Could an independent boutique be your next career move in private wealth management?
Could an independent boutique be your next career move in private wealth management?
Over the last five years, Helm Recruitment has observed some interesting shifts in the "war for talent" within the private wealth management industry.
In particular, the rise of independent, boutique businesses, often established by experienced executives from the private wealth divisions of major banks and global wealth management organisations, has enhanced their ability to attract top talent. Indeed, for many, they have become the employers of choice.
A key driver in the growth of smaller, boutique businesses has been their ability to offer clients independent, tailored advice. This is attractive to the business founders, employees working in the business and of course, clients whose best interests are front and centre.
Ultimately, the success of boutiques depends on the talent they can bring to the table—rather than the brand name of their company or a vast expanse of resources. Talent is necessary to succeed in a boutique, and clients know this; they are attracted to the quality of advice they can expect from a successful Private Wealth Management boutique, which is often smarter, more agile and unconflicted.
Many financial planners and advisers start their careers in the larger organisations, which offer a great training ground and support in establishing their careers. However, the all too common frustration I hear is the restrictions placed on both what advisers are allowed to do and the compensation paid.
By comparison, independent private wealth management businesses can offer benefits including greater autonomy, higher payouts and a superior selection of products for their clients.
Weighing up the move
Below, I have outlined below the factors that, in Helm Recruitment's experience, advisers often weigh up when considering a transition from the Private Wealth Management division of a major bank or Global Private Wealth business.
the pros
1) Ability to offer clients independent tailored advice – free from conflict - and a product manufacturer that serves the clients' best interests
Independent boutiques operating under their own Australian financial services licence are largely established to provide tailored advice solutions for their clients. Advisers looking to move to boutiques are highly attracted to this model as they can offer their clients advice free from the influence of a business that provides wealth but also pushes the products it manufactures in front of its clients.
Often, the best advisors and financial planners are entrepreneurs that need support not corporate mandates on proprietary products, banking products, or product mix. Independent firms can offer the right level of support for advisors along with a more diverse array of products and services that can fit more specific client needs.
Independent firms are often better able to respond to differentiate between the specialized needs of Senior and Junior Advisers and respond accordingly. In my experience, most advisers and financial planners leave bigger organisations in search of greater freedom, higher commission payouts and more sophisticated products and services. Those who are able to make the transition successfully often find greater satisfaction in their practices and in turn, more satisfied clients.
2) Superior remuneration structure and scope for equity in the business
In many cases, the move for an adviser or financial planner to an independent boutique private wealth management business is greater earning potential. As these businesses do not carry the overheads and layers of management that are seen in banks and larger organisations, their cost base is less, allowing them to remunerate employees at a higher level. It is also the case that boutiques need to offer more to attract quality employees.
I have seen that they are able to offer a superior grid structure to banks and global and national private wealth organisations, and often, equity partnership or profit share. All this can be highly lucrative for an experienced high performing Advisors.
At larger organisations, the pie of equity partnership has already been carved up and distributed. With boutiques, this is more likely to be an option, particularly if you on board at the earlier stages.
One caveat to consider is that some boutiques offer a lower base remuneration component compared with banks or larger organisations, even though the overall earning potential, with bonus, may be greater. Boutiques tend to attract, and accordingly reward, entrepreneurial types who back themselves to succeed. The reward for these high performers is a stake in the game, a strong incentive to make the move.
3) Greater flexibility, autonomy and impact on company culture
Frequent complaints from advisers and financial planners in banks and the larger private wealth organisations relate to the bureaucracy and complexity that exists within these structures, impeding efficiency.
Boutiques tend to be more flexible and nimble and can more quickly cut through the red tape. This can be highly attractive to advisors that are looking for a change after years of battling a bureaucratic and political behemoth. Free from distractions, advisers can focus on providing more focussed, personal attention to clients. In fact, many private wealth advisors list this as the top reason they move to the independent channel.
4) Working with like minds, where values, beliefs and purpose are aligned.
Employers in boutiques are keenly focussed on bringing in people who are like-minded and gel well with others in the business. Off the record, they describe it as a "no Muppets" policy (other words have been used).
Boutiques are small in size so it is imperative that anyone coming into the business is aligned to the culture of the business and shares the same values, beliefs and purpose. If the alignment is not right, those people can be highly disruptive and impact detrimentally on the business.
If you find yourself on the right end of the "no Muppet" policy, you can be better assured of working in a supportive, family-like environment where everyone is team-focussed and striving towards the greater good of the business.
5) Concerns about client ownership and 'cannibalisation' by other advisers
A key concern for advisers moving to a new business, large or boutique, is client ownership and the scope for other advisers in the new organisation, who may have dealt with your clients in some way previously, laying claim to this client relationship.
