Credit Suisse has hired 100 relationship managers in Asia over the past 12 months, Julius Baer has taken on 45 Asian RMs since January, and Deutsche wants to recruit 25 private bankers every year until 2020.
UBS, meanwhile, is also expanding its private banking workforce in Asia (it's recruiting for a new Kowloon office, for example), but not as rapidly as many of its rivals.
The firm’s Asian RM headcount actually fell 7.9% in 2015 – from 1,186 to 1,092 – although this partly reflects the sale of its Australian wealth management business.
Why isn’t UBS on a hiring spree in Asia, where millionaire and billionaire wealth is rising more quickly than in another other region?
During the bank’s recent Q2 earnings call, its senior leaders were quizzed by Autonomous Research analyst Stefan Stalmann about being on a “very different trajectory” to competitors who are “hiring like there’s no tomorrow”.
CFO Kirt Gardner said the private bank was reacting to a more challenging market and was being more “prudent” in its recruitment. He added that “over time” the firm will hire more client advisors (the UBS name for RMs) in growth markets such as Asia. UBS’s plans to expand its onshore wealth business in China are still in place, Gardner said on the earnings call.
UBS CEO Sergio Ermotti pointed out the potential downsides of hiring a lot of RMs in a short space of time. It takes up to three years for RMs to be “justifiable from an economic standpoint”, and this can have “a very severe J-curve effect on your results, particularly in this environment”, Ermotti said.
He added: “...we are not focusing on size and growth per se. We need to focus on quality of what we look at in terms of intake of client advisors.”
Ermotti is right to highlight that taking on large numbers of RMs can add to a bank’s cost base in the medium term, says Pathik Gupta, an associate partner at consultancy McLagan in Singapore.
“It does take three years for a newly hired RM in this industry to achieve a mature level of production – the level they were making in their previous firm,” says Gupta. “The breakeven period of an average RM in terms of their own cost is about 12 to 15 months, but if we include the overall cost that the bank incurs to support the RM, the period is much longer.”
UBS was itself a “mass recruiter” of RMs in Asia until about 2014, says a private banking industry source in Singapore. “It’s now become an opportunistic recruiter, having learnt that the failure rate for RMs is quite high when you operate a mass strategy. Banks like Credit Suisse and Julius Baer could soon face the same issues. For UBS it's now quality over quantity."
But while not all its new RMs have succeeded, UBS’s “aggressive” hiring between 2012 and 2014 has given it a “size advantage” (it’s the largest wealth manager in Asia by assets and RM headcount) over its competitors, says former Merrill Lynch private banker Rahul Sen, now head of wealth management at search firm The Omerta Group.
UBS no longer needs to grow as quickly as it did in the recent past. “Credit Suisse, for example, lagged UBS in its Asian hiring and has only gone aggressive since last year. But by then, UBS had already grown to about double CS’s headcount,” says Sen.