No end in sight to DC hiring spree

An improving economy, growing sponsor demand for better investment options and a battle among asset managers for key personnel should continue the momentum in 2011 for what was an active year for hiring top-level defined contribution money managers, executive recruiters say.

“I don't see any letup in activity,” said Joe McCabe, Boston-based vice chairman of CTPartners, an executive search firm. “It's due to pure organic growth and an upgrading of talent. There could be some senior leadership level moves in 2011.”

This year's hiring activity was due to “pent-up demand” by companies unwilling to make many major hiring decisions in 2008 and 2009, said Elizabeth Fisher, a San Francisco-based consultant for the executive recruiting firm Spencer Stuart.

“During the economic crisis, there was little or no movement in asset management in general and the retirement space in particular, but now there's a lot of movement as several companies are trying to make defined contribution a top priority in the next three to five years,” Ms. Fisher said. “We will see some other hires in coming months as more asset management firms want to expand.”

Top-level changes in 2010 included a mixture of internal promotion and company-switching, some via executive search and some through direct hire.

The action started in January when Drew Lawton was hired as CEO of New York Life Retirement Plan Services, Westwood, Mass. Mr. Lawton had been president of Fridson Investment Services.

In February, Goldman Sachs Asset Management, New York, hired Bill McDermott as head of the institutional defined contribution business, a new position at the firm. He had been executive vice president for corporate markets at AXA Equitable Life Insurance Co.

In April, BlackRock Inc.'s San Francisco-based managing director Chip Castille was promoted to head of the U.S. and Canada defined contribution group after his former boss, Kristi Mitchem, was recruited in March by State Street Global Advisors to become senior managing director and global head of its defined contribution business.

In November, J.P. Morgan Asset Management, New York, hired Michael Falcon as managing director and head of retirement in the U.S. and Canada, a new position at the firm. He most recently was president of Samuel Bennett Inc., a financial media and consulting company.

This month, New York Life Retirement Plan Services named David Castellani as senior managing director and head of the retirement business. Mr. Castellani, who had been chief marketing officer at the wealth management firm EWM LLC, assumed many of the management responsibilities held by Mr. Lawton, who remains CEO and added new duties as CEO of traditional investments at New York Life Investments.

“In 2008 and 2009, everyone took a pause” in hiring, said George Wilbanks, a New York-based consultant in the asset and wealth management practice at Russell Reynolds Associates. The total number of Russell Reynolds searches in the asset and wealth management area was flat in 2008 and down 50% in 2009. But in 2010, searches jumped 70%.

“This year, everyone took the cork out of the bottle,” said Mr. Wilbanks, adding that he expects DC-related asset management searches to be strong in 2011 as well. “Retirement-related advice and guidance is one of the big demographic issues driving the asset management business.”

Activity in the first three months of 2011 will be a good indicator of hiring momentum, following payment of 2010 bonuses, said Paul Charles, a San Francisco-based associate principal for Heidrick & Struggles. “This (hiring activity) is typical of most financial services firms,” Mr. Charles said.

And when a company hires a new senior executive, “it typically leads to the hiring of several others as that executive builds out his or her team,” Mr. Charles said.

“There continues to be an upgrading of talent,” added CTPartners' Mr. McCabe. “A lot of moves are seen as sales related. That's a good signal. It speaks of an investment and re-investment in the business.”

And just like baseball managers say you can never have too much pitching, DC asset managers can never have too much bench strength.

“There's probably a relatively limited number of people in this industry recognized by management as having important skills,” said David Bauer, a partner in Casey Quirk, Darien, Conn., a management consulting company.

That means companies are looking to “have the seats filled with high-quality people,” he said. “Even if you're big in DC today, there's no guarantee that you'll be big in DC 10 years from now.”

Recruiters say competition for key executives will remain intense for giant DC asset management companies trying to maintain their size and others trying to grab a bigger piece of the DC asset management market. That's why 2010 featured new hires at State Street, which ranked sixth in Pensions & Investments' latest DC money manager survey with $155.6 billion under management, and at Goldman Sachs Asset Management, which placed 31st with $15.8 billion (Pensions & Investments, Oct. 4).

“Kristi Mitchem brought (State Street) credibility by walking in the door,” said Mr. McCabe of CTPartners. As for Goldman Sachs, “Bill McDermott brought them automatic credibility in the large DC (market).” Mr. McCabe's firm wasn't involved in the hiring of Ms. Mitchem or Mr. McDermott.

DC asset management hiring in 2010 wasn't restricted to senior positions — a lot of key positions just below the top were also filled. More hiring — and competition for executives — is expected in 2011, recruiters say.

Among examples were J.P. Morgan Asset Management's hiring of Heidi Walsh in May as vice president of defined contribution investment solutions. She had been director of intermediary relations at T. Rowe Price Retirement Plan Services, Baltimore.

Another example is the July hiring of Aimee DeCamillo by T. Rowe Price Retirement Plan Services as head of marketing. She had been managing director of personal retirement solutions at Bank of America Merrill Lynch, which in August replaced her with David Tyrie, who had been director of defined contribution product and marketing at Putnam Investments.

The multitude of job changes “are clear examples of companies trying to build up their business in the DC space,” said Michael Castine, the New York-based chairman of the asset management and wealth management unit at Korn/Ferry International.

Although some clients may want an executive with a background in sales and marketing and others may want someone with more investment management experience, searches include common themes of leadership and communications skills, said Mr. Castine, who declined to discuss specific searches.

“There's a huge demand for high-quality people who have proven they can create products that plan sponsors want to have,” added John V. Murphy, a Boston-based managing director at Korn/Ferry. “The attractiveness of DCIO (defined contribution investment only) to asset managers has never been higher.”

As defined contribution plans continue growing at the expense of defined benefit plans, money managers will be looking for executives with the broadest experience, said Christopher Seitz, a Boston-based associate principal in the financial services practice of Heidrick & Struggles. “They want to upgrade talent while at the same time innovating to create something that hasn't been done before in the organization,” he said.