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In hindsight, financial services recruiters in London have mixed opinions about 2016. Some have bitter recollections of a uniformly tough year; others say things improved and that hiring picked up in the fourth quarter.

Will 2017 be any different? Now that fixed income trading revenues are unequivocably improving and a Trump government is threatening to loosen regulatory constraints for U.S. banks, will you find it easier to pick up a new job in London? We spoke to five different front office banking recruiters; this was their verdict.

1. Banks have become a lot more cautious about adding headcount

In the past, a good quarter or good two quarters, was taken as an indication to press the button on hiring. Now, recruiters say banks are far more circumspect.

“There’s a much bigger lag between improved conditions and hiring than there used to be,” says one headhunter focused on rebounding macro (FX and rates) professionals. “The underlying environment might be more positive, but the big revenue events like Trump and Brexit were one-offs and banks will wait and see how this pans out before adding new headcount.”

“The big banks take a very retrospective approach now,” agrees a headhunter who places M&A bankers at vice president (VP) and managing director (MD) level. “They’re not going to rush into anything and will wait and see who leaves after bonuses have been paid. They’ll take it from there. “

Just one of the recruiters we spoke to – Richard Hoar, director of banking and financial services at Goodman Masson, was genuinely upbeat. “I am cautiously optimistic,” he said. “It’s not boom season but we’re not struggling – people are coming to us with work rather than us having to go out and find it.”

2. Juniorization hasn’t gone away

Just because we’re in a new year, banks haven’t suddenly jettisoned their need to cut costs. Accordingly, they haven’t lost their bent for replacing expensive MDs and directors with less expensive but highly able vice presidents.

“Everyone’s still looking for the perfect VP,” says the head of one fixed income search boutique in London. “If hiring picks up this year, it’s the VPs who will benefit.”

Oliver Rolfe, managing director of recruitment firm Spartan Partnership, says juniorization is also being driven by the need to refresh relationships in sales roles. “As portfolio managers in hedge funds get younger, banks need to hire at a junior level to build relationships with them.”

3. It’s about replacement rather than growth

“Last year, there were definite obstacles for hiring managers who wanted to get approval for new roles,” says the M&A headhunter. “This year, we’re expecting something similar. Banks will want to see where their gaps are after bonuses have been paid and people have left. It’s going to be about gap filling and hiring in areas where they’re weak rather than any real growth.”

4. Don’t expect Brexit fireworks – this is a slow burn

Brexit looms over London finance jobs – especially now that Theresa May has clarified her intention of fully disengaging from the single market and walking away from any deal that’s not to Britain’s taste. Even so, and although HSBC and UBS are both now voicing their intentions to move staff, recruiters say Morgan Stanley CEO James Gorman is more typical of the prevailing mood.

“We like the UK, we like the rule of law in the UK. We like having our businesses there and our aspiration is to keep our businesses in the UK,” said Gorman, saying that Morgan Stanley would “wait and see” what happens, but that if Brexit compels Morgan Stanley to shift its European headquarters to Frankfurt or Dublin, then so be it.

“You’re not going to see anything dramatic on Brexit,” predicts the M&A headhunter. “It’s going to be a more gradual change – you’ll see that rather than hiring a new sector head in London, banks will hire that person in Europe, and that the new head will slowly build a team in that new city. This is going to be a longer term drip, drip, drip rather than a sudden change.”

5. Wait until 2018

Lastly, recruiters extol the virtues of patience. Revisiting the notion that banks are more cautious now than in the past, they say it will take a good year rather than a good few quarters before hiring really picks up. “If you get a good year this year and everyone understands that things are really getting better, then hiring will pick up again,” says a fixed income headhunter.

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Photo credit: Dragon guarding the entrance to the City of London by Robin Hastings is licensed under CC BY 2.0.

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The mood around banking jobs in 2017 may be decidedly less bleak than 2016, but cuts are already happening. If you fear the axe is hovering above you, here are some strategies to prepare for your next move, or at least position yourself to land on your feet if you are made redundant.

1. Get ready for your next move early on

While a lot of investment banks are indeed planning a round of layoffs, others are hiring. It’s better to take the initiative and make a move on your own terms, especially if the writing is on the wall, rather than sit back, wait for pink slips to be handed out and hope that you don’t get one.

“If there are layoffs coming, you should be mentally prepared for that – get your resume ready,” says Jessica Glazer, president, CEO and recruitment director of MindHR Placement Agency. “People think, ‘If I do all these things, then I’m going to be safe,’ but maybe no one is safe – maybe the company will close up shop tomorrow.”

2. Don’t join in water-cooler gossip or speculation with colleagues

When rumours about job insecurity start to spread, sometimes the gossip mill starts to churn and employees may turn on each other. Some people may bad-mouth colleagues, which is a big no-no, especially in the office, but also at conferences and other work-related events.

“Don’t participate in gossip or ask colleagues speculative questions about potential layoffs,” says Glazer. “Don’t talk about it – stay away from the gossip, or at least don’t participate in it. Be part of the solution. If you’re working productively, then there’s no reason for them to lay you off.”

3. Keep your skills sharp

Seek out whatever professional development, training, certification, credential or education courses that your firm will pay for and that you can fit into your schedule. If your company does not offer anything of the sort, then consider paying for a key course or two out of your own pocket. This is particularly relevant if, after looking at what jobs are out there, you realise there’s a gap in your skillset.

“Take advantage of training courses so that you are able to do your job better, work in a more efficient manner and bring some more skills to the team that other coworkers don’t have,” says Anya Hurtado, executive senior partner in the contract services practice at recruiters Lucas Group.

4. Don’t shoot yourself in the foot

Engaging in red-flag behavior like insubordination, misconduct and violating company policy will make it easy on firm decision-makers looking to trim the fat.

There are also lesser offenses such as sending an off-color tweet or surfing non-work-related websites on your work computer that can be a mark against you. Wait until you’re out of the office to check Facebook, watch funny cat videos and play Candy Crush.

“We see a ton of companies that monitor the internet, and some employees are online and looking at Facebook and other outside sites, which doesn’t send the message that they’re optimizing productivity,” Hurtado says.

5. Demonstrate the right attitude

The spectre of layoffs can create a doom-and-gloom atmosphere around the office. Be above it all. Rather than looking over your shoulder for potential backstabbers, engaging in negativity or letting the stress get to you, go about your business with your usual level of professionalism.

“Be engaged to show your employer that you want to be there – be positive about your week and demonstrate that you’re happy to be there,” Hurtado says. “You want to show your supervisor that you’re interested in your role and invested in your company, taking an active role in the company culture.”

Hurtado believes that being receptive to constructive criticism and making changes can make a difference when companies are having to make tough decisions about who they want to keep and who they lay off.

6. Be a proactive problem-solver so that your manager takes notice

The most important piece of advice is to continue doing great work.

Companies that have to layoff employees look to keep top performers and employees who are making a difference consistently.

“Look at your work every day and make a realistic assessment, ‘Am I really engaged in my job and my work all day every day?’” Hurtado says.

“We unfortunately will come across companies that come to us and say, ‘We have this person in the role, and they come to work every day, but they’re really not efficient and not doing their job well … they seem resigned to work here rather than taking an active interest,’” she says.

“First and foremost, the name of the game is standing out, going the extra mile on deals or whatever it might be, and in some cases cozying up to your manager,” added Cesar DeLara, senior consultant in the investment banking practice at Selby Jennings. “It has been quite a hard environment, and how to avoid layoffs is a difficult question.”

7. Even if you’ve had it up to here, avoid quitting prematurely or getting fired for cause

Even if you’re fed up with your boss or the job in general, it’s not a good idea to complain too vociferously, quit without another job lined up or, worse, go out in a blaze of unprofessional glory like in the movies or a country song, burning bridges in the process.

“It all depends on why the firm is making headcount reductions,” said Mike Karp, the CEO of recruitment firm Options Group. “Sometimes you get cut for exogenous factors or quit of your own volition.

“Before your employer makes reductions is a good time to search for better opportunities, but when you do get cut, it depends on why, whether it’s politics, the firm’s overall performance or your own individual performance,” he said. “For those who are fired for cause, it’s very tough to place them [in a job at another firm].”

