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GUEST COMMENT: Be aware that networking in financial services can simply lead to being stabbed horribly in the back

Death in the FX market

Death in the FX market

I’ve been done over twice by networking contacts in the past twelve months, and I’m angry.

Conventional wisdom holds that networking is never a bad thing. It allows you to find out new (and sometimes inside) information that you can use to your advantage, to expand your career opportunities and to get valuable advice from people with more or different experience.

Based on painful experience, I would have to disagree with this.

Often, networking comes with very onerous strings attached. Sometimes, advice given is more suited to the goals and best interests of the ones giving it than the person on the receiving end.

In real life, as in markets, intervention in a complex system tends to create unanticipated and often undesirable outcomes. A couple of parables from my own career illustrate this Law of Unintended Consequences.

1. In which I get screwed over by a former senior colleague of mine:

Tim was a very bright MD. I used to work for Tim when I worked in M&A. He was tough, very successful and had slithered his way through several fast-track promotions using a combination of Machiavellian power-broking skills and by masterminding of a number of league table-busting deals.

For some reason, Tim never moved into private equity. Perhaps he just missed the window and left it too late. In any case, Tim left the large bank we had both worked for and he set about setting up his own boutique.

Ostensibly, I did better than Tim. I did move into PE. Unfortunately, the shop I joined wasn’t the best.  There was a power struggle happening at the top, and it made life less than fun for associates like myself.

Either way, I caught up with Tim for a bit of networking a year ago. I wanted his opinion: should I move back into banking, or should I stick it out on the buyside? At that stage, I had several offers from tier 2/3 type firms. Choices were open to me.

Tim thought about it deeply (a little too deeply to be credible, on reflection) and finally counselled me to stay put. I thanked him for his advice and we parted ways.

This was not the end to it. Several weeks ago, I started getting calls from Tim. Could we, he asked, as a quid pro quo for his previous advice, ask me to set up a few meetings with my boss to discuss some deals his firm was mandated on?

No.

By telling me not to go back to banking, Tim had clearly hoped to ensure that he had a contact on the inside of a decent-sized PE fund. In theory, I would also now be grateful enough to help him set up a relationship with the top guys at my firm. Win-win, for Tim.

Or not.

2. In which a so-called friend leap-frogs me and takes the job I’d have been perfect for

Stuart was a very good management consultant. He was the guy that other consultants would have praised as “process-driven” and “detail-oriented”. He also, unfortunately, lacked anything vaguely resembling a personality.

Despite being such a great consultant, Stuart hated consulting with a passion. When we spoke, I did not know this. Nor did I know that Stuart was desperate to jump ship to a mid-market private equity fund – like the one I work for, in fact.

Sadly for Stuart, he lacked real investment experience – being an advisor is no substitute for actually doing a deal.

Anyway, I met up with Stuart recently to ask if a fund I knew that he had done several large projects for was hiring.

“Sorry mate, I really don’t think so. From the way they were sending us work last month, I’m pretty sure they’re firing people and outsourcing work to us instead”.

I had the perfect buyside background for the fund in question, but I trusted Stuart, I took his word for it, and I moved on.

The next thing I knew, Stuart had got a job at that very same fund, as an associate. This was the job that I knew I was perfect for. By putting me off the scent (and who knows whom else with better experience than him) he had somehow managed to slide into a role at the firm.

I am simply saying that conflicts of interest are inherent whenever you ask for networking help. Be warned.

The author has worked in both investment banking and Private Equity.

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