Now is not the time to be working as a flow fixed income trader. However, now – as we noted last week – is the time to be working in a fixed income technology role.
Equally, with equities revenues stagnating, now is probably not the time to work as an equities sales trader, or equity researcher (UBS made 15 of its equity researchers redundant last week), but now may well be the time to specializing in selling banks’ electronic trading capabilities.
Financial News points out today that banks are spending big on IT, even as they’re cutting back elsewhere. A director running a global IT team of between 80 and 100 can now earn £250k-300k a year, it claims. Demand for IT contractors has allegedly doubled, with some people earning £1.2k a day, even though banks went to considerable efforts to oblige contractors to accept rate cuts last year.
Even if the contractor pay rumours turn out to be false, there are distinct signs that increased technology spending is becoming mandatory.
Technology spend is rising, compensation spend unfortunately isn’t
Our own research shows that last year, Goldman increased its spending on IT and technology by 9% while reducing compensation spending by 20%. Morgan Stanley increased its overall spending on technology by 10.1%, while increasing compensation spending in its investment bank by 3%. JPMorgan increased overall technology spend by 6.5%, and cut its investment banking compensation spend by 9%.
European banks don’t break out technology spending and US banks’ figures only include their spending on IT infrastructure and hardware – not on technology staff, who are counted along with mere bankers. However, technologists appear becoming more important in staff terms too: in 2010 Lloyd Blankfein said 25% of Goldman’s workforce, or 8,000 people – at that time – were working in technology jobs.
Needless to say, it’s not sufficient for your future survival to work in any old technology or technology-related role. As we noted last month, banks are doing their best to de-duplicate technology talent, so you need to make sure you’re in a business specific role that can’t be absorbed into a central service offering. You also need to ensure you’re in a business critical position that can’t be outsourced.
Business analysis related to OTC clearing and settlements, or client-facing positions related to the sale of electronic trading capabilities both look like good bets. As Morgan Stanley and Oliver Wyman suggested last week, unsexy things like data provision and new OTC derivatives execution venues, are going to be hot soon.
Our (slightly sketchy) graph (produced with a defunct version of Excel) illustrates the reality. Banks’ IT infrastructure spending is generally on a slow, upwards trajectory. Compensation spending really isn’t.