8. Make networking a priority

It’s important for people who want to layoff-proof themselves to expand their skill set, both on-the-job and career-development skills. Finance has traditionally been one of the most high-touch industries, and those who understand technology or who can really add value to clients tend to avoid the chop, according to A.J. D’Antonio, financial services sector leader at Futurestep, a Korn Ferry company.

“But don’t just do good work and expect people to notice – always be connecting is a good rule-of-thumb for managing your career,” he said. “Network with leaders in other areas of your company as well as clients to make yourself indispensable.

“Flex and pivot as the industry changes to keep your skills relevant.”

Anyone who works for a publicly traded company needs to know that they are merely a line item on a balance sheet. If layoffs are the only way to make numbers, then your job is going away. The concept of “stable permanent employment” with one company is dead.

“Workers need to embrace the concept of dynamic stability – just like a bicycle is only stable when moving, we need to must embrace a very different mentality to keep a stable career,” said Peter Laughter, the CEO of Wall Street Services. “So, don’t wait until you get a pink slip to nurture your network.

“Remember to pay attention to your contacts before you need them – offering connections and introduction so that when you are in need the same people will reciprocate,” he said. “Also no one lays off top performers, so pay attention to where you rank and where your department ranks in comparison to the whole.”

9. If you’re offered a severance package, don’t think twice: Take it

Sometimes banks offer senior members of a particular team severance packages in order to allocate resources to other sides of the business that are making more money. Don’t hesitate to accept such an offer.

“People who have been with the firm for a while are sometimes given attractive severance packages to get laid off and make way for other parts of the business that are growing,” DeLara said. “The employee has the option to take it or not to take it, basically to leave now with money or leave later with nothing.”
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Remember Christian Bittar? He was the Deutsche Bank proprietary trader who, in 2008 alone, was due a bonus of $53m for his work and who allegedly earned $100m+ over the decade he toiled at the bank. If you work for Deutsche, those days could not be more over.

Following our report on Monday that Deutsche would be deferring 100% of bonuses for the vast majority of staff, Deutsche Bank insiders say 90% of people from VP level to MD level (directors included) have been told their bonuses will be entirely deferred for 2016.

“They’re being given zero cash so that the bank can say it paid no bonuses this year, but some are being told they’re still getting stock,” said a source. “That stock is 100% deferred.”

Deutsche’s managing directors and executives are already familiar with the practice of paying mostly in stock. The German bank deferred 85% of the compensation for its top MDs in 2014 and last year, Deutsche MDs took a hit at bonus time in order to compensate their subordinates. This is the first time, however, that Deutsche has squeezed pay for vice presidents, and this is expected to cause big problems.

VPs at Deutsche can be as young as 27 or 28, with AVPs younger still. Unlike more senior staff, they don’t own their own houses in London: they either have big mortgages or aspire to have big mortgages. Senior VPs and directors have big mortgages and young children. As such, depriving them of cash bonuses means one thing: cash flow problems.

“People are super unhappy,” says one DB insider. “These are comparatively junior bankers and they have a huge need for cash.”

In theory, Deutsche has mitigated the impact of zero cash bonuses by increasing salaries. The recent Dartmouth Partners salary and bonus survey said third year associates in IBD at Deutsche Bank receive salaries of £200k, implying that VPs are on £220k+. Figures from Emolument last year suggested the average front office VP at Deutsche is on closer to £100k, however.

Either way, the staff who form the backbone of Deutsche’s corporate and investment bank are purportedly in shock. “There are a lot of directors at Deutsche who’ve been waiting for salary increases, but didn’t get them,” says the insider. “The bank has placed its mid-ranking staff in a very difficult position.”

Deutsche declined to comment on claims about its bonuses. However, a statement on the bank’s website says employees at VP, director and MD level will only receive the ‘group variable component of compensation’ this year. The wording suggests this applies Deutsche’s assistant vice presidents too.

Headhunters said the ‘group variable component’ will be a mere 10% of standard bonuses at Deutsche and will be contingent on the bank meeting certain group-level targets rather than on individual performance. There are also reports that the bank has asked staff to sign non-disclosure agreements relating to this year’s pay structure for the first time, although insiders denied this. Analyst and associate bonuses will be paid, but will be “limited.”

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Photo credit: stare into the abyss by Eleni Preza is licensed under CC BY 2.0.

If you want to impress Guy Hands, the founder and chairman of private equity firm Terra Firma, don’t mention your academic prowess.

Hands, who has severe dyslexia and dyspraxia and “couldn’t copy from a blackboard or pronounce words properly”, scraped into Oxford University despite only getting an A and an E in Economics and Physics at A-level, largely thanks to his school-time business ventures rather than his academic achievements.

He then got a third class degree – again, principally because he spent a huge amount of time running an art gallery and art supplies business at Oxford. Hands ended up graduating with a £40k debt (about £128k in today’s money) because the said art gallery started crumbling and required substantial repairs.

“My careers advisor at Oxford advised me to declare bankruptcy and get a job where this would not be a disqualification, which would have effectively excluded professions such as banking. Instead, I asked him to tell me the highest-paying graduate job that would help me to pay off my debt,” he told the London School of Economics Alternative Investments Conference.

That job was at Goldman Sachs, which paid £13k plus a big bonus in 1982. Hands said all the other graduate recruits were “blue boys, head prefects”, but his qualifications were “clean driving license”, “no foreign languages” and “I own an art gallery”.

“I was flown out to New York, which I was convinced was some sort of experiment. I was asked that since I had a clean driving licence, could I drive a truck,” he said.

Despite all this, Hands says he was the first graduate recruit in Goldman’s London trading team and managed to move up to head of Eurobond trading by the time he was 26.

This is how you should go about impressing Hands.

1. Prepare for some bizarre interview questions

Actually, don’t prepare. Just be prepared for the unexpected. “People who are bright are good at preparing for tasks, and an interview is a task. They tell you want you want to hear about being a team player etc,” he said.

So, what should you expect? “I throw in a question completely off the chart – I usually ask what the perfect murder would look like.”

2. Be humble

Here’s some classic interview advice – when you’re asked to describe your weaknesses, turn it around as a cleverly disguised strength. When you’re asked for an occasion when you failed, deliver a great story about all of your ‘learnings’. Hands wants to see some honesty.

“One question I ask is an example of how they have failed in life, and most people come up with a wonderful demonstration of how good they are at something. I want to know when something really went wrong for them. One person burst into tears – I’m much more likely to hire someone who did this than someone who gave a pat answer.”

3. Be open

Private equity firms usually hire the elite. This means graduates from top universities with top grades and the necessary extra-curricular activities to make yourself seem interesting. Or, it means the top-ranked investment bank analysts who have clawed their way to the top of a competitive group. The problem is, this gives you the (false) impression that you’ve already made it.

“I’m not looking for what they already know; what’s most interesting to me is how they think,” he said. “The best young people who join Terra Firma are rarely the ones who are keen to show us how much knowledge they have acquired about private equity or a particular industry. Rather, it’s those who show the most willingness to learn and to adapt.”

4. Don’t be a big swinger

Hands says that for the 25 years leading up to the 2007 financial crisis, there was a “consistent story” in financial services and that implied seemingly endless growth. The perfect personality at the time was “macho, and I hate to use the term, but it was used at the time – a big-swinging dick”.

“The world has changed, we need people who have humility,” he said. “At Goldman, we had a test which tested self-motivation and self-reliance and the top score was 18. A guy we nicknamed Jaws scored 18 and excelled there. But Jaws wouldn’t survive today, because he didn’t give a damn about anyone else.”

“As a graduate, you go from being top of your class to starting from scratch. You’ll attend meetings; scribble notes; write up minutes; and try to participate in discussions without having any real idea about what’s going on. If you try to be 100% right all of the time, you won’t get anything done,” he added.

5. Connect with people

If academics don’t impress Guy Hands, what does? Getting along with people.

“Success in business is not an intellectual process,” he said. “You have to bring people along with you on an emotional level, especially today, given how people’s means of communication have changed. E-mail, Facebook and Twitter have changed the way people communicate ideas – people want you to simplify your argument down to a level they understand instantly.”

