Steps towards a gold-plated career in private banking

Can private bankers take any professional learning points from a newly published book Honey Money The Power of Erotic Capital by Catherine Hakim of the London School of Economics? The book asserts it can give definition to a new form of capital and works through an examination of this across a number of different cultures.

Ms Hakim describes erotic capital as the “most complex personal asset” including “sex appeal, personal charm, social skills, charm and charisma” which can give far reaching implications to the careers of men and women. This is as new as the Bible story of Deliah seducing Samson. At an academic level, the next phase of Ms Hakim’s work should perhaps include econometric analysis plotting personal financial success against “erotic capital” in different industries pre and post financial crisis. The correlation would be interesting to examine in that time series.

So what really makes a private banker marketable to his or her clients in today’s vexed markets?

“Style is obviously less important than substance but service can help in the short-term,” says Beyla Ziv Guest, partner at Apollo Partners, a Zurich-based independent family office. “In the long-term, clients will eventually notice if there is not substance.”

Private banks of any genre, BanquePrivee, family office or part of a large global bank, can accommodate a wide range of personalities and skill sets. “Clients are pragmatic,” says one head-hunter in Geneva. “They do not wish to be missold or oversold.”

Sally Tennant, CEO of Kleinwort Benson says: “A successful private banker is one who builds long-term relationships with his or her clients, a relationship which is based on competence, trust and mutual respect.”

These long-term relationships also have to exist across different phases of the investment cycle and should also move across generations of the client’s family. “He or she needs to understand their clients’ priorities and their business issues in order to ensure that the emotional family capital is also being looked after,” adds Ms Tennant.

CLEAR CHANNELS

The gold-plated banker has to be just as confident listening to an account of sporting achievements or lack of in their client’s children. Clients want a consistently clear channel of business and personal communication. “The private banker need to have a deep interest in and understanding of financial markets in order to advise well on the clients financial well being and a genuine interest in people,” she concludes.

The successful private banker today needs his own war stories from financial markets borne of experience, which points to banker of a more mature vintage and also one who can make the technical digestible and actionable. When economists like Nouriel Roubini appear on red carpets at international film festivals and are household names, clients are now much more aware of the continued fragility in financial markets. They want to hear “this is what we do next, follow me!” from their private banker rather than “oh dear now what on earth do we do now?” accompanied by nervous hand wringing. They need long-term resilience and endurance both from the banker and his employer.

Clients do not always know what they want. The private banker has to listen very carefully before coming up with a diagnosis and a plan of action. What they do want though is alignment of interests particularly in the aftermath of the 2008 financial crisis.

Ms Ziv Guest of Apollo Partners notes that “private banking is predicated on a model of win/lose, ie the bank always wins, at the considerable expense of the client. However a truly genuine multi family office is built on a model of win/win. The client and the multi family office sit on the same side of the table.” The growth of the multi family office in the last three years in Europe and in Asia has been marked and has to be related to the need for greater alignment of interests.

“Private banking is about giving integrated financial advice embedded with life goals,” says Harry Huerzeler, chief operating officer of the Swiss Finance Institute.

“There are three key areas of professional development in a private banker,” he explains. “Firstly the softer aspect of allowing the client to understand himself, this part is hard to teach, then there are two key disciplines of hard core investment knowledge and the detailed implications of fiscal status and asset allocation.”

Mr Huerzeler draws a parallel with a medical education. “There is the hard core long-term academic medical education followed by a long period of clinical training, where the hardest part is getting the medical student to apply his knowledge with the patient.” A medical education can take nearly a decade.

For private bankers today the time lines are much shorter and an employer will expect a newly-hired private banker to start bringing in revenue-generating business in the first 12 months. The reality may be quite different and a longer investment of time is needed, particularly if the recruit is under 30 or a “lateral” hire, recruited from another professional discipline, for example investment banking.

QUALIFICATIONS

As a starting point, every private banker should have solid graduate level or equivalent academic qualifications, with a confidence in financial mathematics and fluency in at least one foreign language. Within the bank there needs to be positive role models who can act as “mirrors”, both in terms of leadership and also in client relationship management. This is the softer educational element, similar to the clinical medical education to which Mr Huerzeler refers.

There is a divergent school of opinion in some parts of Europe regarding regulated qualifications, particularly comparing UK against Switzerland. While UK private banks of every denomination are preparing for the desired level of compliant qualification as determined by the Financial Services Authority’s Retail Distribution Review, this is in contrast to Switzerland where there is ongoing debate regarding formal regulated examinations. The Swiss banks are regulated at the level of the formal corporate entity, and do not yet regulate at individual level. Those in Switzerland who argue against individual regulation and formal certification fear the cost and burden of extra documentation.

Post crisis, every bank, regardless of location, demands laser sharp precise compliance and regulation from its bankers. They demand talented private bankers who perform profitably and consistently across all the different stages of the investment cycle.

“More firms are investing in the development of their people in the belief that star individuals operating alone are no longer sufficient- well led teams serve clients and organisations far better,” says Robin Hindle Fisher, business coach at Praesta Partners.

Building team work is the much talked of holy grail for many leaders of private banks as this allows for the ultimate reward, the cross sell with other parts of the organisation over a multi generational client relationship. A collegiate culture is obviously more economic at many levels and allows the employer financial and strategic security of client ownership. Structuring a team compensation model has been introduced in some banks. Its introduction is usually received with cynicism and raised eyebrows by employees. It can only work if it is embedded in an environment of genuine mutual accountability and the team is not just a loose group of people who just happen to share the same office space.

TIME TO LISTEN

The tension between corporate and client loyalty is a high wire act that every private banker treads. This inevitably leads to what is anecdotally referred to as “cotton wool clients”. As one former managing director of a large global private bank pointed out, if you have spent all your professional life listening hard and cultivating your client book in bad times and good, then the last thing you want is to put them in a room with other ambitious private bankers and product specialists.

The most valuable resource is therefore time. Paul O’Donnell, founder of In Parallel, a performance consultancy, and formerly head of private banking at EFG, points out that “the ideal private banker has to have the ability to instill confidence in the client to speak openly and honestly about their needs. If you listen long enough, clients sell to themselves.”

The gold-plated private banker is sought after by clients and by employers. His lustre increases as he demonstrates both hard financial skills and an ability to engage commercially with anyone of from any social background and from any geographic location. He has to operate profitably in less than golden markets and win business against the stop watch. In today’s world of prolonged economic fragility the reality is often somewhat more nuanced. The boundaries are constantly shifting in terms of corporate goals and objectives. The hard reality is that for many of today’s private bankers substance has to be more important than style.

Harry Huerzeler, Swiss Finance Institute