The job market in asset management may not be back to pre-crisis levels, but hiring will likely pick up after second quarter earnings reports, says recruiter George Wilbanks, president of Wilbanks Partners.
Wilbanks left Russell Reynolds Associates in the fall of 2011 to start his own search firm, Wilbanks Partners, despite difficult market conditions. Wilbanks hit the ground running and last July helped sustainable and responsible investment shop Calvert Investments find its head of distribution, Lynne Ford, former chief executive of Individual Retirement at ING US.
Money Management Executive recently spoke to Wilbanks about post-financial crisis hiring trends.
Tell me about the experience of starting your own firm.
Large professional service firms are good places to be in a bull market, but when growth slows you're saddled with a fair amount of overhead and all kinds of issues coming from the fact that you're trying to eke out a bit of profitability, and yet you're carrying a lot of overhead.
In the summer of 2011, after I gave my notice to the firm, I sat there and thought "What have I done?" I almost had a little buyer's remorse.
In the beginning, I went to see a few business guys I trust to ask for advice. I didn't get too far into that before I ended up with several searches. I was busy right through the spring of 2011.
What are some trends you've seen in hiring since the 2008 crisis?
Hiring conditions have not been ideal since 2008-2009 and they became less ideal following the volatility in the fall of 2011.
After budgeting, most firms went into 2012 with a zero-base hiring budget, only filling open positions, not adding positions. In the summer of 2012 hiring was flat.
In the fall of 2012, I participated in a roundtable with 85 or 90 top HR executives. We were looking around saying, we're not really enthusiastic about long-term organic growth. The larger alternative firms with enhanced credit products, like BlackRock, being the exceptions.
Later in the fall, people I had been talking to the prior year started to call back. I was very busy though the rest of the fall and into spring.
I don't think it was necessarily because the markets were up so strongly, but because people really felt that they were getting out of the woods; commodity prices were leveling off, the election was coming to an end, the dust was settling in the European markets, and China was starting to stabilize.
Within this macro trend of general stabilization there are two areas where searches are ultra robust.
The first is ultra high-net worth. Generally speaking, wealth management is not growing. Since 2009, most of the big wirehouses have been having problems. However, there is a piece that is growing and that's ultra-high net worth.
After 2008-2009, because of the market volatility, everybody started realizing the value of good advice, which is a highly customized and specialized commodity that is hard to deliver.
The cost of delivering this is not $5,000 a year, it's more like $50K to $100K a year. So therefore, unless you have $10 million, $15 million to $100 million to invest in the cost of good advice is prohibitive. I think that because of this, it is not surprising that a significant portion of search work is in the private banks that service ultra high-net worth customers.
The other macro trend is an expansion in technology and operations. Looking back 20 years, operations searches were never more that 5% of the search business, post-2008, these searches grew very rapidly to almost a quarter of the business.
Money managers can't grow their top line 20% anymore, therefore getting 15%-30% growth in profitability is out of the question.
A lot of the smart managers are looking at the one thing they can control easily, their infrastructure and they're spending money on it.
They're saying "I bet I can apply lean Six Sigma continuous improvement methodology to my infrastructure and cut costs annually by 3%, 5%, 7% or 10% a year."
In 1999 or 2006 with the market growth of 15%-30% a year it would have been fiduciarily irresponsible to focus on 3%-5% growth. But today, it's one of the only places you can go to predictably harvest growth.
Are there any other trends that are going on in the search market?
There continues to be a joke among headhunters about the permanent employment act, that is, the aging of the baby boomers. The whole industry is getting older and it has not done as good a job as other industries, like retail or manufacturing, at thinking about succession planning.
One of my searches right now is for a head of investments for a mid-sized deep-value shop. It is all about finding a successor for the founder/entrepreneur.
This has been a common theme since the late 1990's. It continues to be a driver for 25% to 50% of my searches.
I did the search for the head of distribution at Calvert, where the current head of distribution was retiring. The driver for that search was about what next generation of leadership going to look like.
So what do you see going forward in the job market?
Firms are still being very cautious with expenses and headcounts going into the second quarter of 2013.
After the earnings reports at the end of the second quarter, barring any sudden market collapse, profits will jump significantly, I would expect a bump in hiring to follow.
There's no question firms are starting to think a more than a little about growth.