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Investment banks trimming at the top

Published on Saturday, 05 Jul 2014
John Mullally is associate director for financial services ar Robert Walters Hong Kong and has almost 10 years' experience in recruitment for the banking and finance services industry. Robert Walters is one of the world's leading professional recruitment

The majority of hiring in most investment banking divisions is currently for associate-level candidates. This is a function both of the current workload needs within these teams (more execution and management of a deal rather than origination), but also of how the decrease in analyst intakes over the past few years has affected the hierarchical make-up of these business units.

Increasingly, we are hearing from directors and managing directors within investment banking divisions that their teams are "top heavy", and that while they need to hire junior staff with two to four years of solid transaction experience, they also need to trim the number of senior employees within the business.

There are obvious cost benefits to doing this as it allows the bank to shed a hefty fixed salary cost and replace it with one or two less-expensive salaries.

It also does reflect, however, that the business need right now is for solid junior staff who can transact deals, and that the need for "rainmakers" and very experienced talent is not as significant.

This demand for associate-level talent is a function not only of a market that has gradually improved over the past year, but one that has also gone through a significant degree of turmoil and bad times since 2007.

It is a truism that if you enter investment banking on an analyst programme during a bear market, your immediate earning capability may be hindered significantly. However, if you have managed to stick around when the market eventually does turn (as it inevitably does), then you will have your pick of suitors.

This has also inevitably led to an increase in the median salary levels for such bankers. Within an area such as debt capital markets, which has experienced a significant growth in recruitment volumes over the past 12 months, associates are requesting around 20 per cent increases on their base salary in order to make a move.

This contrasts starkly with the situation we experienced only two years ago, when such candidates were making lateral moves at the same salary level if they felt it would lead to a role with a better brand or platform and greater job security.

On the other side of affairs, senior bankers are finding the demand for their experience is notably lacking.

All banks are under increasing pressure to reduce their cost base, and while many unemployed director- and managing director-level bankers are more than willing to be flexible when it comes to prospective compensation packages, they are finding that potential employers are not so willing to take a broader outlook on things.

The simple fact is that most investment banks do not feel comfortable about bringing in senior talent and paying them significantly below market rate, because they do not trust that such an employee would not then be keeping one eye on the market with a view to maximising their earning potential if and when the market improves or the right opportunity comes along.

The other factor limiting senior bankers' job options is the simple fact that the higher up the career ladder one climbs, the fewer actual jobs there are at those senior levels.

In any investment bank, there are far more people employed at the associate level than at the director-or-above levels. This means that the opportunities for a senior individual on the market are always going to be less plentiful than those for someone at the junior, broader end of the market.

It is a somewhat counterintuitive state of affairs, but the most experienced and knowledgeable investment bankers right now are running a decent second in the race for talent behind their colleagues who are not yet out of their 20s.

 

John Mullally is associate director for financial services ar Robert Walters Hong Kong and has almost 10 years' experience in recruitment for the banking and finance services industry. Robert Walters is one of the world's leading professional recruitment consultancies, with a network of 53 offices in 24 countries.

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