Wealth Management Growth in 2021

So much of life boils down to being at the right place at the right time. This is particularly true of careers. Becoming a corporate lawyer or investment banker in the 1980s launched you into a rapidly growing field that hadn't yet developed a rigid, top-heavy hierarchy. However, joining those fields today is not only difficult, but places you in stiff competition as those industries have matured with senior members now reluctant to leave to make room for more junior folks to rise up.

As I've mentioned before, when discussing the history of wealth management, over the past decade large investment banks have almost universally put an emphasis on growing out their wealth management business.

The reason behind this is simple: wealth management provides a relatively stable, predictable form of revenue that doesn't require holding back any of the banks own capital. So, this is unlike investment banking (M&A/DCM/ECM) revenues that vary based on economic conditions, or sales and trading that requires holding back capital due to risk-weighted asset requirements. 

In the aftermath of the pandemic, banks have doubled down once again on wealth management. Increasing pay, increasing training, and competing heavily for new talent. In my view, wealth management - in particular at large investment banks - represents a tremendous growth industry. 

Part of the reason why I created this site is that I've long felt that wealth management is a wildly misunderstood field; one in which people assume you do nothing but try to sell something to people via cold calls (like an insurance salesman would, for example).

The reality is that a wealth manager is a decades long partner with his or her clients. Helping them through good times and bad and being an indispensable companion as they make decisions on how best to conduct their financial life.

To illustrate the growth within wealth management occurring, below are some articles that may be of interest. As I've said many times, these are the kinds of articles that are worth reading prior to doing interviews as it's always impressive in an interview to show that you understand wealth management is a key focus of the firm and is a key rationale behind your decision to want to work specifically at that firm.

HSBC, for example, is making a strategic shift away from sales and trading toward wealth management as they seek to better serve their growing wealthy client base. Here's a Bloomberg article on HSBC's 2021 focus on wealth management.

Here's another article, detailing how the rapid rise in the wealth of high net worth clients over the past year has led to banks doubling down on their wealth management efforts.

Here's another story about Credit Suisse that clearly illustrates what I referenced before about the shift in focus among large investment banks toward wealth management. After dealing with the fallout of the Archegos situation - in which Credit Suisse lost $5.5 billion - senior executives have realized that instead of being a full-service investment bank, it may be best to focus more heavily on their core revenue drivers (wealth management, retail banking, and some advisory investment banking).

Morgan Stanley was at the forefront of the shift toward wealth management after the financial crisis. Here's an interesting article about how that shift is still occurring and in many respects accelerating. 

What many outside observers have noted in the case of Morgan Stanley is that the stock market has rewarded them with a higher multiple than its peers, such as Goldman Sachs, because there's nothing the market loves more than steady and predictable cashflow (which is exactly what wealth management gives you).

Ultimately, wealth management as a career is not for everyone. It does take a certain personality type. In particular, someone who can handle rejection, can deal with clients who can be understandably emotional, and who is willing to have a variable income stream (since at more senior levels base salaries are not given).

But, if you're inclined toward a career in finance and think that wealth management could be a fit, you'll be joining a field that has had billions of dollars thrown into it by some of the largest investment banks in the world. You always want to be in growing fields, and there are few in finance growing as fast, that are also as structurally flat, as wealth management.

If you're interested in wealth management, be sure to look at some of the wealth management interview questions I've put together (or the private wealth management interview questions). They'll give you a feel for the industry through the way I frame the answers.

One final thing to keep in mind is that while you never want to get on a career path and then leave it, leaving wealth management after a few years is not the end of the world. There are few careers that help you develop confidence and an ability to work with all kinds of people in such a short period of time as in wealth management.

These are skills that serve a lifetime and they are valued across a number of different industries. I personally know of many who have left to lucrative fields such as tech/enterprise sales, which like wealth management requires being knowledgable and speaking to highly successful people. Like wealth management, these fields are also rapidly growing and because of that generally have compensation structures that are enviable. 

In the end, whether you choose to pursue wealth management or not, keep in mind how important it is to enter into fields that are growing rapidly, that are being invested in heavily, and that have relatively flat structures. No matter how prestigious a certain path looks, if it's very top heavy eventually you'll end up in a scenario in which you are forced out (or have to work absurdly hard to try to break through). For example, there's a small but growing trend of folks leaving M&A investment banking to pursue wealth management entirely because of this phenomenon. Wealth management just provides a better work / life balance, high compensation upside, and doesn't involve fighting tooth and nail to try to get to the more senior management director (MD) level (which not can take until you're well into your forties).

As always, best of luck and I hope some of the articles linked above are illuminating.