6. Never assume you’re an ‘expert’

It’s not just the people of the UK who are seemingly tired of ‘experts’.

“The experts got everything wrong last year. Not only did they fail to predict which way the votes would go, they misjudged their effects on the markets. The experts all learned in the same way you have; they all have doctorates and master’s degrees like you. But they couldn’t use their intelligence, knowledge and learning to reach the right conclusion,” he said.

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The British government thinks banks are exaggerating about Brexit. We know this from Brexit Minister David Davis, who reportedly said before Christmas that banks need to “move on” from the referendum and to get over their obsession with passporting, which isn’t as important as they think. We also know it from the UK Treasury Select Committee, which keeps recalling senior bankers to discuss Brexit because it thinks they’re giving misleading information about its impact.

Well, guess what? Turns out those bankers weren’t exaggerating after all. This morning at Davos, Andrea Orcel, the apolitical, Italian head of UBS’s investment bank, tried shouting into the UK government’s echo chamber. The government would do well to listen.

1. This isn’t about extending the benefit of the doubt – it’s about harsh reality

Forget Theresa May’s bold claim about “no deal being better than a bad deal.” Forget the fig leaf of an unspecified ‘transitional arrangement.’ Banks can’t wait to see what happens on Brexit. They’re not interested in politicians’ platitudes. They’re interested in what’s really happening and in the absence of anything concrete they need to start implementing contingency plans.

“The only thing we can do is to anticipate the worst,” said Orcel. “We can’t be optimistic. At the worst, we anticipate a de-minimus agreement between the UK and the EU and that there won’t be a transitory period.”

2. It takes time to move operations. Banks have no choice but to begin the process soon – irrespective of any reassurance from the British government

Back in September, HSBC chairman Douglas Flint told the Treasury Select Committee that moving jobs because of Brexit could take years. It took HSBC three years just to shift jobs from London to Birmingham, Flint said.

Orcel said much the same this morning, although he cut the implementation time in half. It will take UBS between 18 months to two years to execute a “transformation” of its European operations because of Brexit according to Orcel. He added that, “the moment the UK invokes Article 50, we need to be in execution mode. We need to move whatever we need to another jurisdiction.”

In other words, it begins March 2017. Flint also said today that it will move jobs to Paris in 2019 when Brexit becomes effective, so we assume HSBC has begun activating its plan already.

**3. Banks will set up new EU hubs. And the Brexit agreeement – determined by particularly the EU – will depend upon how well populated those hubs are**

In September 2016, UBS CEO Sergio Ermotti said the bank could move 1,500 of its 5,000 jobs out of London because of Brexit. UBS chairman Axel Weber suggested today that around 1,000 London jobs could go. Orcel, however, went one step further in spelling out what will determine the degree of displacement: “How much we move is dependent on what the sub-jurisdiction is going to concede in terms of transitory and permanent agreements…,” he said.

In other words, this isn’t just about the UK government’s demands, it’s about what the EU is prepared to concede. This is self-evident. It’s also something the UK government is in danger of overlooking amidst all the bombast.

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There are several things that I wish I had known at the beginning of my college years. What not to do as much as what to do, and realising that the odd misstep is OK on the way to your first banking job.

I’ve just secured an M&A job at a large U.S. investment bank on Wall Street in 2017. These are my tips for getting in.

Fair or not, you’re going to have an uphill battle if you’re not from a target school

Attending one of a particular bank’s target schools can make a huge difference. Sure, a lot of people from non-target colleges break into investment banking, which is fine and dandy, but I was thinking once it comes to P.E. recruiting or getting promoted to the associate level at a bank that it would matter less which school you went to and more where you work, but the whole where-you-went-to-school thing still persists.

If you go to Wharton or another Ivy League school, you’re set for life, whereas even if you’re really good but didn’t go to a target school, banks will still hire the Wharton guy over you. Plus, later on, it’s really difficult to networking your way to a PE job if you haven’t been to a target school.

Start building your network right away

Your network is literally everything when it comes to getting a job.

It’s never too early to start networking with peers, older students who are on track to join the financial services industry, faculty and professionals currently working at an investment bank. You need to build network during your college career to get internships and eventually a full-time job, then you have to build a whole new network once you’re in the industry.

It’s a lot harder to network effectively than some people realize. There is a low percentage who get into banking in the first place, and a low percentage of those who get into PE or who stay in investment banking and make managing director. There are typically at least 10 analysts for every MD, so the funnel gets smaller and it gets harder and harder to get referrals from people who you already know.

I made friends, both in class and in the banking society that I was a member of, and they helped me get my sophomore investment banking internship – they put my resume through to the right people. After they graduated, some reached out to help me out and others responded when I reached out to them, but I do wish I had more actively networked with more people.

One big thing I noticed, and I didn’t think it made any sense, you can have a high G.P.A., the best internships, the best work and activity experience while at university, but if you don’t have someone to put your resume through, it doesn’t matter. Applying through a bank’s careers portal isn’t effective. HR directors at the big banks don’t look at them – they don’t have the time or inclination to look at random resumes that come through their website, so networking is key.

Normally what happens is you’ll find someone who works at a bank you want to work for, either an analyst or an associate, and you reach out and tell that person you’re interested in working there. You ask, “Do you have time to talk?” If they say yes, you talk to them and start building a rapport. Two months later you call them again, two months later you call them up again, and two months later you follow up again and say, “Recruiting season is coming up, I want to get a job at your bank – can you put my resume through to HR?”

If they like you, they’ll set up an interview on campus, over the phone or via video. Eventually, you’ll get an in-person interview with another banker or more than one.

If they don’t like you, you won’t hear back. Or it will be like when you ask a girl, “Do you want to get dinner?” and she says “I’ll have to see what my schedule is looking like” – a soft no.

If you’re trying to break into a particular industry like investment banking, you have to have a strategy from when you’re a sophomore at the latest and steadily build up your network and work experience.

The work-life balance is tough to adapt to

Work-life balance is difficult, especially going from college where you spend 15 hours screwing around in class and socializing almost every night to sitting at a desk for 90 hours or more every week. Working at an investment bank is a big change from taking a nap whenever you want and cramming for a test or finishing an assignment the night before. Once they start a banking job, many people stop exercising and have unhealthy lifestyles.

Once you start an IBD analyst position, you’re not only trying to figure out how best to do your job, you’re reaching out to the older generation at the bank, and you have to help the younger people, taking phone calls from the students who want to work as interns in the summer and summer analysts who want full-time positions, all the while thinking of a PE job. Doing the job in general requires 80 to 90 hours per week, plus you’ve all these kids reaching out to you, while being contacted by headhunters, so it’s very hard to balance all of that and have a social life.

My biggest mistake

When I interviewed for the job I have now, I made a huge mistake, although luckily I was able to act fast and recover from it.

I couldn’t interview for a good portion of my junior year because I was sick. At a certain point, even though I wasn’t 100% healthy, I started going to super days and got some interviews.

I went into this particular interview confident, because I had a high G.P.A., very good activities and experience, and did an investment banking internship the previous summer. They asked me a question about one of the deals I worked on, and I talked about a private placement that I played a key role in. Then they asked the typical “Why do you want to work at the bank? Why do you want to be a banker?” I had all the attributes they were looking for, and I sensed that I was in the home stretch. Then they asked me, “If we gave you an offer today, on the spot, would you accept it now?” I could tell they wanted me to say yes, but I was thinking about the other interviews I had lined up and I said something like “I don’t have enough information about the offer, but I would certainly strongly consider it.” They went on to deliver a sales pitch about how great the firm is.

Afterward, it didn’t sit right with me, so I went to the career center and told them what I told the interviewers and realized I had made a mistake. I thought about sleeping on it and emailing the next morning, but I called all my friends at the bank for help, and they advised me: “They’re making decisions right now – send the email right now.” So I did – I sent an email right away to mitigate my mistake, and it influenced the decision others. Later I found out others weren’t given offers because they were “overqualified” – that is, the interviewers felt that they weren’t going to accept an offer, at least not right away, so they went with people like me who demonstrated more enthusiasm.

