Swiss private banks are dealing with a well-known problem in Asia: relationship managers are jumping from bank to bank for prices reminiscent of football transfers. finews.asia looks at incentives and the effect on customers.
Swiss private banking has become a merry-go-round: reputable client advisers are switching allegiance in rapid succession. Inevitably, some banks get branded as losers while others are seen as winners, at least on the outset.
Notenstein La Roche for instance has seen a string of bankers leave since the beginning of the year. At UBS, several departures not least in the Executives & Entrepreneurs (E&E) division have drawn attention – however, the bank has managed to replace the departed bankers as a high-ranking UBS representative told finews.asia.
Winners – or Losers?
Credit Suisse by contrast has taken on numerous of the E&E bankers from UBS; Bank J. Safra Sarasin, EFG International and Vontobel also have reported the hiring of well-known bankers.
The question however is how sustainable the strategy will prove to be for companies and clients alike – it is a similar issue to the one engulfing the football industry, where the transfer of Neymar to Paris Saint-Germain has become the latest hotly-discussed issue in terms of the financial well-being of the sport.
The Neymars of Banking
An example from last week will serve as an illustration of the acceleration of transfers in banking: Falcon Private Bank, the Abu Dhabi-controlled Swiss private bank which was sent packing from Singapore over 1MDB, hired Christian Blum and his team.
For a long time, Blum generated a healthy return for Credit Suisse by working with rich clients. When Barend Fruithof took charge of Julius Baer Switzerland, Blum joined him. And now, with Fruithof long gone, Blum is moving on again. Julius Baer sources say that Blum and his team hadn’t achieved their targets.
When Fruithof left after his short stint, it was also met with similar protestations about him not having met his targets and for having angered customers and employees alike.
Not Sustainable
If this were to be the case, the human resource department at Julius Baer must have failed to get their right people – the period of employment proved far too brief. This can’t be a sustainable development in an industry that for a very long time presented a picture of stability and reliability with a long-term perspective.
A further practice employed by many banks is similarly affecting the image of a stable and sustainable business: like in football, banking executives have taken to lure relationship managers with the help of premiums. A top banker would hardly move from say Julius Baer to Falcon without the payment of a special bonus – the latter banks simply does not have the same luster and sheen as Julius Baer.
Retention Rates Have Soared
It is questionable whether such «transfers» will help banks grow as intended. The money that the bankers are able to move to their new employer has diminished substantially over the past years.
In the golden age before the financial crisis, a rate of 40 percent was customary. Nowadays, 10 percent is considered a success, headhunters confirm. The reason for this? Banks have put measures in place to improve the retention rate. Basically, they offer whatever is necessary to keep customers with the bank, even if the relationship manager jumps ship.
God's Little Mysteries
The observer of this game is tempted to ask why banks under conditions will spend so much money to lure bankers away from their rivals – highly-paid staff that won’t be able to repay the huge fees.
For a customer, moving assets to a noble private bank such as Julius Baer may make him or her feel good and esteemed. However, why would you move money to a bank that may be based in Switzerland but is owned by sheiks that are at home in the Middle East? An unresolved mystery for sure.
