Wealth Management Forum 2007
The Spencer Stuart


the panelists:
* Rob Elliott, senior managing director of client account management and business development for Bessemer Trust
* Matt Gorman, managing director and eastern division manager for Credit Suisse Private Bank * Tony Guernsey, president of Wilmington Trust – New York •
* Harry O’Mealia, president and chief executive officer for Legg Mason Investment Counsel
* Doug Sacks, vice president, private wealth management for Goldman, Sachs & Co. •
* Tad Smith, managing director and region head of New York and Greenwich for JP Morgan Private Bank •
* Nathan Walsh, formerly head of strategy for Citigroup Global Wealth Management and current head of strategy and business development for the Australia region of National
Australia Bank


Spencer Stuart’s Financial Services Practice recently brought together industry experts at our second annual Wealth Management Forum for a wide-ranging discussion about the needs and preferences of high net worth clients, the qualities of the most successful wealth management professionals and the strategies wealth management firms are employing to differentiate themselves with private clients.

David Hunt, leader of McKinsey & Company’s North American Wealth Management Practice, presented findings of an in-depth survey of high net worth individuals’ needs and preferences, as well as their perceptions of wealth management services. The study found that many private clients could benefit from more counsel on family and wealth transfer issues. The McKinsey research also uncovered that many clients are frustrated with the basics of some of their
wealth manager relationships. Client preferences are shaped largely by factors such as their wealth objectives, their product preferences and the communication style with which they are most comfortable. By better understanding these evolving needs and preferences, wealth management firms can increase overall client satisfaction and cement client relationships for the long term.

The panel discussions explored two key topics related to how wealth management firms can respond to these evolving client needs and preferences: first, how firms are finding and developing top producers who understand client needs and can capture and grow significant business, and second, how firms can strategically differentiate themselves in a highly competitive marketplace.

the dna of the top producer
If having the right team in place is the key to differentiation in the private wealth management
arena, how do firms recognize, recruit and develop the talent they need?

Members of the first panel:
— ROB ELLIOTT, senior managing director of client account management and business development for Bessemer Trust;
MATT GORMAN, managing director and eastern division manager for Credit Suisse Private Bank;
DOUG SACKS, vice president, private wealth management for Goldman,Sachs & Co.; and
TAD SMITH, managing director and region head of New York and Greenwich for JP Morgan Private Bank —

have spent all of their time either as members or leaders of some of the most successful business development teams in the country. They discussed the qualities of a top producer and how firms can nurture and develop a team of top producers.

Top business developers must possess the right combination of technical skills and emotional intelligence, panelists said. Successful professionals have a passion for the business and are focused on their relationships with clients rather than on selling products.

“First and foremost, you need a combination of both technical skills and gravitas. Gravitas is not an easy thing to define, but it’s essentially finding somebody who a person with $50 million or $100 million would be comfortable turning their money over to,” Elliott said. “If you worked all your life to make $100 million, you don’t turn it over to a clerk.”

“nature versus nurture”
Finding individuals with the strong technical skills as well as the essential emotional intelligence is challenging, and emotional intelligence is difficult to develop when it is not innate, panelists said.

“What’s a top producer? I actually think these individuals’ successes are more a function of
nature than nurture,” Sacks said. “I believe this is a relationship business, not a performance business, and the ‘natural’ salespeople rise to the top because of their unrehearsed rapport and connectivity with clients. Ultimately, this business is about you and someone else, eyeball to eyeball.

Top producers are able to develop a trust and a service model in which clients feel comfortable
talking about and sharing very personal issues with them and the client service team.”
The JP Morgan Private Bank model is teambased, integrating banking, brokerage and investment management, Smith said. So, in addition to having individuals with strong technical skills and experience, it is important to develop and cultivate a team that works well together. “The real secret is to have a team that is well functioning and integrated. Anyone we hire is interviewed and signed off by the entire team,” Smith said. “The team’s success depends upon the contributions of the individual players. We’re not really looking for star individual producers. We’re looking for people who fit well in a team environment.”

the search for talent: to buy or to grow

To build their teams, panelists said they hire established professionals from traditional private
banking and brokerage, emerging professionals and individuals who are just beginning their
careers, often right out of business school.
When evaluating established professionals, Gorman said he spends time understanding the
individual’s current business, the relationship he or she has with clients and the investment profiles of those clients. “I spend a huge amount of time talking to professionals who are considering joining our team about how they look at the business and what their client base is like in order to make sure it’s a fit with what we do,” he said. “We have a small shop. We’re very busy and I can’t hire people who don’t fit with our model. They’re too time-consuming and wind up not being profitable hires for us.”