You need people in your corner

It goes to show, it’s so important to have people who would vouch for you. You are a commodity – you’re not special. You’re like a snowflake – even if every snowflake is a unique individual, it doesn’t matter, because snow is now. Everyone applying for investment banking jobs is smart has a great resume. Essentially, it all comes down to who you know and who likes you. Find people on campus who are pursuing a banking career and throw the football or Frisbee around, get a beer with them, just like you’re making a friend, which is kind of what networking is like, but a professional friend. That’s especially important if you’re from a non-target school like I am.

I ended up getting a couple of good offers from investment banks and took the better of the two. I graduate in May, and I’m starting as a full-time investment banking analyst in July. I have a month of training, then I’ll start at the desk I’m assigned to in August.

The author contributed this blog post on condition of anonymity. Luke Williams is a pseudonym.

Photo credit: loveguli/GettyImages
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If you thought Goldman Sachs was the ‘best investment bank in the world’, you could be wrong. In league table terms it’s long be roundly trumped by J.P. Morgan in most businesses. And last year, it performed worse than its U.S. rivals in almost every business area.

The chart below highlights Goldman’s sorry year. Compared to 2015, it did worse in M&A, worse in equity capital markets (ECM), worse in equities sales and trading and, worse in fixed income trading than Citigroup, Bank of America Merrill Lynch, Morgan Stanley and J.P. Morgan. The only business area in which Goldman Sachs outperformed its rivals was debt capital markets (DCM), and here it did so by a large margin. In every other area, it looks like Goldman lost market share last year.

How can this be? And more to the point, does anyone at Goldman care?

In answer to the first question, it might simply be that Goldman’s business areas did better than rivals’ in 2015, giving it a harder job of increasing revenues last year. This was certainly the case in terms of both equities and M&A. However, it doesn’t excuse the poor show in fixed income or ECM (Goldman’s fixed income trading business actually under-performed the market in 2015 too).

In answer to the second question, Goldman seems inherently untroubled by its apparent weakness. CFO Harvey Schwartz said the bank is in a “position of strength” as we go into 2017 and that everyone’s very happy with how the bank’s positioned. Sure, equities didn’t have the best end to the year, but “I wouldn’t read anything into that,” Schwartz said.

Goldman cut costs last year. The bank aimed for $700m of cost savings in the first half, but CFO Harvey Schwartz said today that it actually ended the year $900m down. It also cut headcount, ending the year with 400 fewer people than in 2015. Maybe it cut too deeply? More cuts may yet be coming: soon-to-be-CFO Marty Chavez said today that his reign, starting in April, will be all about “applying math and software to the problem of risk management.” That doesn’t bode too well for the non-programmers in the securities business.

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If the City of London is dismantled as the result of a nasty Brexit settlement, it won’t magically reappear elsewhere. Things that currently happen in the City will be dispersed across Europe and the Atlantic. – This is the message of the Goldman Sachs Brexit contingency plan, allegedly seen by journalists at German newspaper Handelsblatt.

Handelsblatt claims Goldman is contemplating halving its London workforce in response to Brexit. 3,000 jobs could go at Goldman’s Fleet Street office. 1,000 of these will reportedly be shifted to Frankfurt, where the firm is purportedly thinking of rehousing people in a new subsidiary known as, ‘Europe SE.’ This Frankfurt unit will reportedly take in regulated personnel like traders, senior managers and related compliance staff.

The other 2,000 refugees from Goldman Sachs in London will be scattered liberally. Handelsblatt says Goldman is planning to shift back office jobs to Warsaw, where it has an established technology and operations unit. It’s planning to shift relationship managers working with clients in France and Spain to offices in those countries, and it’s planning to move product innovators in trading operations to New York.

In other words, there will be no replacement for London post-Brexit: there will only be fragmentation and additional cost. This matters, because as we’ve pointed out before, Goldman’s London office is unusually profitable. If that profitability is lost, Goldman’s global margins could suffer.

Of course, it might not happen. Goldman Sachs denied claims that it was moving jobs to Frankfurt when they last surfaced in November. During yesterday’s results call, CFO Harvey Schwartz said the firm continue to evaluate its options. “There’s obviously going to be a long process, but we’re contingency planners by our very nature,” said Schwartz. “We will run through different alternatives. We need to ensure that it’s not disruptive, and that there’s a long enough runway [to implement decisions]… we’re going to see how these things evolve over the next couple of years.”

If Goldman does decide to spread its London operations across Europe after Brexit, it won’t be alone. Citigroup’s Brexit strategy also involves shifting front office jobs to Frankfurt, while its back office jobs will go to Dublin.

Separately, Erkin Adylov has the best back-story of anyone in finance. Bloomberg reports that Adylov grew up in a small settlement in Kyrgyzstan as the child of two farmers. He was a goatherd until, aged 16, he won a scholarship to the U.S. His parents subsequently sold their house to pay for a one-way ticket to Hawaii, where Adylov secured a scholarship at Hawai’i Pacific University. There, he worked 60 hours a week at four different jobs and still managed to graduate with a GPA of 4.0. This got him another scholarship at the London School of Economics, from which he joined Goldman Sachs in 2007 and then hedge fund GLG partners where he was a top portfolio manager earning $1m a year.

Today, Erkin has followed many of the other more talented people in finance into fintech. He runs Behavox, the compliance technology firm which uses machine learning to predict rogue traders. “I realized that if I scrolled my life forward 20-30 years it was highly predictable,” he says. “My life has always been a chase, a perennial progression toward something better. For me, it’s all about the struggle.”

Meanwhile:

Brexit might not be that bad. What Theresa May actually said was, “The new deal with the EU “may take in elements of current single market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders – as it makes no sense to start again from scratch when Britain and the remaining member states have adhered to the same rules for so many years.” This suggests she wants passporting. The question is whether she’ll get it. (Financial News)

Tidjane Thiam says it should be a “reasonable year” for Credit Suisse compensation. (Bloomberg)

Meanwhile, at HSBC: ““Activities specifically covered by EU legislation will move [from London to Paris], and looking at our own numbers, that’s about 20 percent of revenue.” (Bloomberg)

Henrik Gobel has taken sole control of Morgan Stanley’s global capital markets business in Europe. His predecessor is becoming head of a new structured credit solutions team in Morgan Stanley Investment Management. (Financial News)

In America, 49% of postings in the quartile of occupations with the highest pay are for jobs that frequently ask for coding skills. (Economist)

A short guide to time series analyses. (KD Nuggets)

The archetypal M&A client: “I love good wine and good food. I eat just once a day, at dinner, because I don’t conceive of a meal without a good bottle of wine, and I couldn’t drink during the day.” (Financial Times)

Cambridge University is hiring a professor of Lego. (BBC)

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What proportion of London banking jobs are at risk from Brexit? Handlesblatt claims 50% of Goldman Sachs’ 6,000 London banking jobs could migrate, but Goldman is denying this. Overall banks’ stated figures put the displacement closer to 22%.

For the moment, J.P. Morgan seems most eager to shunt jobs overseas. At Davos today, Jamie Dimon today reaffirmed his June threat to move 4,000 jobs or more out of the UK because of Brexit – 25%+ of the bank’s total in the country. “It looks like there will be more job movement than we hoped for,” Dimon told Bloomberg, adding: “.. it is not a threat — it is just a fact that we will have to accommodate the new requirements.”

UBS seems to have moved in the opposite direction. CEO Sergio Ermotti said in September that the bank could move 1,500 jobs or 30% of its UK total overseas as a result Brexit. At Davos this week, UBS Chairman Axel Weber downgraded this to 1,000 jobs, 20% of the total, although Ermotti said there won’t be clarity on the number until the end of 2017.

This puts UBS on a par with HSBC, which is also threatening to move 1,000 of its London jobs elsewhere (Paris).

If other banks come out with similar plans, the job Brexit-related job losses in London could be higher than expected. In October, consulting firm Oliver Wyman said 13% of jobs across trading, investment banking, asset management, market infrastructure, and insurance could go. That’s starting to look like an underestimate – particularly if Handlesblatt’s worst case Goldman Sachs contingency plan turns out to be true.

