Hunt for banking talent ups pay

GENEVA (Reuters) - The battle for talent in Europe's private banks is driving up pay to seven-figure sums, prompting banks to boost training to ease a shortage of people who can cater to the rich, financial industry figures said.

"We see that because of high value creation, compensation will become like that for investment bankers whose value creation is very high," Bernard Coucke, head of Europe and deputy chief executive officer of ING Private Banking, told a Reuters Wealth Management Summit.

A decade ago it was more common for private banking salaries to be no different to those at retail banks. But that is now changing with bankers involved in wealth management commanding much higher salaries.

Pay packages, including bonuses, are now measured in six- and even seven-figure amounts, Sebastian Dovey, founding director and managing partner at Scorpio Partnership, a research and consultancy company, told the summit.

"That is not just in places like London but also in the Asia market," he said.

After a lean period following the end of the 1990s bull market in stocks, the fortunes of private banks have improved, boosting demand for staff in this area of finance.

Private banks, often overshadowed by big retail banks and often domiciled in locations like Switzerland, have become a hot business area because the ranks of the rich are growing.

Companies such as Swiss group UBS AG (UBSN.VX) have snapped up small banking groups in recent years to tap this potentially large and fast-growing market.

Last year, the assets of wealthy individuals -- those with wealth above $1.0 million -- rose by 8.5 percent from 2004 to $33.3 trillion -- according to a report published in June this year by Merrill Lynch/CapGemini.

EDUCATING THE WORKFORCE

To develop new talent, Italian banking group UniCredit (CRDI.MI) is sending staff to study a part-time university course to learn and improve private banking skills, Dario Prunotto, the firm's head of private banking, told the summit.

"35 people can (join) a course for two years...that is a huge investment for the bank," he said, later adding that the bank now has 70 people studying on this course.

Private banking arms of companies such as Credit Suisse (CSGN.VX) are investing heavily in developing new management skills, Scorpio's Dovey said.

"They have to (spend on training), there no other way for them to meet their (growth) targets."

There is also a need to bring younger people into the private banking sector, traditionally populated by those in their 40s, 50s and 60s, Dovey said.

While pay scales are rising, private bankers' pay is unlikely, however, to contain the same high proportion of performance-related pay as at investment banks, ING's Coucke said. Pay arrangements will have to ensure that staff work for the long-term interests of their clients, he said.

"It is clear that a significant part of total remuneration will be linked to performance without going to the extremes of investment banking," Coucke said.