On the 85th Day.....

Santiago took 85 days before he bagged the "big one".

Hugh Ellerton of EFG Trust Singapore, the old man (just an analogy Hugh, nothing personal) in our story, has taken maybe 365 days (or more) and is still out there searching, trolling, baiting....... The marlin he is seeking is his successor. Meanwhile, others have come and gone with catches of their own (including Sean Coughlan who was one of Hugh's peers or even dotted-line boss who has now relocated to Singapore for another trust company!)....tells you something.

So does EFG Bank suck? Or is it that the role sucks and none of the qualified candidates (including internally) want the job? Or is it that the EFG's requirements are unrealistic and no one is measuring up? Or is it the recruiter(s) fault?

Valuable lessons for those looking for people (especially hiring managers from outside the region, like some global Head sitting overseas) as the annual mass migration triggered by year end bonuses looms. Now how will you go about finding your catch-of-the-day?

After the first batch of résumés flow in, you should have a good idea how of where you stand and whether or not you need to formulate a fall-back plan. You should have started to get a feeling for whether you are using the right bait, which means the appropriate recruiter/headhunter, the right job portals, trade rags (or newspapers....gasp!) etc. If you're not getting bites or getting inappropriate candidates then dump the recruiter or change the ad or place an ad on another job search site, etc.. Recruiters are generally working on a success basis and for good reason, they're generally not successful. Recruiters also tend to work certain fishing spots only. For instance, if they have gotten CitiTrust engagements then they (if they're good) tend to track Citi people and you have a Citi-family tree. You will get a lot of former and current Citi candidates from them. Nice but you may need another recruiter to see what the Credit Suisse-tree has to offer. Obviously the big caché companies have little problem attracting candidates, they're problem lies in screening. For small banks and independents, getting people interested can be a daunting challenge even in buyer's market conditions. They have even more to lose when the big boys gearing up to hire.

After the first batch of interviews, you should have a clear idea of where your mismatches are. Time to consider whether or not you are going to be able to fill the role "as is" or whether you have to make adjustments like splitting up the duties or increasing the experience/seniority level or vice versa. Of course if you were close to a hire then you'll soon find out whether your compensation levels are market or not. If people are saying nay or coming back with counter-offers, then you may have to revise your budgeting. If your first run fails, then you should have a strongly focused revised game plan for your second run. Also remember the potency of the grapevine.....by day 2, 90% of the market already knows you're hiring so you're likely targeting only the remaining 10% who have been under a rock or were previously dis-interested. In a small trust community like HK and Singapore, the well dries up fairly quickly. Even these people will have had a scoop on the pros and cons of job and pay, etc. as they been talking those you already interviewed. You really have your work cut out for you with each successive search so try to get it right the first time.

"Perfect" candidates can be as elusive as great white whales. The more your organisation or role is "unique", the more trouble you will have finding a right fit. After all, a fair portion of the work force out there has been "trained" and compartmentalized by the big institutions. If you're not running a similar operation/model than you can expect some adjustment pains. Somewhere along the line, you are going to have to stop being stubborn and settle on the next best thing. Somewhere along the line, all the best candidates will be gone. Somewhere along the line you will have be forced into a corner and settle for any warm body. Particularly in Singapore, there may be no time to snooze as it is more of a seller's market. So do you begrudgingly go back to the short-listed rejects and possibly foot another 20-50% pay hike on an already inflated salary? Face a buyout or 3-month notice period? Spend more time and money on another search? Or do you continue to sit back and wait for something to fall into your lap? Now for a senior hire, 2-6 months isn't unreasonable, but what is the deadline you're prepared to work on? If EFG pulled the trigger say a year ago, they would have already put in a year of training/grooming a "sub-par" candidate. Time is an opportunity cost.

At Risk

At Risk Amount (AR)....now this term has a new usage: a nice euphemism for tax dodging and tax dodgers.

See this Reuters article on how: "Tax deals to cost UBS 10 percent European client assets"
http://www.reuters.com/article/idUSTRE6AF2U120101116 On Page 7 of Jürg Zeltner's Investor Day presentation, in the footnotes, is: "We believe that CHF15-40 billion are still at risk as a result of changes in tax regulations."

It's wonderful to know that you can potentially lose say $40b in assets and you can say "no biggie", just footnote it. By way of comparison, $40b is roughly twice the amount that UBS estimates "clients from neighboring countries have withdrawn over CHF 20 billion over the last twelve months". Not picking on UBS, as this is an industry wide issue and not just for Swiss or Europeans either. Still want to be the "new Switzerland" of wealth management?

Look at some of the salient issues and we have some real heady stuff to deal with.

Firstly, how does one actually determine one's AR amount? It used to be only outsiders (analysts/government/revenue/auditors) tried to put a number on AUM that was at risk for fiscal reasons. It's rare that any bank officially comes out and quantifies the AR amount. We all know it exists, its just we can't quantify it. So what's scarier? Having at risk assets, or you know it so well that there's actually a number for it?