When moving from one large organisation to another, you will likely find all clients have been touched in some capacity and there is potential for your clients to be 'cannibalised' when moving to another organisation. The potential for this is arguably greater in larger organisations, given the volume of advisers, compared with a boutique business. Within a boutique, it is unlikely that there will be such client overlap and if so, there is greater flexibility in how you can proceed to deal with them.
6) Less time focussed on onerous, untargeted compliance and less regulatory scrutiny
Law reforms targeted specifically at improving standards in the private wealth management and financial planning industry have been particularly onerous for advisers within private wealth divisions of banks and larger organisations. Reportedly, they have applied an overly cautious, broad brush approach on compliance across the entire organisation which the private wealth management divisions have needed to abide by, even if it may not always be entirely relevant. Some advisers tell me that around 50% of their day within these organisations can be taken up with compliance.
While compliance is of upmost importance to boutiques they do not subject themselves to the broad spectrum approach applied across the entire bank. The scrutiny from regulators is less and so, boutiques' resources can currently be directed towards revenue generation and meeting client needs. In addition, some larger organisations are restructuring their businesses and closing client accounts because they no longer fit the corporate model. This has led to some advisers considering options with boutique private wealth management firms to better service their clients.
In many regards, smaller boutiques do not have the inherent brand image to protect, and may decide it is worth taking slightly more risk when vetting customers. Moreover, they have been successful in luring private bankers by offering them inflated job titles and higher salaries.
The cons
1) Questions over retaining and transitioning clients to a boutique business
The number one reservation I encounter with advisers weighing up the move to a boutique private wealth management business is whether clients will follow.
Really, this comes down to a the strength of the adviser-client relationship - the rapport and trust you have built and of course, the success you have achieved, and what additional benefits you can offer to offset the comfort and security of a larger, a well-known brand.
Any adviser considering the move should carefully evaluate the strength of their client relationships. You want to make sure your clients are more than satisfied with your work and that your relationships are strong. Clients want to feel that their advisor knows them well and is looking out for their interests over the longer term.
Reinforcing these relationships through frequent client contact is key. That’s why advisers contemplating a move should start shoring up their client relationships months in advance. I have seen that around, 60-90 % of clients will stay loyal to their advisor when they move to a different firm. The stronger the relationship, the more likely it is that a satisfied client will follow their advisor wherever they go.
More often than not, our experience is that it is the advisor that holds the loyalty and trust, and not the brand. When an advisor leaves, their top clients are often greeted with a call from the head of the area in a bid to keep them. Clients often think to themselves why has it taken this long to receive the love from the business and opt to continue the relationship with their trusted advisor at a new firm, rather than being assigned a new advisor with whom they have no relationship or track history.
On the flip side there is something to be said for the security of a strong brand and business longevity which comes with working with a bank or large Private Wealth Management business.
2) Less access to corporate deal flow
I often see reservations with advisers who rely on corporate deal flow to make up a large chunk of the offer to clients.
If this is a big component of your business, this would be something to seriously consider, although many boutiques still have access to capital raisings.
3) Less support available in boutiques
While boutiques may be more flexible and nimble, they may not have the same levels of administrative support as the banks and larger organisations.
The rewards of superior earning capacity and grid structure will be there, but may you may also need to roll up your sleeves and get your hands dirty.
I have appointed many senior advisers who embrace this in the knowledge the business is being run lean and they will be rewarded as a result of this by higher earnings ability and profit share. In any case, with the narrowing of margins we are continuing to see levels of support in the banks reduced and with advances in technology and other disruptions, the gap closing between the two types of organisations.
Making the move
So there you have it. While the number of pros is longer than the cons, each weighs differently in the decision to move.
All advisers and financial planners will need to work through their potential reservations and concerns about a career move to a boutique private wealth management firm. It is an individual choice at the end of the day and everyone needs to do their due diligence and practically assess their ability to perform in the boutique structure.
While not setting myself up as the cheerleader for boutique businesses, in my experience, the advisers we have appointed to boutique businesses gained comfort in their decisions through a vigorous recruitment process.
In light of where the industry is heading, they have seen it as a long term career move, offering superior remuneration for those who back themselves to succeed and an environment that is flexible and nimble.
Helm Recruitment has various opportunities for experienced advisers and financial planners within boutique businesses. If you are interested in exploring these opportunities, we welcome your contact.
In particular, we are currently recruiting a Senior Adviser role for an exciting independent boutique private wealth management firm which continues to go from strength to strength. To learn more, see here: Senior Advisor – High Net Worth clients.
Brendon Jukes is the founder of Helm Recruitment, with more than twenty years of recruitment expertise and direct financial services industry experience.
Helm Recruitment is a financial services recruitment specialist. We focus on careers in investment management, including private wealth management, financial planning and funds management.