Staff shortages may hold back wealth managers

By Douwe Miedema

GENEVA (Reuters) - A lack of staff may dent the growth outlook for wealth managers and those banks which fail to satisfy increasingly demanding clients could feel the pinch the most, industry participants said.

A healthy global economy and the rise of wealthy middle classes in emerging economies still meant a rosy outlook for the industry servicing the world's richest customers -- but not every bank would benefit equally.

"We have stood on the crest of the wealth management growth wave and the issue preventing the market from expanding is how can you get enough sales people to tap the assets," Seb Dovey, at the Scorpio Partnership consultancy group said.

Dovey was speaking at the Reuters Wealth Management Summit taking place in Geneva, Boston and Asia.

Wealth management is one of the fastest growing financial sectors and has been largely immune to recent turmoil in financial markets that has shaken other banks, because private banks do not take risks for clients onto their books.

But the sector has struggled to keep pace with soaring global wealth, which is estimated to keep growing at a 6.8 percent annual rate to reach $51.6 trillion in 2011, according to the Cap Gemini world wealth report.

Those banks best able to attract staff would have an edge over their rivals, private bankers said, as wages in the sector soar and bankers are setting up training programs to tap new sources of professionals.

"It is a challenge, but it's a manageable challenge for us," said Samir Raslan, head of Citi Global Wealth Management's (C.N) Central and Eastern Europe, Middle East and Africa region.

"Today, everyone is trying to recruit. If you are a good banker, you can be choosy as to who you work with."

CLIENTS BECOME INTELLIGENT

Wealth managers increasingly have to work harder to win business, with younger clients now more financially savvy and demanding sophisticated tools to minimize tax and plan wealth succession.

"Pressure on the service providers is principally around investment performance (and) treating the client as an intelligent, proactive counterparty rather than assuming he is loyal," said Ray Soudah at Millenium Associates, a consultancy advising on private banking mergers and acquisitions.

The traditional private banking model has sometimes been criticized for relying on banking secrecy in jurisdictions such as Switzerland and Luxembourg, where clients would hide their money and be satisfied with moderate returns.

Banks that had stuck to that traditional model would find it increasingly hard to tap new clients even if the global wealth pool kept expanding as rapidly as it has done.

"One thing we often despair of is that with private banks there is sometimes a lack of strategy ... The typical small Swiss bank doesn't realize the world has changed," said Stephanie Jarret at law firm Baker & McKenzie.