If you thought centralising investment functions at wealth firms would mean the death of client-facing investment managers in favour of relationship managers, think again.
Exclusive Citywire research has found that 57% of wealth managers surveyed anticipate increasing the number of client-facing investment managers at their firms, while only 41% are expecting to hire more relationship managers.
According to 134 respondents of the Wealth Manager annual questionnaire, growth in their client base and assets under management is the main reason for increasing the number of investment managers.
However, the number of relationship managers will rise as firms move more towards model portfolios. This will also impact the appointment of dedicated model portfolio managers, with a number of respondents revealing that it is a service that they will look to offer and expand. Around 34% expect to up their headcount in this area.
When looking at the split between head and regional offices, client-facing investment managers are still expected to increase by 62% and 54% respectively. It appears that the majority of investment managers are still based at head offices currently.
A more centralised approach is also expected to impact the number of investment analysts being hired by firms. Respondents said that with the increased usage of both automation and artificial intelligence, only 30% of respondents expect to increase the number of analysts at their firm, while 3% expect a decrease in the headcount.
Back office staff are under the most threat, with 14% believing that they will reduce the headcount in those departments.
Similarly, continued automation and the rise of artificial intelligence were cited as the main reasons behind this change. Those who expect to continue to increase their back office staff, some 52%, said the appointments will be made to ‘cope with additional investment managers’ and ‘to process increasing levels of paperwork to do with compliance’.
Perhaps not so surprising, 52% of respondents expect an increase in compliance staff.
Charles Stanley is among the companies seeking more investment management professionals instead of just relationship managers.
Head of investment management Gary Teper said: ‘We want people with investment expertise and relationship skills. We are very much wedded to an investment manager-led proposition, which means we want investment professionals and not relationship managers engaging with clients.’
He believes that more and more firms will look for people who have broader skills. He also highlighted the move to automate and digitise as much as possible, which means switching resources from operations people.
However, traditional back office staff are being replaced by more tech-minded individuals to help leverage new technology.
In terms of compliance staff, Teper says that at Charles Stanley, the firm’s headcount has been largely stable, with specialists focusing on data security now more of a target.
In contrast, Whitechurch Securities’ managing director Gavin Haynes said his focus is more on increasing the number of business development managers ‘to work closely with financial advisers’ who use the firm’s DFM services.
‘It is interesting to read about the industry trend for wealth management firms looking to increase the number of directly client-facing investment managers. It does appear that a lot of the larger wealth managers are looking to increase direct-to-client propositions to protect their margins,’ he said.
‘This is not how we see our approach, given that we are looking to grow our DFM proposition through financial advisers who understandably want to have the relationship with the client and be in charge of assessing suitability in order to justify advisory fees.’
In terms of back office staff, Haynes said that he has no plans to reduce the number. He argues that one of the key appeals of having a boutique is also having a team of administrators that clients and advisers can easily contact to sort out any issues.
‘However, there is no doubt that increased efficiency of back office systems can enable us to increase the number of portfolios we administer without having to materially increase the number of back office stance,’ he added.