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Deutsche Bank may be slashing bonuses, it may be cutting 20% of underperformers in its investment bank and it still has a hiring freeze in place. And yet, for the right role it’s still signing off on new recruits.

Technology and compliance are the two areas where Deutsche Bank continues to hire, and it’s just poached a managing director from J.P. Morgan.

Robert McMillan has joined Deutsche Bank as a managing director and global head of intelligence. He comes from J.P. Morgan where he was global head of sanctions compliance for the corporate and investment bank.

McMillan has a background in regulatory risk and compliance, but also has experience in financial crime compliance. He joins Deutsche Bank at a time of upheaval in the compliance team.

Earlier this month, Peter Hazlewood, the global head of Deutsche Bank’s anti-crime unit, left after just six months in the job. Deutsche is still recruiting compliance staff, but Hazlewood reportedly left after the bank rejected his request to hire an additional 600 employees for the financial crimes division. The bank approved 400 additional people.

Sylvie Matherat, Deutsche Bank’s recently installed chief regulatory officer, said previously that the bank was aiming for long-term solutions to the compliance issues that have continued to dog the bank and cost it billions in fines.

Deutsche ended 2016 with around 2,200 people in compliance and anti-crime – a 60% uplift in 2014.

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2017 isn’t starting well for equities sales and trading professionals. First Morgan Stanley trimmed directors in its equities team, then HSBC did. Now, it seems Panmure Gordon is doing the same.

Headhunters say the British M&A and brokerage house has quietly parted company with four of its most senior staff. They are: Hugh Rich, a director of equity sales, Paul Modlock, the head of sales, Nick Cutting, a senior equities salesman, and Harinder Sandhu, a director in cross sector sales.

Cutting joined Panmure Gordon in 2000 after 10 years at Dresdner Kleinwort Benson. Sandhu, however, was only hired by the firm in January 2016 after leaving an African private equity fund. Rich was hired from Charles Stanley in 2015.

Finding a new job in equities sales and trading isn’t easy, especially if you’re senior and therefore expensive. Nomura closed its European equities business in April last year, making around 500 staff redundant. Some of Nomura’s equities staff have been rehired by the likes of Jefferies, but plenty are still out of the market. Late last year, Tim Harvey, a former head of equities trading at Cantor Fitzgerald and RBC Capital Markets became the landlord of a pub in Kent. “If you’re 45 year-old equities trader, life is tough,” he told us. “Your best bet is to join a commission only house, like Mirabaud, and eat what you kill.”

Panmure Gordon made a profit of £168k in the six months to June 2016, up from a similarly sized loss a year before. The bank has been cutting costs after making a loss of nearly £17m in 2015. “We’ve trimmed a few people on the sales desk and are hiring in other areas,” says CEO Patric Johnson. “Salespeople are vital, but as the business changes under MiFID II we’re investing more heavily in technology. This is just a case of increasing spending in some areas while other areas are reduced.”

Banking analysts at Bernstein Research say U.S. equities desks could have a good 2017 as investors “churn” their portfolios under Trump. It’s less certain this will be the case in London. In 2016, most U.S. banks had a difficult fourth quarter in equities trading: at Goldman Sachs, revenues fell by 12% compared to a year earlier.

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Xi Chen, who got his Ph.D. in machine learning from Carnegie Mellon University’s School of Computer Science, is an assistant professor of information, operations and management sciences at New York University’s Stern School of Business. He was recently named to the Forbes 30 Under 30 list. Chen featured in the science rankings, but he’s working on machine learning products that will disrupt the financial services industry.

How will machine learning impact financial services?

First of all, modern machine learning techniques will lead to more accurate predictions of the future prizes and trends in financial services. It can also help predict market trends by aggregating many opinions on the social networks. This might be even more accurate than the subjective judgment from an expert.

Also, it can lead to quick decisions.

For example, machine learning techniques have been widely used in algorithmic trading.

Moreover, using machine learning techniques, banks can know better about the needs of each individual and thus provide personalized financial services to each customer.

How are these leading to new learning methods and approaches to analyzing data?

Increasing demand for better financial services will also lead to improvement in learning methods and data analytics. For example, the flourishing of algorithmic trading will lead to new techniques, which can predict the prices on the millisecond and even microsecond level. It can also lead to cost-cutting.

Do you see a potentially negative impact of machine learning and automation on employment?

Yes. Machine learning technology will make many jobs obsolete – some will be replaced by machines in the future. Examples include driverless cars, automated trading systems, and robots as waiters and cleaning people, to name just a few. I think one way [to approach the problem of unemployment] is to provide people with a better education so that the next generation will be trained to perform jobs that machines are not competent in.

Generally, what interesting trends are you seeing in the areas your research focuses on?

I am working on several key aspects in machine learning and statistics, from data collection to structural data analysis.

For example, my series of work on crowdsourcing has laid the foundation for how to enable high-quality and cost-saving crowdsourcing services to harness the wisdom of the crowd to extract rich information from web-scale data. This line of research not only has an immense impact on utilizing human power for data-intensive scientific research, such as FoldIt, EyeWire and Zooniverse, but also helps boost the crowded labor markets and opens up opportunities for unemployed people.

In addition, I have been devoted to developing new methods in statistical machine learning to better analyze the high-dimensional data, which is prevailing in scientific studies. These methods have been successfully applied to analyzing climatological data, brain fMRI data and genetic data, leading to new scientific discoveries.

In addition, I am also investigating the application of machine learning to revenue management.

Crowdsourcing becomes one of the most important tools for collecting high-quality data. However, the reliability is always a key challenge in crowdsourcing due to the noise from workers. There is an increasing demand for new technologies to enable more reliable crowdsourcing systems for complex tasks.

For high-dimensional statistics, although this topic has been studied extensively in the statistical community over the past decade, the computational challenges of many developed models have not been fully explored. In my understanding, the research on new statistical models together with efficient implementation will be a growing trend.

New York University, NYU, Stern, NYU Stern, Stern School of Business, machine learning, artificial intelligence, AI, Wall Street, banking, banks, bankers, investment banking, investment banks, investment bankers, finance, financial services, professional services, audit, auditing, auditors, accounting, accountants, CPA, CPAs, Big 4, Big Four, management consulting, management consultants, consulting, consultants, hedge funds, hedge fund managers, asset managers, fund managers, mutual funds, ETFs, mutual fund managers, asset management, wealth management, wealth managers, wealth management firms, RIAs, registered investment advisers, advisers, advisors, financial advisers, financial advisors, FAs, IB, IBD, fintech, financial technology, risk, risk management, compliance, analyst, analysts, investment banking analysts, research analysts, investment analysts, investment management, investment managers, private equity, PE, recruiters, recruitment, hiring, hiring managers, firing, layoffs, laid off, job search, job-search, Wall Street hiring

Dr. Xi Chen of NYU Stern

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It seems Deutsche Bank’s banking analysts were onto something. Earlier this month, they suggested that things were looking up for Barclays. As if on cue, Barclays CEO Jes Staley today told reporters at Davos that – the non-core unit aside – Barclays is “done with massive layoffs.” Simultaneously, there are reports that the bottom 20% of performers in the front office at Deutsche are at risk of redundancy this week and next.

Historically, Deutsche Bank and Barclays were not dissimilar in terms of their business structures: both built investment banks skewed towards fixed income trading; both have tried to diversify into other areas. So why – for the moment – has Barclays come out on top?

Deutsche Bank kept on accreting staff; Barclays didn’t

While both Deutsche and Barclays implemented hiring freezes last year, only one of the two was successful.

Barclays no longer breaks out headcount in its investment bank, but in September 2016, CEO Jes Staley said the bank had eliminated 13,600 jobs since he arrived – largely as a result of failing to fill spaces left by people who left. This followed 1,000 job cuts at Barclays’ investment bank in January 2016, when 230 jobs went in Asia.

Deutsche, on the other, hand has struggled to cut staff in its global markets division. As the chart below shows, the business ended the third quarter of 2016 with 922 people more than it had at the start of 2015. As fast as Deutsche cut staff in the front office, it added even more in the back.

