Deutsche Bank reportedly smoothed the way for several private bankers to join – with hefty premiums. The justification for such payments is often more one-sided than banks would care to admit.
The move to poach thirteen banks focused on super-rich clients is reportedly costing Deutsche Bank dearly: the bankers have been promised a 40 percent rise on their current pay, as well as guaranteeing to match their 2018 bonuses.
The «danger money» – or compensation for joining a bank not widely viewed as a major player in wealth management – comes as the battered Frankfurt lender cuts thousands of jobs in a recovery bid.
Bulking Amid Overhaul
Danger? The private bankers Deutsche poached tend to ultra-wealthy clients in Italy. The nation is one of the European Union's biggest industrial producers, a republic with a well-functioning rule of law. Arguably, the biggest risk facing the private bankers is to choke on a scampi during a client lunch.
Of course, Deutsche Bank is paying to mitigate another type of risk entirely: the German bank ranks 17th in an annual ranking of private banks by size, but it isn't yet clear what effect the clean-up of its decade-old wider problems will have on its wealth arm. In addition, Deutsche is working its way through a series of scandals – from 1MDB to Trump family ties. The combination doesn't make for a persuasive hiring story.
«Deutsche Must Offer Something»
The business lives from advisers being able to persuade clients to leave their existing bank and follow their private bankers to new pastures. Deutsche's private banking unit has vowed to bulk up with roughly 200 new advisers by 2021; The factor of uncertainty is potentially toxic for business with wealthy clients – and not one private bankers in Europe will take lightly.
«Danger money» might not be the right term, a Swiss-based wealth headhunter told finews.com, «but Deutsche Bank in its position certainly does have to offer something if it wants to attract top talents.»
Ironically, the inverse is also true: if Germany's biggest powerhouse doesn't make good on its wealth growth plan quickly, it can bury the offensive. To do so, it is heavily reliant on advisers who will move. Thus the «danger money» isn't just an insurance policy for employees – it also applies to banks, where it typically takes years to turn a profit with new advisers.
Asset Management Stars
While golden promises in advance like Deutsche's have grown rarer, "please stay" payments haven't. In Switzerland, Vontobel ring-fenced a performance pool to make star fund manager Rajiv Jain happy (it didn't help in the long run: Jain left in 2016, sparking a tumble in Vontobel's shares).
Swiss asset manager GAM was in a much more precarious situation: the shutter of a key fixed income fund plunged the asset manager into crisis last summer. In December, as the company began letting go some stuff, it set up a program to reward others for staying in place. A spokesman for GAM didn't comment to finews.com.
UBS Kangaroo Deals
The best-known example of such schemes are the so-called kangaroo deals, set up by UBS' Matthew Grounds. The star Australian banker negotiated a bonus pool for himself and his team which ran separate – and counter – to the Swiss bank's wider pool. As long as the Aussie bankers were delivering deals, Grounds and his staff were earning well despite curbs elsewhere. The deal reportedly lapsed last year – and Ground left recently.
UBS is no stranger to drastic measures: when the Swiss bank was still reeling from the financial crisis, it reportedly guaranteed fixed income staff three years' pay to join. At the time, UBS was coming off a 2008 bailout. To be sure, Deutsche Bank never took state money, but it has now allotted 13 billion euros ($14.6 billion) for technology and innovation initiatives – at least some of the money is sure to be earmarked for star staff.