When hiring for the firm’s M.B.A. training class, Gorman said he looks for individuals who may have many job choices but who are committed to making a career in the private wealth area and do not view it as just another job opportunity.

the method of nurture
Once they hire promising young professionals, how do firms train and cultivate the talent? While
acknowledging that the industry as a whole probably does not do as much as it should to develop upand- coming talent, panelists discussed approaches their organizations are taking to give them the experience they need.
“We’ve explored different models, including placing young professionals on teams for a year, which the firm finances, in order to create mentoring programs and to stimulate acculturation. In today’s environment, it may be less appropriate to leave new wealth management associates to their own devices,” Sacks offered.
JP Morgan Private Bank provides extensive internal training to new hires and pairs junior bankers with highly experienced ones. “The junior banker’s role is to help leverage the senior banker for the first couple years and, then, up and out of the nest,” Smith said.

implementing a team approach

Finally, as private wealth businesses grow, they must build and grow client service teams in order to operate efficiently and respond to the range of private wealth client needs. For instance, senior leaders can end up spending a great deal of time addressing client questions about their statements or information they have seen on the web site. “I want to delegate those kinds of issues to administrative colleagues so that I have the time and the freedom to speak with clients about their concerns and needs, whether they are personal or investment related. I need to be focused on the relationship side of the equation,” Sacks said.
“There are pros and cons to the team approach,” Smith said. “On the one hand, a team approach
allows for more specialization and allows you to delegate simple issues to less senior professionals.
The challenge is coordinating the coverage with so many people touching the client. It requires constant communication within the team and making sure the appropriate people are working with the client,” Smith said.

keeping the leaders motivated
With competition for talent intense, firms also are conscious of the need to keep the leaders motivated.
Panelists discussed several approaches that have been successful for their organizations.
“We motivate them in more obvious ways. Compensation is the greatest motivator, but we also give a lot of ‘atta boys’ and ‘atta girls,’” Elliott said. “Management — from the chairman on down — is intimately involved in the process, not just closing deals, but thinking through how we access different kinds of prospects and different channels. We also do more training than in the past and share best practices in the business development area.”
To help keep its best and brightest, Goldman Sachs has identified the top 15 percent of its sales force as part of an initiative to maintain talented professionals’ connection to the firm and encourage them to view the firm as a career, rather than a job, Sacks said. “We have developed approaches and offerings in three areas — recognition, financial offerings and lifestyle. The recognition piece includes titles, leadership groups, access to very senior management and offsite events. Financial offerings include feefree or fee-reduced investments and generous charitable budgets. Lifestyle perquisites address options for home offices, sabbaticals, retirement packages and enhanced technology that enables advisers to be productive while away from the office,” he said.
Firms like Credit Suisse also encourage top performers to take a long-term view of their career. “We preach a kind of ‘long-term greed’,” Gorman said.
“There are a lot of big checks being thrown around the industry, and we want our people focused on the right messages. If you get in a good firm and you develop a good business, that’s your best way to long-term wealth.”



Strategies for differentiation in the private wealth arena

In the ultra competitive private wealth marketplace of today, differentiation is key to the long-term success of an organization. Firms take various approaches to differentiation, depending on their size, scope and history in the market.

On the second panel,
TONY GUERNSEY, president of Wilmington Trust – New York;
HARRY O’MEALIA, president and chief executive officer for Legg Mason Investment
Counsel; and
NATHAN WALSH, formerly head of strategy for Citigroup Global Wealth Management
(and current head of strategy and business development for the Australia region of National
Australia Bank),  
discussed the strategies that differentiate their firms, the types of people they are seeking for their teams and the recruiting challenges they face.

the power of segmentation
With three different components — the Private Bank, Smith Barney and an investment research business — Citigroup’s Global Wealth Management’s challenge and opportunity is simultaneously leveraging the benefits of its large scale and the benefits of specialization for particular clients, Walsh said. One way Citigroup is doing that is by developing focused coverage groups that provide distinct product offerings and services to address certain markets.