Deutsche Bank kept paying, even while profits plummeted

Cryan is resolving a legacy problem at Deutsche Bank. As the chart below from J.P. Morgan’s analysts shows, Deutsche abjectly failed to cut compensation expenses across the bank in line with plummeting returns to shareholders between 2007 and 2015. Deustche’s combined corporate banking and securities business (CB&S) and non-core operations units (NCOU), either made zero profits or a loss between 2012 and 2015, while compensation and benefit spending barely budged.

Barclays no longer breaks out compensation in its investment bank, making it difficult to gauge cuts to pay. However, overall costs in Barclays investment bank rose as a percentage of revenues in the first nine months of 2016 – from 69% in 2015 to 73% a year later, suggesting the British bank can’t afford to be complacent.

Deutsche Bank’s stubborn pay costs

Deutsche Bank pay cut JPM

Source: JPMorgan

Barclays has rebalanced its business, Deutsche hasn’t

Since acquiring Lehman’s U.S. operations in 2008, Barclays is closer to the model of a diversified investment bank. Deutsche, however, is still heavily skewed towards fixed income trading. This might be good news as fixed income trading picks up in 2017, but most banks have tried reducing their reliance on capital-hungry fixed income businesses and Deutsche is no exception. Deutsche CEO John Cryan has said repetitively that he wants to build its investment banking division (IBD) in the Americas. – Guess who won’t be getting fired…

Deutsche’s DOJ fine is $7.2bn. Barclays’ will (probably) be a lot less

Lastly, Deutsche has agreed to pay fines totaling $7.2bn for its transgressions before the financial crisis. Barclays, however, has refused to pay anything for the moment. The British bank is said to be willing to pay up to $2bn and there were reports that the DOJ wanted to double that amount.

While Deutsche’s settlement is a lot more than the $14bn originally requested, it’s still higher than the $6.3bn in litigation reserves Deutsche had accrued by the end of last year. Deutsche needs to find money. Barclays – for the moment – does not. This doesn’t mean Barclays will be hiring, though. Staley said, “It’ll be nice to run the bank status quo for a while.” In other words, the hiring freeze remains.

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Even before Trump comes in, U.S investment banks have reasons to be happy. Even before they reported sizeable gains in the fourth quarter, Wall Street’s biggest banks had widened their lead over European rivals in securities trading and now control around 60% of the global market.

Perhaps no one in the industry is happier than J.P. Morgan Chase CEO Jamie Dimon, who’s getting a $1m raise from 2015 for a grand total of $28m in compensation for 2016, a 3.7% year-on-year bump. However, across the pond, European banks’ outlook isn’t so rosy.

Brexit is turning into a slowly unfolding train wreck for investment banks in the City.

On the one side is Barclays’ CEO Jes Staley, who says that the U.K. will continue to be the “financial lungs for Europe” and that most of the bank’s European business will stay in London post-Brexit. However, HSBC is planning to move a thousand jobs out of London, Goldman will relocate 3k from the City, and J.P. Morgan and UBS are both planning to move an unspecified number of employees out of London.

Speaking at the World Economic Forum meeting in Davos, the mayor of London warned attendees that a hard Brexit would drive financial services jobs to Hong Kong, Singapore and New York, not continental Europe. Christine Lagarde, managing director of the International Monetary Fund, said at the WEF that everything may seem OK now but that the U.K. would feel serious Brexit-induced pain down the road.

Prime Minister Teresa May attended a private WEF session with financial services executives in an attempt to calm their frazzled nerves. She said, “I value financial services in the City of London, and I want to ensure that we can keep financial services in the City of London.” Also at Davos, Chancellor of the Exchequer Philip Hammond said that financial services will be a “priority” for the UK government in its Brexit negotiations.

Despite widespread worsening Brexit anxiety, top bankers in Davos believe that London will probably end up winning the battle over its clearing industry.

Separately, it’s well-known that hedge funds are struggling to justify their exorbitant fees as returns fall by the wayside. But included within this are everything from buying out new hires’ deferred bonuses to picking up traders’ dinner expenses. If performance fees hurt, “pass through” expenses – which also include travel and investment in technology – are increasingly resisted by investors. Reuters reports that big firms like Citadel and Millennium are still putting these expenses through and almost doubling the already sky-high 2 and 20 performance fees. Hedge funds suggest this helps them recruit and retain the ‘elite’ talent that help them generate good returns. This is increasingly difficult to justify – as Matthew Granade, chief market intelligence officer at Point72 Asset Management, told a conference this week: “It’s kind of: ‘I promise you a Rolls Royce and I give you a Honda’”.

Meanwhile:

Steven Mnuchin, Trump’s pick to be Treasury secretary, didn’t disclose almost $100m of his assets to the Senate Finance Committee and forgot to mention his role as a director of an investment fund located in a notorious tax haven. (New York Times)

Is Mnuchin deserving of his reputation as the “king of foreclosures?” (WSJ)

Victims describe OneWest Bank as a “foreclosure machine.” (The Intercept)

George Soros said that Trump “would be a dictator if he could get away with it” (New York Times)

Accenture is saving one big bank $100m a year in compliance salaries by automation. (Business Insider)

Boutique investment bank LionTree, focused on media, technology and telecommunications (TMT), is opening a Paris office. (Reuters)

The shiny future of fintech has run into the stodgy present in the form of banking regulators. (Bloomberg)

Advancements in artificial intelligence have even surprised Google co-founder Sergey Brin. (Bloomberg)

The Securities and Exchange Commission Chief of Staff Andrew “Buddy” Donohue will be stepping down at the end of the month. (SEC.gov)

If you’re familiar with financial trading and know Python, then you can get started with basic algorithmic trading in no time. (O’Reilly)

UK minister was rejected from an investment bank because she couldn’t afford a gap year (The Times)

Students at elite colleges are even richer than experts realized – at 38 colleges in America, more students came from the top 1% of the income scale than from the entire bottom 60%. (New York Times)
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In perfect finance ‘career arc’ terms, moving to a big portfolio management job in a hedge fund after years as a sell-side trader is a one-way ticket.

However, Mark Deniston, who left his job as head of sterling rates swaps at Goldman Sachs to join Brevan Howard in 2013, has returned to banking. But Deniston, who left Brevan in August last year, is now working at Royal Bank of Scotland.

Deniston is a managing director and head of GBP rates trading at RBS. The bank has, of course, been consistently scaling down its investment bank and continues to cut heads and move away from risky activities.

If Deniston’s move from Goldman to Brevan and then RBS therefore seems like a bit of come down, it’s worth remembering that RBS’s rates trading team is one of the best in the business.

In Q2 last year, as most fixed income teams enjoyed an increase in revenues thanks to the Brexit bounce, RBS posted a 40.7% year on year increase in macro trading revenues. This was 8.3% and 5.2% respectively at HSBC and Barclays. In Q3, revenues in rates were £348m – or a 117.5% year on year increase.

At Brevan Howard, meanwhile, fees were cut on its BH Macro fund in October as it waived an operational services charge. Generally, the hedge fund has been struggling with investor redemptions and a number of senior staff have left in recent months.

Deniston spent nearly five years at Goldman Sachs before moving to Brevan Howard in May 2013. Before this, he was a vice president at Deutsche Bank for six years.

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Bonuses could be ok at Credit Suisse this year. Even though average compensation per head fell 3% on an accrued basis in the first nine months of 2016 compared to 2015, CEO Tidjane said at Davos that 2016 should be a “reasonable year” for Credit Suisse compensation. New research suggests this may be especially the case in the U.S.

The chart below, from Chirantan Barua and his team at Bernstein Research, shows the (estimated) differences in the cost structure at Credit Suisse in the U.S. compared to Switzerland, the Rest of the World (eg, the UK) and Asia Pacific. It also shows the likely distribution of costs across the bank when Credit Suisse achieves Thiam’s latest CHF17bn cost target in 2018.

Credit Suisse’s U.S. bankers look a lot more expensive than their peers overseas. Bernstein says 65% of all costs at Credit Suisse in the U.S. are eaten up by pay. This compares to 46% in Switzerland, and 57% in the rest of the world and APAC. Both salaries and bonuses are a significant proportion of Credit Suisse’s costs in the Americas.

