Why 50% of Private Bankers Quit in 21 Months?
Getting into Private Banking is tough. Getting to be a Private Banker is even tougher. But in Private Banking, 50% of Private Bankers quit after 21 months. Why? Shouldn’t the stringent qualifying criteria already pooled the best candidates to succeed?
But this 50% quitting rate is not only for new Private Bankers. The same pattern recurs for existing and seasoned Private Bankers too. So why would 50% of Private Bankers quit in 21 months?
No. 1 Shifting AUM is increasingly Difficult
Joining a new Private Bank is exciting. New life, new colleagues, new system, new desk, higher salary with hopefully a 20% to 50% pay raise & maybe sign-on bonus, where all these obviously comes with higher performance targets in Assets Under Management (AUM) & Revenue.
Example of AUM Targets:
| Private Banker | HNW | UHNW |
| Junior Private Banker | 100 Million – 300 Million | 300 Million – 500 Million |
| Senior Private Banker | 300 Million – 500 Million | 500 Million – 2 Billion |
- HNW: High net worth
- UHNW: Ultra high net worth
There are many ways to get clients, and most Private Bankers already have a strong network and AUM size. But it is increasingly difficult to shift AUM to a new Private Bank:
Some reasons why client don’t give AUM quickly:
- How long would you be in your new Private Bank?
- Is your new Private Bank & Team reliable?
- Are you going for higher pay?
- Is your new Private Bank sound?
- Will the AUM transfer result in unnecessary expenses?
- Will there be operational mishap in the transfer?
- Will the new replacement be better than you?
- The existing Private Bank will aggressively retain them
Read More: 12 Reasons why Clients won’t give you AUM within 6 Months?
No. 2 Comparing $200 Million & $250,000
The numbers just don’t add up. Risking a $200 Million AUM for a pay check of $250,000 excluding sign-on bonus. Or risking $500 Million AUM for a pay check of $500,000?
Over the years, clients have become less sticky with Private Bankers. Clients have more bank accounts, more Private Bankers, and growing distrust with banks & investments recommendations. And with all these happening at the end of an economic boom, the easy pot of gold are getting harder to find and for clients to risk.
Private Bankers also found themselves struggling between doing their best for clients, their (new) Private Bank and for themselves.
Private Bankers’ strengths are in relationship management and access to the high net-worth network. With the extra effort required to assess Private Banks’ strengths, weaknesses, internal system & product competencies means the Private Banker now have to determine if their pay check and new Private Bank, would be worthwhile to build or to shift their AUM over.
A wrong move could risk the wrath of their clients and risk losing all AUM, and most importantly – client’s trust.
Private Banking Cases:
- Citibank sued 7 bankers joining UBS for data-theft
- Investor sue DBS Bank for losses of US$6 Million over useless FX Options
- Tycoon Ooi Hong Leong’s dinner with Goldman Sachs cost $34 Million
- Scientist sue Deutsche Private Bank for $49 Million loss
- 2 Clients to fight $100 Million lawsuit against Julius Baer in Singapore
- HSBC sued by Billionaire’s ex-wife for losses with Private Bank
Internal Rigging Cases:
- Barclays, HSBC & RBS fined $924 million for forex rigging
- Deutsche Bank expect to pay more than $1.5 billion for LIBOR fixing
- 6 banks fined $5.6 billion for foreign exchange rigging
No. 3 The 15 Months Trap
Most Private bankers’ contract have a 1 – 6 months garden leave and 3 – 12 months non-solicitation clause. In other words, you could be away from the job and client for as long as 12 – 15 months.
Most Private bankers’ contract have a 1 – 6 months garden leave and 3 – 12 months non-solicitation clause
Your target starts running the moment you join the bank and the contract to bring in the AUM is usually 3 years. After 6 – 9 months, somehow the senior management looks at your performance using a straight-line approach.
Then you start to wonder how you could have better handled the transition to a new Private Bank. Could that be done more effectively?
Private Banker’s Timeline to a new Private Bank:
| Time Spent | 3 Months | 6 Months | 6 Months |
| Your Plan | Holiday | Start Work | On Track for AUM |
| Reality | Garden Leave | Non-Solicitation | Marketing |
| Meet Friendly Prospects | Banking Secrecy | Account Opening | |
| Regulations | KYC Documentation | ||
| Compliance | |||
| Training | |||
| System Learning |
In all, a Private Banker could be spending almost 12 – 15 months before AUM starts flowing in. During this period, a crisis can occur, the new Private Bank could be undergoing M&A activities, there could be leadership changes, your customer may diversify holdings into a few Private Banks.
And there is the mismatched expectations on AUM:
AUM Expectations:
| Expectations | HR Manager | Junior Manager | Senior Manager | C-Level |
| Target | $300 Million | $300 Million | $300 Million | $300 Million |
| Timeline | 3 Years | 3 Years | 3 Years | 3 Years |
| Review Frequency | Semi-Annual | Monthly | Quarterly | Annual |
| Targets Expectations | 80 – 100% | 75 – 100% | 90 – 120% | 100 – 120% |
If the agreement would be to bring in $300 Million over 3 years, your AUM performance would still be subject to regular review. Anytime there is a clear difference in opinions on when the targets should be met, either the Private Banker quickly leaves or the Management will end the contract early.
