Demand for private banking is on the rise in China. Where will China's private banks find the talent they need to keep growing in the future?
While the financial crisis of 2009-2011 briefly slowed the growth in the number of millionaires in China, massive stimulus spending by the Chinese government helped the Chinese economy recover quickly and maintain its double-digit growth in GDP. As a result, the rising number of high net worth individuals (HNWIs) in China is driving an increased demand for private banking services.
For private banks in China, managing and deploying talent causes retention problems and increases the demand for outside hiring of both experienced and entry-level talent.
The talent race is on, and the cannibalistic practices of poaching talent from direct competitors has created the potential for a talent market bubble within private banking, which is compounded by the changing needs of HNWIs.
The ability for private banks in China to expand their client base depends in part on an organization’s flexibility to meet differing client needs based on demographics, wealth tier, and preferences. Equally important is developing a team-based approach to building relationships with heirs and building close relationships with the next generation.
The rising number of high-net-worth individuals (HNWIs) in China is driving an increased demand for private banking services, creating a shortage of individuals with the right skills to service them. Bhushan Sethi and Susan Hothersall from our Financial Services practice recently provided some insights into how foreign private banks in China can develop sustainable talent strategies. Here are some of their observations.
Q: What is a key example of an approach to talent acquisition and management in China that PwC has found useful?
A: In our view, foreign private banks have an opportunity to create collaborative partnerships and relationships with Chinese universities. This type of collaboration can create win-win situations for banks, educational institutions, and students both in the Chinese market and globally.
Q: What are some of the challenges associated with drawing talent from universities?
A: One of the biggest challenges banks face when hiring from universities is the onboarding process. Often, students need an accelerated onboarding process, a kind of “boot camp” that teaches them what it means to work in a business environment. They also need to become familiar with financial products and markets, and what it takes to build and sustain client relationships.
Q: Can you identify another source of talent within the China market?
A: We have found that key talent pools from China’s luxury services industries are often overlooked. The people staffing luxury services have been groomed to cater to High Net Worth Individuals (HNWIs). These are individuals with key competencies in sales and service, which are important for private banking organizations. One specific example would be specialists in the Chinese real estate market. These specialists have strong relationships with HNWIs and a good understanding of their investment behaviors.
Q: What is an advantage to tapping into the luxury services talent pool?
A: These individuals are at a different level of development from those who are onboarded at the entry level. Banks don’t need to teach them client relationships or how to manage HNWIs. But they will need onboarding assistance in understanding financial markets and products and how to work within a global financial institution.
Q: In addition to locating the right sources of talent, what other talent challenges are foreign private banks facing in China?
A: Although we spend time talking about the need to drive growth by attracting, developing, and retaining talent, one important step that comes before those actions is to identify the right talent needs. For example, how many experienced hires do you need to drive business growth? What is the workforce plan at the entry level? Where do you source individuals at the entry or experienced level? How much of your sourcing comes from within China, versus from Chinese nationals currently studying or working abroad, such as in the United States or United Kingdom?
These questions can be answered through an integrated, proactive talent management strategy that supports the integration of alternative talent pool candidates.
Q: What results can be expected from an integrated, proactive talent management strategy?
A: We believe these strategies will help banks make the right investments in identifying and rapidly onboarding the most qualified entry-level candidates. A talent management strategy will help determine the right level of investment in the development of these candidates and will help with retention—something we see as critical to driving growth and capturing an increased share of the Chinese market for foreign private banks.
Q: What comes after the talent management strategy?
A: A series of additional activities will follow strategy development. With a strategy in hand, banks can recruit and onboard talent according to defined, targeted talent markets; reallocate existing talent as needed; and make appropriate investments in talent as part of that process. These activities may include training programs that smooth the transition into a new talent strategy.
The strategy also will call for measuring and managing talent through development of an ongoing performance management program. We find that such programs provide banks with continuous forward-looking data on the effectiveness of the talent strategy in meeting business goals.
Q: What additional steps will help to ensure the success of a talent management strategy?
A: Good performance should be recognized and rewarded. This can be accomplished by developing an incentive and rewards strategy that encompasses both team and individual goals, as well as base and incentive compensation.
Q: In thinking of future challenges in China, what should foreign banks take into account?
A: We believe foreign banks have a great opportunity in China right now, so long as they understand the needs of HNWIs. China’s HNWIs demand increased levels of diversification and nontraditional, value-added services from wealth management institutions. For example, high-quality medical care is challenging to secure in China, and HNWIs seek private banks that can leverage their resources to facilitate access to top providers. Others are looking for guidance on how to get their children into top universities abroad. Foreign banks must provide the broader and more global expertise that HNWIs require.
As the Chinese market continues to expand, competition for talent will intensify and lead to rapidly rising compensation costs within many businesses. To forge a sustainable approach to these challenges, financial institutions should seek the appropriate mix of local Chinese nationals, Chinese nationals living abroad, overseas returnees, and non-Chinese nationals; this can be accomplished with an integrated and proactive talent management strategy.