Positions at Private Wealth Management Firms

by Derek Loosvelt | March 31, 2009

The pivotal role in private wealth management is the private banker. This is the person who evaluates a client's financial position, recommends solid investments, and helps with the fiduciary aspects of their client's accounts (regularly consulting tax and accounting experts within the firm). The private banker can even set up a family office for wealthier clients to pay bills, staff and make sure family members are appropriately taken care of, or "given their allowances" as one banker put it.

Analysts

The career track for the private banker is fairly cut-and-dry at the major corporate banks and Wall Street brokerage firms. Undergrads coming in are called analysts, just as they are in sales and trading, corporate finance and everywhere else within the corporation. They're the ones who do all the researching, number crunching, report writing and, yes, coffee fetching on occasion, for the higher-ups who are actually working for the clients.

Being an analyst at a private bank is very much akin to similar roles in trading and investment banking. If a private banker needs an analysis done on a client's tax status, you'll tap the appropriate expertise within the firm to draw up the report. If a client is looking for a hedge fund investment with a specific strategy, you'll provide the banker or relationship manager with the best options. And while the banker can be called at any time to address a client's needs, you'll be called by the banker to assist and probably will keep longer hours on top of that as well.

The rewards can be fairly standard for the financial industry, with starting salaries ranging around $45,000 to $60,000 annually. Bonuses can be lighter than those given to investment bankers, however, and in the $15,000 to $30,000 range. At smaller firms, that bonus range can vary from analyst to analyst, depending on how useful they were in addressing client needs. The same goes for larger firms, of course, but the range is smaller, especially if there's an entire analyst class to consider.

Associates

The next rank up is associate, or just plain old private banker at the smaller firms. These are the guys who work with the clients and attract new business, the real face of the private bank for most clients. This is considered a very entrepreneurial job, in that you'll be expected to not only serve clients, but attract new clients as well. At many firms, you'll also be expected to attempt to sell your clients on the company's proprietary financial products, though the practice is starting to be curtailed at some firms. Associates work closely with clients to create an overall financial strategy that encompasses not only investment, but income management, budget, real estate holdings, taxes, small business partnerships, estate planning and even paying the day-to-day bills of the household, all depending on the level of service the client wants (and the fees he or she is willing to pay, but at this level, fees are a secondary consideration to impeccable service and peace of mind).

Associate pay generally mirrors other Wall Street positions, with a newly minted associate making about $95,000 per year. Bonuses can vary, however, depending on how the firm structures compensation. Some private bankers receive bonuses solely on selling the client new services and the company's investment products, getting a percentage of the business the private bank brings in from that client. Others have more complex metrics, measuring performance against the client's stated goals. For example, some private wealth management clients may not want anything more complex than safe fixed-income investments that generate income with little or no risk, of 5 percent yield each year. If the private banker reached that goal, he would get a larger bonus than he would have if the investment only yielded 4.85 percent.

Some private wealth management firms eschew commission bonuses altogether, preferring to grant bonuses that do not give clients the appearance that their banker is simply interested in selling them products. These firms' bonus metrics are primarily based on fulfilling the clients' goals--a few firms even ask clients to review their bankers each year. Of course, firms will always appreciate it when associates convince their clients to use the private bank's estate planning services instead of someone else's, and in that sense, selling a non-investment service is seen as very bonus-worthy.

Likewise, associates are expected to drum up new business, and bonuses can come if you manage to gain new clients. Sometimes this will come from word-of-mouth, as current clients recommend the associate to their high-net-worth peers. It also comes from good old-fashioned networking, which means an investment on the associate's part in both time and, occasionally, money--especially when belonging to the right club or attending the right charitable event can mean a room full of potential clients. Some private banking firms organize cultural events or sports outings for their clients as well, with the hopes that they'll bring well-moneyed colleagues or friends for associates to network with.

Vice presidents

In time, salaries and bonus money for motivated, skilled and trusted associates can top $500,000, usually anywhere from five to eight years, depending on the firm and opportunities that have presented themselves, and up to $1 million within 10 to 13 years of private banking. At that level, however, an associate has often already been promoted to vice president. As such, he or she can be placed in a position overseeing a number of associates, or even a regional office. Alternatively, an associate that has specialized in spotting unique investment opportunities or has helped come up with new products can branch off from the client business and into an investment specialty. They may end up as market strategists or in-house portfolio consultants, gaining a smaller piece of individual clients' business, but making up for it by consulting with larger numbers of clients. Note, though, that VPs do not necessarily have to become specialists or managers, and can simply be super-producers.

Managing directors

Finally, after years of service--and income that can top $2 million or more for the best performing vice presidents--a successful, entrepreneurial, client-driven VP can be named a managing director. (Again, they may also remain super-producers, focusing only on their own super-high-net-worth clients.) In these positions, an MD can expect to be in charge of associates in a major branch office, or even in a firm's headquarters. They can be given the highest-net-worth clients, or the problem clients whose money is just too valuable for the firm to lose. In specialty positions, they may end up as the private bank's chief investment officer, chief fiduciary officer or general counsel. There are generally only a handful of MDs within any private wealth management firm, and they are often on the executive committees of the firm. At this level, salaries enter a realm in which the MD may want to find a private banker of his own, and are generally high enough that firms don't discuss them, though still nowhere near the level where they have to be reported to the Securities and Exchange Commission!

Filed Under: Finance


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