DMG seeks non-City talent

Equities boss looks outside for his new team, reports Ian Griffiths
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Deutsche Morgan Grenfell is set to disappoint City analysts and traders hoping to exploit its alleged generosity on pay by going outside the Square Mile for many recruits for its new equities business.

John Smith, DMG's head of UK equities, who aims to build a team of around 70, has made it clear that he will not be offering the extravagant salaries that the firm is accused of paying. "I am keen to build the right business, a different business and a business we are proud of," he said. "The way not to do that is to be like Blackburn Rovers and buy a lot of expensive stars, which might work in the short term but is incompatible with building a quality business for the long term."

Mr Smith has already been inundated with applicants but said he was in no hurry to make appointments.

"This is a unique opportunity. I am not going to squander it by rushing out and offering big salaries. That is not a rational business strategy. I will build the team slowly over a two or three- year period because it is essential we get the right people who are prepared to embrace the new philosophy and culture which will allow us to differentiate ourselves."

Rather than recruit established names, particularly among the analysts, Mr Smith is looking to consultancies, industry, academia and overseas for new talent.

"It is no good us becoming just another broker," Mr Smith said. "We have to be different and we have to provide a service our clients want. Our research will be dimensionally different in terms of the numbers we produce, our databases and our valuation methodology. That is why I will be looking away from the traditional City labour market. Our research will be innovative, creative and challenging.

"To succeed we have to be substantially more productive and generate more income per head than our competitors. In that respect, hiring is a great discipline. If we just put together a selection of established City names we would inherit old cultures and a high-cost base."

DMG is returning to UK equities at a time when the economics of the industry are poor. There is over-capacity, systemic pressure on margins and spiralling overheads. However, Mr Smith is certain that by listening to customers DMG can differentiate itself and build a profitable business.

"The motto here is `dare to be different'," Mr Smith said. "If we cannot do things differently and excellently then we will not do them at all. We know that the current structure is not what the customers want. It is absolutely unique then to be in a position where we can build something they do want."

DMG will not, therefore, be providing waterfront market making coverage. Although it will cover all the FT-SE 100 stocks, the intention is to provide quality not quantity.

"We will run fewer sector teams but with greater depth and on a pan-European basis."

Mr Smith also intends to re-invent the sales function by employing multi- skilled salesmen. The trading function will be underpinned by a different philosophy, too. The operation will be supported by state-of-the- art risk management.

"There will never be another opportunity like this," Mr Smith said. "I am sure we will be criticised for overpaying. But the fact is that everybody here could earn more elsewhere. That they stay says more about this firm than I ever could."