If Credit Suisse bonuses rise in 2016, its U.S. bankers could be in luck. However, their high pay may prove a problem in the near future. Thiam wants to cut another CHF4bn from costs by 2018. In a best case scenario, Bernstein is predicting cuts of CHF3.2bn, with CHF2.3bn shaved from compensation and bonuses halved. As Thiam cuts costs, Credit Suisse’s cosseted U.S. bankers look vulnerable – especially if the dollar keeps rising.

Bernstein Credit Suisse

Source: Bernstein Research

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Junior employees in investment banking are increasingly questioning whether the long hours and high pressure of the job are really worth it, or if it’s better to dedicate their energy elsewhere.

For Marcin Olechowski, who left his job in structuring at Morgan Stanley and SocGen to launch his own start-up in September, it was a simple mathematical calculation that led him to quit the industry.

“It’s an equation – how much am I learning? Plus how exciting the role is, plus the financial side of things against the investment of time,” he says. “I realised that the financial potential was lower, and structuring in particular is not as interesting as it used to be. So if I was going to dedicate 12-14 hours a day on something, I’d rather it was on something I was more passionate about.”

Olechowski has launched a new app called Mesh, alongside former Marshall Wace quant researcher Borja Rivier. It uses a Tinder-style swipe-left-swipe-right interface combined with machine learning to connect professionals with people in other industries whose expertise could eventually help you either switch careers or get a start-up off the ground.

Both Olechowski and Rivier decided that it was worth quitting their finance jobs to focus on the start-up full-time. Combining a demanding financial services job with a side-project just wasn’t feasible, they said.

“I started working four days a week, so I could focus on Mesh, but I couldn’t dedicate the necessary time,” says Rivier. “It made sense to take the risk, while I’m still 25.”

“I was in a job that required at least 12 hours’ work a day,” adds Olechowski. “To come home, switch off for a while and then try to start coding for your start-up idea is too much – at least if you want to sleep. You really need to focus full-time on your start-up idea.”

It’s not unusual for juniors to leave banking, but Rivier battled to a highly-sought after quant role in a hedge fund. Unusually, he doesn’t have a PhD and secured his first job through a chance encounter during a university networking event. So, why leave?

“It’s hard to get into a hedge fund, but a lot of algorithmic trading is basically data science,” he says. “What I’m doing now is not a huge step away from a quant role in a hedge fund. There’s a lot of statistical modelling and coding – the skills overlap. It means I could go back into finance if I decided to. Generally, there will be a lot more movement between finance roles and start-ups in the future.”

Rivier’s attitude is indicative of millennials who view no longer view their career as a linear path. But one of the reasons for Mesh is that a lot of jobs are under threat – either through the onslaught of technology, or simply because businesses are downsizing or offshoring – and people need to reinvent themselves. Other industries might be interested in your skills, but you just don’t know it.

“If you look at what’s happening on the trading floor, there are a lot of talented guys whose career options are less stable, and they’re sort of stuck because money is still good and they’ve never worked outside of finance,” says Olechowski. “But they have skills that might work elsewhere.”

Rivier says that “people need to start thinking about their lives like a start-up.”

“It’s unlikely you’ll be in the same industry for 30 years, or even the same job for more than five,” he says. “Skills are changing, industries are shifting and you need to connect with the right people to allow you to make the right move.”

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Donald Trump, the 45th president of the United States, will be great for banks. Won’t he? After all, there’s no shortage of former (Goldman Sachs) bankers on his team, and the volatility surrounding Trump’s election along with rate hikes and the expectation of a fiscal stimulus have been credited with delivering the best fixed income trading conditions for years.

While President Trump will almost certainly be good for the U.S. banking industry and might even offer some respite to the interminable cost and job cuts, Wall Street CEOs also sounded some notes of caution during the calls accompanying their fourth quarter results this week and last. To a degree, this was inevitable – it’s incumbent on CEOs to mention downside risks while extolling all the upsides, but it also illustrated why the Trump presidency might not necessarily be plain sailing.

M&A bankers could be busy, with nothing to show for it

M&A bankers are broadly expected to have a good 2017. Trump’s corporate tax cuts should encourage businesses flush with cash to start thinking about acquisitions. The danger, however, is that in a climate of uncertainty they’ll think about deals, but won’t execute them.

Goldman CFO Harvey Schwartz said as much during this week’s call. “Dialogue in boardrooms remains quite high for us,” said Schwartz, before cautioning that dialogue and deals are not the same thing. The arrival of a new administration with new policies can, “have an impact on timing of transactions,” he added. Reading between the lines, this means 2017 could be a year of talking rather than doing. “The environment is pretty robust in terms of dialog,” said Schwartz. It’s just a shame that dialogue doesn’t earn fees.

There’s a geopolitical event

The real risk from Trump is geopolitics. If not Russia, then Iran or China. Morgan Stanley CEO James Gorman elucidated this danger during Morgan Stanley’s call on Tuesday. The bear case for 2017 includes the risk of, “a geopolitical or political event which creates enough confusion in the minds of potential issuers that the underwriting calendar doesn’t come back,” said Gorman. Like Schwartz, he added that the failure of the M&A pipeline to “crystallize” because of political changes is also a risk.

Regulation won’t be lifted after all

Schwartz said that in light of the “body of work” created by regulators over the past eight years, it now makes sense to “step back” and evaluate it. Regulatory weakening could be a boon for U.S. banks – especially if European banks remain bound by tight constrictions, and the anticipation of looser constraints has contributed to the 25% and 28% respective increases in the share prices of Morgan Stanley and Goldman since Trump was elected.

There’s no guarantee that regulation will be weakened under Trump, however – or, at least, that it will be weakened in the way banks would like. During yesterday’s grilling by the Senate Finance Committee, Trump’s Treasury Secretary nominee Steve Mnuchin said he doesn’t plan to eliminate the Volcker Rule and allow banks to resume proprietary trading because, “the concept of proprietary trading does not belong” in banks guaranteed by the government. Instead, Mnuchin said the rule needs to be clarified so, “banks can understand what they can do and what they can’t do.”

Reputational damage

Lastly, and this wasn’t articulated by Schwartz (or indeed anyone at Goldman), but ‘the firm’ is also exposed to reputational damage under the Trump administration. Ex-Goldmanites are peppered throughout the Trump team and the bank is already attracting flack for its association with the new president. If Trump falters, or is perceived as damaging living standards for U.S. voters, Goldman stands to be implicated too. The firm’s share price may not stay this high forever.

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Everyone knows that banking jobs aren’t as special as they used to be. The pay is lower. The job security still isn’t the best. Banking simply isn’t the ‘sexy’ and prestigious career choice it was ten years ago. Even so, plenty of people still want to work in banking, and you’re going to have to fight hard to get anywhere near an analyst or associate job in a top tier investment bank.

A new study by Quinlan & Associates, a strategy consulting firm specializing in the finance industry, suggests that winning the battle for a banking position might be something of a pyrrhic victory. People who work in investment banks have plenty to gripe about.

Quinlan asked 1,200 bankers across the Americas, Europe, the Middle East and Africa (EMEA), and Asia Pacific (APAC) for their opinions about their careers. The respondents were disproportionately working in the front office, especially in markets, and were most at global banks, especially at Europeans. If you’re thinking of breaking into an investment bank, the results weren’t hugely edifying.

1. You’ll leave of your own accord

Firstly, just because you get into a bank, don’t assume you’ll stay there. Quinlan highlights a study which showed that in 2015, the analysts and associates who quit finance left after just 17 months; in 2005, they left after 30 months. As the chart below shows, the voluntary turnover rate at European investment banks has been creeping up. At Credit Suisse in 2015, around 10% of people left voluntarily.

quinlan leave banking

2. You’ll get a smaller share of the pie, unless you’re at Goldman Sachs or Deutsche Bank (until now)

You probably know this, but pay at investment banks is falling as a proportion of revenues. As the chart below shows, UBS and Morgan Stanley used to pay over 55% of their revenues in compensation. Not any more. The only banks which have resisted the pressure to cut the allocation to employees are Goldman Sachs – which was pretty low in the first place – and Deutsche Bank (which is about to embark upon an unprecedented bonus cut).

