, will take over as CEO of Will see in January.

“As CEO of our wealth management solutions business – which generated record earnings in 2021 – and in her previous leadership roles, Heather has distinguished herself as an extraordinary leader focused on growth, innovation and culture,” current CEO Rod Martin said in a statement about the meeting.

And SageView Advisory Group, a traditionally retirement-focused advisory group, just named Jorge Bernal as COO. Bernal was previously managing director and co-head of advisory services for Goldman Sachs Financial Management.

Bernal’s appointment was the latest in a wave of hiring following the acquisition of SageView by Aquiline Capital Partners last year and a renewed commitment by the company to grow through mergers and acquisitions. . Randy Long, founder and CEO of SageView, says Bernal’s appointment came after a nationwide search.

“How lucky we were to land Jorge,” Long said. “He saw what we were trying to do and the vision of trying to combine wealth and retirement, and he brought all of his wealth experience and his background in operations and technology.”

Long says SageView has doubled in size over the past 18 months to more than 250 employees, and has evolved to meet growing demand from plan sponsors not only for portfolio management, but also for financial and health services. wealth management for plan participants. Meanwhile, Sageview’s wealth management division has grown to over $4 billion.

“You can argue that there are bigger margins in wealth management than in institutional consulting,” Long says. “But I don’t think that’s necessarily what drives him. There’s just this void, a huge need among Americans for a trusted advisor. And when you’re already working with their pension plan, there’s almost an implicit trust between employer and provider.

A Fidelity survey last year found that providing advice and guidance to members was one of the top three drivers of advisor value among plan members, after improving employee results and satisfaction. of service.

As more retirees keep assets with their 401(k), there’s also a greater need for help with withdrawal strategies, Long adds.

“They want someone to help them locate their assets and what account to withdraw from, when to take Social Security,” Long says. “It’s a much broader perspective, and that’s where the holistic approach comes in.”

“Naturally attractive as candidates”

The focus on wealth management — and leaders with a background in wealth management — is also happening in middle-market companies, says David Speicher, co-head of the financial services practice at JM Search. This reflects the experience that wealth management leaders have in leading their side of the business, including front-line perspective on profit and loss, investment knowledge, product knowledge, technology, digitization and customer experience.

“The asset management side tends to focus on some of these things, but not all of them,” Speicher says. “It’s helpful to have talent coming in with as many arrows in their quiver in terms of experience and exposure that they have. This makes them naturally attractive as candidates.

Additionally, income generation from wealth management has increased over the past few decades and will continue to do so over the next few decades as wealth is passed on to the next generation, the sources say.

“Growth projections are absolutely insane, so those multi-faceted financial services companies where wealth management is a part of the overall business can’t help but see the writing on the wall with this momentum,” says Speicher. “And as fintech continues to grow and automate wealth management, that will only increase profitability.”

Many companies also recognize how wealth management overlaps with other areas of their business. For investment bankers, for example, helping a successful baby boomer sell their business can also be an opportunity to build a wealth management client.

“There are so many potential clients in wealth management right now that might not have two cents to rub shoulders with, but on paper they’re worth $2 million,” Wunderli says. “Banks recognize that if they help them sell the business or go public, they might be more likely to get the wealth management business down the line.”

These changes could be a boon for individual wealth managers who may find their services more in demand, even as the existing talent pool shrinks due to aging advisors and a lack of new entrants.

“If the money is supporting one side of the business and there’s a need and a lack of available talent, companies will go after wealth managers and advisors who are doing a good job,” Wunderli says. “There’s just going to be a lot more money for it. We have customers who pretty much have to pay what they ask for because they can’t afford to lose them.

This is especially true for advisors who have a strong relationship with their clients.

“There’s always the risk that if they leave the company, the customer will leave with them,” says Wunderli.

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