By Susan Chadick, Co-CEO of New York City headquartered retained executive search firm Chadick Ellig and Global Leader of IIC Partners' Financial Services Practice Group.
According to statistics from IIC Partners' New York member firm Chadick Ellig, 2010 and the beginning of 2011 indicate a healthy return of search activity, actually close to a peak last seen in 2007, particularly within the Financial Services sector. 1A report from the Chartered Institute of Management Accountants states: "The Financial Services sector is emerging from the worst financial crisis for 80 years. Tighter regulation, an overhang of debt in the west and the immense growth in the power of banks in emerging economies will transform the landscape of banking." 2 The report continues: "As businesses find new market opportunities, they will need access to corporate finance, which will open up markets for bond and share issues."
This certainly has been seen by IIC Partners' Brazil member, Fesa.
"Brazil has the third largest stock exchange in the world in terms of market value, now partnering with the Chicago Mercantile Exchange, and is seeing increased foreign investment," says Fesa's Ricardo Amatto, Vice President & Partner of Fesa's Financial Services Business Unit. His colleague Vice President & Partner Patricia Gibin adds, "The increase of IPOs in Brazil together with the rise in the number of M&A deals helped to boost wealth management activities there. Brazil is one of the leading countries in the 'new millionaires' growth ranking. Due to the emergence of several new wealth management clients, several banks have established new segments to properly attend those clients. In addition, due to both the emergence of more sophisticated and demanding clients and the lack of structure to properly serve them, the family office industry in Brazil has been growing at an accelerated pace. Those players are ready to offer a high class service, including a full range of products from money market to tax planning." In Brazil, family offices are private companies that manage investments and trusts for wealthy families.
The insurance sector is booming in Brazil mainly due to investments in the infrastructure sector. Also in Brazil, some banks have been acquiring brokerage houses. "Banks and brokerage houses are seeking to expand their capacity to serve high net worth clients and have been hiring private bankers and financial advisors, which has increased the compensation level of those professionals," continues Patricia. "The open architecture concept (the ability to provide internal and external asset management capabilities) seems to be a must for this industry and has been growing at a fast pace."
Unfortunately, the good news is not evident everywhere. "The German financial services market seems to appear a bit frustrating," states Norbert Abraham, Partner of Frankfurt-based IIC Partners' member firm ingeniam. "The number of people working in the whole Financial Services arena (excluding the insurance business) is down from approximately 715,000 to 630,000. In addition, the public Landesbanken Sector in Germany has lost the WestLB as one big international player and is still under substantial pressure to develop sustainable businessmodels. With only two mayor players left, Deutsche Bank (just integrating Postbank) and Commerzbank (incorporating Dresdner Bank) the demand for top talent remains low. While the number of 'non German banks' with operations in Germany is almost constant, business has decreased in almost every market segment."
Fred Gautschi of JF Robertson & Partners AG in Switzerland had - until recently - observed that "banks in Switzerland are repositioning themselves after the crisis, the tax issue and risk discussions. They are reestablishing new strategies, especially the private banks. Most of them planned to expand their business. Based on the market development (new hires in front offices, higher regulations in risk, compliance, tax) cost management remains an important focus and task in the banking industry.
The market is also seeing some mergers & acquisitions, especially in the non-Swiss banking segment. Growth strategies were - 'in' again. Many banks were searching for new relationship managers. Beside front office employees, banks were looking for tax, compliance and risk specialists, which are still hard to find in the market."
But at the end of June and beginning of July the market seemed to change again. Some banks are - due to a sluggish business development - starting again restructuring their activities and will also reduce headcounts. Fred concludes, "For the retained search industry there will be a fairly bumpy market, and competition is also growing by new entrants or by bank in-house search practices."
IIC Partners Global Chair and Managing Director of Singapore's Executive Talent International Lim Chye Lian says "organizations are now a lot leaner. Before the crisis, size mattered, now organizations have become very lean. C-level executives cannot expect to have an army of staff supporting them. There are no longer jobs for arm chair leaders. Organizations want to hire today, executives who have the bench strength for the future." Chye Lian also notes: "Companies are taking a lot longer to hire. They are more fastidious about what they seek in their leaders and more people are involved in the selection process, both internally and externally."
In the United States, the insurance sector continues to show healthy growth with an increased interest in life insurance and annuities because of the ongoing challenge of adequately financing retirement. Beginning this year, the first Baby Boomers will have reached 65, generally retirement age in the United States. For the next two decades, thousands of Baby Boomers will reach that age every day.
At Chadick Ellig, we are seeing a greater exchange of talent between Wall Street firms, global banks, and insurers, as the services offered are broader, and the issues more complex in a global growing marketplace. With the majority of insurers now public and no longer following a mutual model, they have the equity and compensation leverage all to 'keep whole' and attract executives coming from Wall Street. The key issue is no longer the 'package' but more the ability of the executive to make the cultural transition from the hard charging - 'cowboy' - to the collaborative leader who engages colleagues and sees the big picture.
It is also noteworthy that candidates from entities that have tainted reputations as a result of the unrestrained risks taken during the financial crisis are in a defensive position as they are considered for positions within more financially conservative entities.
Overall, the climate for retaining executive search firms to find key executives who bring specific, competitive, and much sought after experience in the financial services sector, is positive and continuing to move in that direction. While we're not quite back to where we used to be, in some parts of the world, more than others, the war for talent has been re-engaged.
1. "The Global Banking Sector: Current Issues." Chartered Institute of Management Accountants, 2011. Page 1
2. Global Economic Prospects, World Bank, June 2010 from "The Global Banking Sector: Current Issues." Chartered Institute of Management Accountants, 2011. Page 5