Why banking jobs aren't that great

3. You’ll get promoted faster at first, but then you’ll get stuck…

You’ll probably also know that banks these days are big on the idea of accelerated promotions. In an effort to keep juniors happy, they’re now promoting them anything from six months to a year sooner, as shown by the chart below.

That’s all very well, but as Quinlan points out, those expedited analysts and associates tend to face problems when they trying progressing beyond vice president to director and managing director. Quinlan cites the case of one bank’s regional equities business, which had around 200 managing directors but only promoted two to MD. As we noted last week, none of Morgan Stanley’s 156 new managing directors were from cash equities this year…

Banking jobs not so great

4. And because of this, you’re more likely to leave between three and seven years in

Once it becomes apparent that you’re stuck and get a promotion, you’ll start to get frustrated. As the chart below, showing front office turnover rates in an investment bank, demonstrates, turnover rates are highest for associates and vice presidents. Once you make executive director (ED) and managing director (MD), you’re far less likely to quit of your own accord. Unfortunately this contributes to the bottle neck at the top.

Quinlan turnover rates

5. You’re going to get less training than in the past

While you’re twiddling your thumbs, hoping to get promoted, you’ll also be trained less than your historical counterparts who were paid more and promoted more frequently. Bad luck.

Quinlan training

6. And you’re going to work with a lot of men – especially if you make it to the top

You’ll also find that you’re working with a lot of men. Maybe this isn’t an issue. Maybe you like a mostly male environment. It will help if you do, especially if you make it into senior management.

Banking jobs not so great

**7. Attempts to shorten juniors’ working hours haven’t really amounted to much**

If you’ve been reading-up on banks’ efforts to shorten working hours, you might also figure that you’ll get weekends off to lie in bed or take city breaks. Actually, no. As the chart below, showing banks’ ‘protected time’ initiatives, reflects, the protected weekends don’t amount to much. At Goldman, Citi and Credit Suisse you’ll get Friday nights and Saturdays off (with the Friday night watershed starting late). At J.P. Morgan and UBS you get one weekend off a month.

Quinlan protected time

8. And it will at least five years before you can get even a whiff of a longer break

After working all these weekends, you might fancy a longer break. Unfortunately, as the chart below shows, banks aren’t big on sabbaticals. Compared to professional services firms you’ll a) have to wait a lot longer before you’re eligible for one and b) find that your sabbatical lasts a lot less time.

Quinlan sabbatical

9. The only things you’ll really be super-satisfied with will be your pay and (surprisingly) you’re working hours

As the chart below shows, it’s the lack of promotions that most tends to irk people in banks nowadays. By comparison (and curiously), people are actually comparatively happy with their working hours.

The categories in the chart below are as follows: Compensation (CMP), allowances & benefits (BEN), promotions (PRM), training and education (T&E), mobility (MOB), elite programs (ELT), networking (NET), mentoring (MEN), team dynamics (TDY), firm communication (COM), diversity & inclusion (D&I), community engagement (CEG), overall working hours (HRS), protected time (PRO), flexible schedules (FLX), sabbaticals (SAB) and leave entitlements (LET).

Banking not so great

10. But your satisfaction with your working hours will decline if you actually make it to the top

Even so, your happiness with your work-life balance might deteriorate over time. Contrary to perception, being a senior banker might not be so good after all: Quinlan found that senior bankers are less satisfied with their overall working hours than juniors or mid-rankers.

Banking not so great

Follow @MadameButcher
Contact: sbutcher@efinancialcareers.com

Things used to be quite relaxed over at HSBC. The British bank had a reputation for offering jobs for life, with palatable working hours and jovial colleagues. Until a man schooled in the ways of Goldman Sachs came along and changed everything.

We’ve already written about the maelstrom that is Matthew Westerman, the former Goldman Sachs banker who took over as head of HSBC’s global banking division in May 2016. Back then it was because Westerman – who spent 15 and a half years at Goldman Sachs – was shaking things up at HSBC with a new system that tracked exactly how HSBC’s senior bankers used their time, including how many clients they visited and how many deals they brought in. Gone was the ‘HSBC way’ of trusting senior staff to do what’s right, irrespective of the consequences.

In fact, it seems that Westerman’s cultural revolution extends far beyond the mere monitoring of HSBC’s senior M&A staff. Reuters reports that HSBC is cutting around 100 senior investment banking staff (possibly as a result of those monitoring efforts), while Bloomberg says HSBC has implemented a “much harsher” year end review procedure and will henceforth be employing a far more differentiated distribution of its bonus pool. The pay change is designed to make HSBC’s investment bank more competitive, says Bloomberg: in the past it was “more egalitarian” than its peers.

The job cuts, the harsh reviews, and the inegalitarian distribution of bonuses are reportedly all Westerman’s doing. If HSBC bankers don’t like it, they’ll have to find new jobs elsewhere (like Canaccord Genuity, maybe). Westerman is there to say: Reuters says he’s tipped by insiders to become HSBC’s new CEO.

Separately, what if Brexit isn’t an unmitigated disaster for London banking jobs? What if it’s just a bureaucratic exercise which is easily containable with a bit of damage limitation? This seems to be the opinion of Jes Staley, CEO of Barclays. The Financial Times points out that Staley has been suggesting that Brexit is really a question of administration: “Same people, same traders, you have to book a trade in Ireland as opposed to London, but that’s not a wholesale move of our capability from London to Ireland,” he said last week.

Meanwhile:

“You need to have a broker and a bank in the UK, and a broker and a bank inside the EU. We have that already. There will be other small adjustments, but it is as simple as that.” (Financial Times)

Representatives of Goldman Sachs, J.P. Morgan, Bank of America and UBS met the French finance minister and were a bit disappointed when he didn’t speak fluent English. (Financial Times)

In summer 2017, UBS might decide to move its London M&A bankers to Madrid. (Bloomberg)

Morgan Stanley will move 1,000 jobs in sales and trading, risk management, legal and compliance out of London. Citi will shift 100 sales and trading jobs to Dublin. (Reuters)

HSBC may send 1,000 workers to Paris but there will still be 44,000 left. (The Times)

Why it’s a bad idea to work for an M&A boutique as a junior when the work dries up: “We still had 15 people who needed to be paid . . . who didn’t want to come to work and do nothing — they wanted to come to work to learn and do deals,” (Financial Times)

Jamie Dimon got a $1m pay rise. (Independent)

James Gorman got a $1.5m pay rise. (Reuters)

Reasons to work in the rates business. (Business Insider)

“If I weren’t a fund manager, I’d be an economics and history teacher.” (Telegraph)

A model to calculate your chances of getting a job in an investment bank. (Google Drive)

Follow @MadameButcher
Contact: sbutcher@efinancialcareers.com

Photo credit: HSBC London by Håkan Dahlström is licensed under CC BY 2.0.

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1. Banks have become a lot more cautious about adding headcount

2. Juniorization hasn’t gone away

3. It’s about replacement rather than growth

4. Don’t expect Brexit fireworks – this is a slow burn

5. Wait until 2018

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1. You’ll leave of your own accord

2. You’ll get a smaller share of the pie, unless you’re at Goldman Sachs or Deutsche Bank (until now)

3. You’ll get promoted faster at first, but then you’ll get stuck…

4. And because of this, you’re more likely to leave between three and seven years in

5. You’re going to get less training than in the past

6. And you’re going to work with a lot of men – especially if you make it to the top

7. Attempts to shorten juniors’ working hours haven’t really amounted to much

8. And it will at least five years before you can get even a whiff of a longer break

9. The only things you’ll really be super-satisfied with will be your pay and (surprisingly) you’re working hours

10. But your satisfaction with your working hours will decline if you actually make it to the top

Related articles:

Meanwhile:

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**3. Banks will set up new EU hubs. And the Brexit agreeement – determined by particularly the EU – will depend upon how well populated those hubs are**

**7. Attempts to shorten juniors’ working hours haven’t really amounted to much**