Fund managers are seeking to strengthen their distribution teams to target the wealth management channels, but recruiters say it can be difficult to find senior hires.
With the decline in institutional investment as superannuation funds look to internalise their investments as well as the expected $5.4 trillion intergenerational wealth transfer, this is leading fund managers to pivot their attention to the wholesale market.
This is being exhibited by the heavy launches of active ETFs lately and the launch of alternative funds in forms that are accessible to the wholesale and retail market. In many cases, this may be the first time these types of funds have been made available to this audience.
However, this move to new realms necessitates the hiring of new teams to reach this audience which can be an expensive business.
Speaking to Money Management, Jack Brown, director at Keegan Adams, said: “Funds who haven’t entered into the wealth channel are hiring heads of wealth or heads of wholesale, and they’re trying to strengthen up their wholesale distribution teams as they find that that is where they can get the most fees in the door and build out that capability.”
He said the internalisation of superannuation fund mandates meant institutional headcounts have been shrinking, with firms moving their attention towards the wealth channel.
“They’re saying, ‘Well, if we’ve lost an institutional mandate and we can’t regain that, we can see that there is less opportunity for us in the institutional market. We then need to start a wealth business, or focus on the wealth channel.’”
Earlier this month, Platinum Investment Management announced it has lost an institutional mandate worth $958 million, while Perpetual and Magellan have also seen institutional outflows.
Chris Hanley, consultant at Michael Page, told Money Management that he had found salaries for distribution teams were only “up slightly, mostly aligned with inflation” over the past year, potentially making senior personnel unlikely to jump ship between companies without a sufficient incentive.
“Investment managers used to have 16 BDMs on a team, but that’s changed, and now they are more likely to have 10. In particular, people with 2–5 years’ experience are getting good salaries, especially if they have a good network where they can bring clients straight over. The network is very important.
“On the other hand, sometimes a firm wants to hire someone senior, but heads of distribution aren’t moving around much so they have to hire a junior or they find they are constrained by budget.”
Research by Robert Half found the average salary increase that would compel an individual to change company is 22 per cent, but 39 per cent of its survey respondents also prioritised job security over salary.
The fact that firms are hiring junior staff rather than senior ones has also led to a narrow disparity in pay between the roles.
A wholesale head of distribution can earn $288,000 while a senior wholesale BDM can earn $227,000, Hanley said, excluding superannuation and bonuses. Keegan Adams’ ranges found a head of wholesale distribution could earn between $290,000 and $350,000, while a senior wholesale BDM could earn $230,000–280,000.
In both cases, wholesale candidates saw lower salaries than they would have done for the equivalent institutional roles, with institutional typically seeing higher pay due to the larger complex deals and nature of the sophisticated client base.
For example, Michael Page found an institutional head of distribution could earn $354,000, some 23 per cent higher than in the wholesale space, while Keegan Adams put the salary range for an institutional head at $340,000–$400,000.
Hanley agreed with Brown that institutional teams are “in decline” due to the lack of mandates in play in favour of the wholesale space, and fund managers working with financial advisers on separately managed accounts (SMAs).
“Institutional investment is declining, while wholesale and family office channels are growing in importance.
“There has also been a big increase in SMAs. We saw a firm that had predominantly been doing equities for years and branched into SMAs as they feel it is a big area for growth, and I know others are looking at it too.”
Earlier this year, Rita Da Silva, asset and wealth management leader at EY, explained: “To get to advisers, you have to have a distribution network of people who go out to advisers and speak about the product so they get to know you, and there is a cost to have this distribution network. We are seeing strategic partnerships where they take a non-controlling stake in the business and you can access their distribution network to distribute your asset – we’re seeing that a lot.”
Private markets distribution
Another area that is growing, Hanley said, is private markets where hiring is strong and salaries are growing, especially for those with technical experience in private equity, private credit, infrastructure and property.
Compared to the standard wholesale distribution roles, a head of distribution for private markets can earn $450,000.
“Private market salaries have skewed the data because there is huge growth there and they are increasing salaries as well as in infrastructure and real estate,” he said.
This was also observed by James Lindsay, senior practice director at Robert Half, who said asset managers were expanding private credit teams to deploy capital efficiently and manage risk. This necessitated hires such as credit and investment analysts and private credit portfolio managers.
“Asset management firms are increasingly focusing on private credit funds, seeking to capitalise on opportunities in this growing area.
“As the sector expands, there’s a greater need for specialised skills, potentially leading to more competitive salaries and a focus on attracting talent from traditional banking and other financial services sectors,” Lindsay said.
However, it could be difficult to find staff in these sectors as fewer professionals have expertise in this field, and there is cross-industry competition with other sectors in the asset management space. With this in mind, he said Robert Half has seen companies looking overseas to countries where private credit is more established for candidates.