OK, so I have say a 100 British or German nationals with accounts in Switzerland. Are all 100 deemed "at risk" because they are Brits or Germans? If not, what percentage? How did you arrive at that percentage? Guessing? Some formula or marker/trait? Did you have first hand knowledge or an admission of guilt? By having a AR number, doesn't that mean that you are knowingly harbouring, if not aiding and abetting, "risky business"?

Secondly, the tax witch hunts are triggering either a capture/ferreting out of the fiscal rascal; a surrender/repatriation/"amnest-icized" under some tax amnesty scheme ; or thirdly, a flee to deeper darker places. Now some of the money exiting will be "declared" and end up back in the home country. Now if your a global player, then surely you could repatriate the funds into your domestic UK or German booking center. But since they're talking about outflow/exit, the money is "hot"/undeclared and not bankable (or you're an offshore business sitting onshore and failed to see the writing on the wall years ago). Shouldn't the course of action to be proactively closing these accounts instead or waiting for the risk to exit at their leisure? An ounce of prevention....?

But inevitably some money will flee to another jurisdiction and we in Asia will be on the short list of possible destinations. Remember all that flight capital you were so keen on booking these past years? As Singapore and rest of Asia continue to sign up for OECD information exchange treaties (See my 12 Monkeys entry: ), the same thing that is happening to the Swiss/Euro banks has and will happen to the Asian banks, unless you happen to think your AR amount is zero that is. Some money will have to exit sooner or later (see my White is Good entry:).

And we need not look at European customer base to see risk. How much of the purported $460b of illicit Indian money (according to the Global Financial Integrity organisation http://india.gfip.org/) is sitting with your bank?

Hong Kong: Hot or Not?

Bad news if you're a lawyer looking for trust work, at least according a survey of hiring managers and recruiters: http://www.hk-lawyer.com/userfiles/HKL_201011_030%281%29.jpg from http://law.lexisnexis.com/webcenters/hk/Hong-Kong-Lawyer-/Reviewing-Hong-Kong's-legal-job-market-in-2010/

Even the general banking sector looks bearish but in-house Wealth Management/Advisory roles for private client lawyers seems to buck then trend and could be hot.

However, the optimism at the STEP Asia Conference 2010 was hardly bleak. In fact the show was sold out. Some 300+ trust people! The conference has out-grown the Four Seasons venue.

And with uncertainties (aren't there always?) dogging the private wealth business, there was a silver lining within the speech made by Secretary for Financial Services and the Treasury of HK, Professor K C Chan: the HK government plans to introduce a trust law Amendment Bill into the Legislative Council in 2011. While I think we need not hold our breaths as HK will not become a significant trust booking center anytime soon, new laws often means opportunity for some advisors and analysts.

Kin In The Game......But Are You?

"Kin in the Game" is tagline for PwC's latest Family Business Survey which covers small and mid-sized family companies in 35 countries of which Asia is represented by Japan only. http://www.pwc.com/gx/en/press-room/2010/family-business-owners-optimistic-about-growth.jhtml

The headline that will be buzzing all the advisor/PB/wealth/asset management websites in coming weeks will be that despite their worries and concerns, some 50% of families have little or no succession planning. Sounds like absolutely nothing has changed when PwC first started this survey several years ago. Other major findings include:

• 62% haven’t prepared for the possible sickness or death of a key manager or stakeholder
• 56% haven’t established any procedures for purchasing the shares of incapacitated or deceased shareholders
• 50% either lack the liquidity to buy out family members who want to dispose of their stakes in the business or haven’t considered the possibility
• 37% don’t know how much domestic capital gains tax they or their companies might be liable for, while 58% don’t know the international implication

Family businesses are probably the predominate form of commerce in Asia so it may be fair to assume that the issues/problems are even more acute in Asia.

So what's your business plan to tap this market? Does your organisation's talking head have his speech ready on how you're going to bolster your succession services and teams of qualified advisors and product specialists?

If you're one of the families looking for answers, talk to as many people in different areas (accounting/tax/banking/insurance/etc) as you can before you do anything. The problems you face can be daunting but most people will have only a partial solution for you. They pitch only what their organisation can offer which may leave you with big holes in your planning. What do I mean? Well insurance people will sell your their "succession" insurance policies which may be great at providing liquidity for a share buy-out but they can't help with you with the buyout agreement. Is even a buyout the most tax efficient manner to accomplish a change in ownership? So bring in the tax accountant/lawyer. Are you sure you want to hold the shares in your name? Maybe bring in the trust guy.... It typically takes a slew of measures to have a workable solution.

And perhaps most important of all, don't forget it needs to work before and after succession. Dumping all the company shares into a trust may seem to be a great succession plan but can you live with a trust until then or after? What are the exit strategies? Go through your "What if" scenarios as the best laid plans of mice and men....often go awry