While making substantial cuts in other areas, Barclays is quietly adding to its wealth management business, with a particular focus on recruiting investment representatives in the U.S. and U.K.
The London-based bank is actively looking to add to its team in the new office it recently opened in Beverly Hills, Calif., it said. “We are actively in dialogue with talented advisor teams and individuals in the Southern California area to further grow our Beverly Hills office,” said Brian Sears, regional manager of the Beverly Hills and Los Angeles offices. Sears declined to provide specifics on the number of hires he hopes to make.
Barclays also recently hired 13 wealth management professionals in New York, Houston, Boston, Chicago and Miami. All three Houston hires were recruited from Goldman Sachs. Barclays’ Manchester, England office added two private bankers this month, and continues to eye growth.
The bank’s focus on wealth management comes at a time when Barclays – and most other global banks – are pulling back from riskier business units like investment banking. Barclays said that it will cut roughly 3,700 jobs over the next three years, with the majority of the cuts affecting its investment banking division.
Wealth management is seen by most banks as a safer pool to play in, with steadier revenue streams than more volatile sectors like fixed income currencies and commodities. Unlike investment banking, wealth management won’t be held captive by new regulations like new Basel III capital rules, according to JPMorgan Cazenove analysts Kian Abouhossein and Amit Ranjan.
“We estimate average return on equity for 2015 in wealth management at 35% compared to average 13% for IB divisions, declining to 7% post full regulation including Dodd-Frank,” write Abouhossein and Ranjan in a recent research note.
In the U.S. and Europe, wealth managers are fighting over ultra-high net worth individuals, the sector Abouhossein and Ranjan believe will be the fastest-growing in the industry. These customers are usually defined as people with $30 million or more in liquid assets.
Barclays intends to stake its claim in this segment as well, hence the opening of the Beverly Hills office.
“We've seen a growth in the number of entrepreneurs, especially in the tech space, based out of Venice and Santa Monica, and an influx of wealthy émigrés, particularly from China, buying real estate,” Sears said. “There's also a significant population of younger millionaires who are investing in real estate with wealth transferred from their parents.”
Buried beneath its $1.3 billion fourth quarter loss, Barclays saw its wealth management business make major strides in the final three months of 2012. Profit in the division was up 46% in the fourth quarter, compared to Q3.
Barclays has suffered through a drama-plagued year, highlighted by the ousting of its former chief executive, Bob Diamond, and a litany of high-profile scandals. The firm’s wealth management division made negative headlines itself.
Andrew Tinney, the former chief operating officer Barclays Wealth, abruptly quit in January after reportedly shredding a damning report that referred to the unit as “out of control.” The report also called the unit’s culture “broken.”
“Management consciously failed to invest in necessary technology, people and safeguards that it knew it needed, leaving these areas understaffed, under-skilled, under-supported and in disarray,” read the report, which was issued last March but suppressed by Tinney.
Chief Executive Antony Jenkins has promised to “shred” Barclays’ culture and begin anew, both in wealth management and in all other areas of the bank.