“These are very focused coverage groups, segmented by sources of wealth,” Walsh said. “For example, our private bank law firm group targets the top law firms and their associates; we also focus on wealth creators such as entrepreneurs, real estate investors and financial sponsors of hedge funds or private equity, all of whom have some distinct client needs based on the illiquidity of their holdings and the concentrated risk positions that they have. And then we have our Private Partner business which serves the $100 million-plus client.”

marriage of big firm and boutique
O’Mealia talked about Legg Mason Investment Counsel’s strong association with the (now) pure asset management business of the larger Legg Mason.
“We are money managers in our heart and soul. We do not believe that money management is a commoditized product,” O’Mealia said. The firm differentiates itself through its core and satellite strategy of creating client-facing businesses around the country, while centralizing functions such as operations, technology, legal, compliance, trading and research.
“While we centralize many parts of the business, we have a very ‘boutique-y’ feeling, very client-oriented businesses around the country that are portfolio manager-driven,” he said.

access to the right products
Guernsey emphasized the product availability at Wilmington as a key differentiator. Over the years, the firm has purchased numerous managers that have enhanced the product suite available to clients — Cramer Rosenthal McGlynn, Roxbury Capital, Balentine & Company. All told, after all of these acquisitions, Wilmington has about $43 billion in assets under management.
As to another differentiating strategy, the firm also has leveraged the trust and corporate business to further build its presence — which ultimately impacts opportunities on the wealth management side.

differentiating through talent
Ultimately, panelists said, firms differentiate themselves by having professionals who earn clients’ trust.
“Our differentiator is the individual portfolio manager who has been in this business for 20 or 25
years and really has lived and breathed it, who has gone through up markets and down markets, and can get very granular,” O’Mealia said. “It really does come down to people. It’s hiring people who care about people and want to solve problems, not people who just want to turn a sale.”

Wilmington has had luck with opportunistic hires — individuals who have come to the firm toward the end of their careers wanting to set their clients up in the right place, Guernsey said. In addition, the firm is committed to hiring and developing young professionals, including pairing junior people with very seasoned investment professionals.

“You really have to support and mentor these people. You have to let them fail. You have to let them fall down and pick them up and pick them up again. Eventually, they will do extremely well if they’re around a very senior person,” Guernsey said.

the recruiting challenge

Recruiting talented investment professionals has become more difficult, and compensation continues to rise dramatically, panelists said. “It’s a competitive market. Brokers’ payouts have become very aggressive, which makes it tougher to find people,” O’Mealia said. “What we say to people is, because we are an investment management firm — not just an asset-gathering firm — our model allows scale. It allows you to manage more money and do it more efficiently. You can build a bigger book with us.”
With recruiting becoming more difficult, institutions have to identify innovative ways to enable
professionals to do their jobs, Walsh said. “It’s very challenging when you’re paying out those
kinds of figures. It comes back to the productivity of the institution and how you can enable an
adviser to be more productive than he or she could be anywhere else. That allows you, in a
sense, to outplay other firms in a bidding war for talent,” Walsh said. “So, folks who are part of a
segmented model are actually much more productive than those who are trying to be generalists.”


implications for talent management

Speakers on both panels discussed important issues and challenges that will impact recruiting and talent management in the private wealth market. Drawing on these comments and Spencer Stuart’s own work in the field, we conclude with several observations about the implications for leadership and talent development:

1. High net worth clients are more sophisticated and demanding than in the past. Wealth management firms require professionals who possess exceptional technical skills and the emotional intelligence required to work effectively with a broad-ranging landscape of private clients.

2. In order to have the experienced professionals required for the long term, wealth management firms must commit to developing promising talent through mentoring and training programs. Young talent may need to be supported for five or more years before reaching the desirable level of seasoning. “Junior banker/senior banker” pairings can be quite powerful.

3. To retain the best business development professionals and thereby grow the business, firms will need to focus on constantly innovating with recognition programs, lifestyle programs and financial incentives for top talent. The firms that build lasting employee relationships will have lasting (and expanding) client relationships.

4. As business grows, firms are establishing operating leverage through various team structures. The challenge lies in building in the right structure with the right leadership, so that clients are wellserved and true efficiency is achieved. The right senior leadership will ensure that the team concept is implemented appropriately.

5. No matter what the private wealth business model or strategy — large and sprawling and segmented, narrow and boutique-like, brokerage, investment management, trust or a combination thereof — it is clear that the people, as always, will drive the long-term
success of the organization.


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About Spencer Stuart
Spencer Stuart is one of the world’s leading executive search consulting firms. Privately held since 1956, 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 50 offices in more than 25 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.

Financial Services Practice
Comprising 22 percent of Spencer Stuart’s worldwide client base, our Financial Services Practice is guided by industry specialists who have conducted more than 3,700 executive searches over the past five years, placing senior-level managers in a variety of functional disciplines across a range of industry segments:
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