6 July 2010

Private Bankers lured with huge guarantees

The somewhat stronger financial markets that we have seen after the markets bottomed out in March 2009 have led to a scramble to hire experienced private bankers away from their present employers. Large guaranteed pay packages are offered as incentive to move. Naturally, their new employers expect them to move many - if not all - their existing customer portfolios. These pay packages put enormous pressure on the candidates to convince their customers of the benefits of moving their accounts. Clients are advised to be on the defensive when they get told of the purported advantages of moving their money to the new firm as the banker has every incentive to paint things in a rosy light. Guaranteed compensation also tends to push employees to produce revenue (commissions, fee income on investment funds and other products) at any cost - often to the detriment of performance in the client portfolios.

More on the subject: Your adviser is changing firms. Should you follow? (Wall Street Journal)