No. 4 Reality Strikes
And after 15 months of hard work, you either found yourself doing well, just about managing, or way behind target. Then, you review your future, the remaining 9 months to your 2 years tenor, and the 3rd year.
Do you continue to work hard? Is this the right Private Bank for you and your clients?
What’s at stake?
- All your confidential clients’ contacts are now with the new Private Bank
- You had paved the way with the account opening, saving them lots of time
- Your AUM are now stuck with the new Private Bank
- If you leave, client thinks you are being irresponsible
- If you leave during a market decline, client thinks you are being very irresponsible
No. 5 Private Banking losing its Soul
Private Banks used to be shrouded for its secrecy. Where political and business uncertainties were huge, Private Banks are the protector of the individuals who had gathered huge wealth. Where the owners of Private Banks used to be deeply involved in the business, today, most of them are less involved, leaving the operations in the hands of professional managers.
- Indonesia introduce tax amnesty for Indonesians with offshore assets
- HSBC fined $1.9 billion for failure in money-laundering controls
- Barclays fined £72m over $1.9 billion wealth management deal
- ABN AMRO fined for failure to control money-laundering risks
The impact is huge as Private Banking clients are not only wealthy, they are enormously influential and successful in their own fields. Owners of Banks and Private Banks understood that key to success in business and banking is trust. Based on that principle, they are / were able to attract depositors and become protector & custodians of their wealth, together with their edge in global political, economic and financial developments.
Today, Private Banks are focusing on Wealth Management solutions & lifestyle, despite a growing Asia where business opportunities are huge. Private banks are stuck in the spectrum of chasing for the old dollars, turning into a large Asset or Fund Management Company, attempting to earn AUM fee of 1% – 2% annually but with most of them hitting Return on Assets (ROA) of 45 basis points (bps) to 89 bps.
Private Bankers who joined a new Private Bank are caught in the trap. With promises of a better Private Bank, a trusted leadership and team, they start to find difficulties in providing Private Banking solutions to the diverse needs of clients. For most Private Banks, the products are increasingly homogenous (a natural process of competition).
The days of getting to someone with a complex problem who could stamp his authority to make decisions, are now in the hands of committees and policies.
No. 6 Maybe not the Right Private Bank
Then you start to wonder if this is the right Private Bank? Joining a Private Bank is almost like getting into a marriage. Except this union involves 10 – 50 of your clients.
By all means, marry. If you get a good wife, you’ll become happy; if you get a bad one, you’ll become a philosopher.
~ Socrates
It is not long before a Private Banker discover they are in the wrong Private Bank. With a competitive Private Banking landscape and many Private Banks, it is apparent why the one you are joining could be the wrong Private Bank for you. Read More: How do you find the right Private Bank?
Possible reasons:
- Unable to provide for your top clients financial needs
- Unable to assist important clients on corporates & business needs
- Half the meetings’ time are spent on Revenue & Sales
- Inadequate or Shrinking Product Range
- Inefficient Processing
- Poor Reporting Standards
- Poor Management
- High Turnover of Operation Staffs
This impacts Private Bankers confidence and ability to attract clients and AUM quickly. And just when yesterday the CEO promised the Private Bank is here to stay … … it gets acquired.
- OCBC Bank acquire ING Private Bank to form Bank of Singapore in 2009
- DBS Bank acquire Societe Generale in 2013
- Julius Baer acquire Macquarie Private Bank in 2011
- Bank of America acquire Merrill Lynch to form BOA ML Private Bank in 2009
- Union Bancaire Privee acquire RBS Coutts in 2015
These are 6 reasons why Private Bankers quit in 21 months.
Related Articles:
- What is a Private Banker?
- How do you become a Private Banker?
- Why 50% of Private Bankers quit in 21 months?
- 12 Reasons why most clients do not give Private Banker AUM within 6 months
- How do you survive as a Private Banker?
- How to succeed as a Private Banker?
- How do Private Bankers acquire new clients?
- How do you find the right Private Bank?
- 5 Shocking deals that shake-up Private Banking in Asia
Useful Lists:
Sign Up / Register
Caproasia Users
- Manage $20 million to $3 billion of assets
- Invest $3 million to $300 million
- Advise institutions, billionaires, UHNWs & HNWs
Caproasia Platforms | 11,000 Investors & Advisors
- Caproasia.com
- Caproasia Access
- Caproasia Events
- The Financial Centre | Find Services
- Membership
- Family Office Circle
- Professional Investor Circle
- Investor Relations Network
Monthly Roundtable & Networking
Family Office Programs
The 2024 Investment Day
- March 2024 - Hong Kong
- March 2024 - Singapore
- July 2024 - Hong Kong
- July 2024 - Singapore
- Sept 2024 - Hong Kong
- Sept 2024 - Singapore
- Oct 2024 - Hong Kong
- Nov 2024 - Singapore
- Visit: The Investment Day | Register: Click here
Caproasia Summits
- The Institutional Investor Summit
- The Investment / Alternatives Summit
- The Private Wealth Summit
- The Family Office Summit
- The CEO & Entrepreneur Summit
- The Capital Markets Summit
- The ESG / Sustainable Investment Summit
