2008 Hiring Trends: Institutional Sales

Hiring across all areas of Institutional Sales & Client Servicing fell sharply in December, bringing hiring over the whole year down a relatively modest 28% on 2007 - the least effected of the three core areas we examine.

Hiring figures for December across Institutional Sales fell sharply, by 90% on December 2007, bringing the overall fall for the fourth quarter to 46% down over the previous year’s volumes. However, because hiring demand in the first half of the year started relatively strongly (up 15% in Q1 2008, and down 9% in Q2, so overall flat on the first half year), overall hiring for 2008, was ‘only’ 25% on the same period last year. We say ‘only’ as, when compared with Equity and Fixed Income Investing hires, which were down 41% and 48% respectively, hiring in Institutional Sales remained relatively buoyant.

Hence Institutional Sales was the least effected segment within asset management, with hiring for the year running only 3% down on 2005’s level. However, the annualised figures disguise a very rapid drop-off in hiring in the last quarter, with hiring in October, November and December down 56%, 52% and 91% respectively, reflecting the same dramatic reductions we have seen in both Equity and Fixed Income hiring.

Lehman Brothers’ unexpected demise in September, followed by widespread market volatility led to severe falls across most markets and asset classes in October. This proved to be the final straw for hiring sentiment, prompting most firms to shift from a hiring stance to a firing stance - deciding how best to wield the axe on staff costs, in line with sharply falling fee revenues. This was accompanied by the suspension of most firms' hiring budgets for 2009, as the sudden decline in fee revenues prompted Finance Directors to call for re-submission or freezing of headcount requests.

We would therefore expect Fixed Income hiring in the first Quarter of 2009 to be very subdued compared with historical levels, as many of the searchers that would normally have been coming to fruition in Q4 2008 were simply cancelled pending budget revisions. And, in an atmosphere of widespread redundancies, we doubt that most firms will be willing or able to initiate new searches in Q1 2009.

Demand for Institutional Business Developers was strongest for the Middle East specialists, comprising 14% of all hires (up from 8% in 2007). The next busiest area was for Global specialists (9%), and Central European (by our definition, covering Germany, Switzerland, and France)specialists (9%). Demand for Global specialists remained at a steady rate throughout the year, whereas demand for Central European specialists started off the year very strongly, and then tailed off in the second half of the year as the market problem continued. The biggest relative decline in demand was for Nordic and Benelux specialists – these had been amongst the busiest areas for recruitment in 2007, but fell to 9% and 6% respectively, compared with 17% and 9% last year. This was partly due to the fact that most teams had been already been built out by the end of 2007, and partly due to the impact of market conditions on those areas.

Although UK hires were down by 2% to 25% of all hires, there was in fact an increase in senior hiring in the UK market, with management hires (ie. heads of Consultant Rels teams, overall heads of Sales, etc.) accounting for 32% of all hires – up from 25% in 2007. This was no doubt in response to difficult market conditions, where heads rolled as sales targets failed to be achieved and firms bought in external talent to revitalise their teams. Even within the ‘rank and file’ it seems that hiring retrenched to business-critical hires, with a notable preponderance of senior, seasoned staff. This is a fairly common pattern when times get tough; hiring tends to focus on more senior salespeople, as they tend to pay for themselves if they are good, whilst no one wants to devote resource to training up more junior staff.

Demand for Salespeople slightly declined (down 5%) in favour of Client Relationship Managers, as firms went on the defensive, shifting away from asset gathering to asset servicing in an attempt to persuade clients to stick with them through difficult markets. remained strongest for Salespeople, with 85% of hires focusing on Sales/Business Development and Consultant Relations, and only 16% in Client Servicing and Client Relations.

Our prognosis is that hiring in Institutional Sales will probably pick up more quickly than hiring on the investment side. This will be partly as a result of overseas managers (possibly from the US and/or Asia) seeking to expand their sales and distribution footprint into Europe, taking advantage of the cost savings in rents and salaries; and partly because, with the dramatic polarisation of investment performance, once liquidity returns, most firms are expecting a rapid switch of mandates, punishing losers and rewarding winners. The winners will probably want senior salespeople to broadcast their success, whilst the losers will want seasoned client servicers to persuade clients to stick with them. So we would expect overall net hiring to increase by the 2nd quarter 2009.

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