Banks are falling over themselves to protect their junior staff from long working hours. Goldman Sachs, JPMorgan, Bank of America and Credit Suisse have all introduced restrictions on weekend working. Other banks are expected to follow. Many are said to be hiring extra graduates in 2014 - particularly for areas like M&A, where life is particularly harsh.
And yet, if being a junior in an investment bank were as excruciating as claimed, then surely junior investment bankers would do what's within the power of any unconstrained young adult: quit. Anecdotally, this is happening. Less anecdotally, our research suggests a very high percentage of young people hired into investment banks stay where they are for 16 months, at least.
In September 2012, we took snapshots of the incoming analyst classes at JPMorgan and Bank of America Merrill Lynch, scrutinizing 23 people in total. 16 months later, all but 21 of them are still doing the same jobs at the same banks. Every single JPM analyst we mentioned in 2012 is still employed at the bank today. Two 2012 graduate hires from our sample have left BAML, one for the finance department of Microsoft, the other for a finance masters at the London School of Economics.
An aggregate turnover rate of 10% looks impressive - suggesting banks must have been doing something right. At most banks, the weekend working rules have yet to come into effect.
The reality is that most banks only hire gladiatorial high achievers who are prepared to work hard. This is why they screen so heavily. At Bank of America Merrill Lynch there are allegedly 750 applications for every internship position in the investment banking division. The trick has been to isolate the intelligent individuals with an appetite for overwork.
Nonetheless, ex-analysts say the fallout from the industry is more obvious by year three. One, who stayed at a U.S.-based M&A boutique for five years said only two people in his original class of 16 were in place at the end of the analyst programme. "It was crazy," he said, "You'd be doing all-nighters, coming home, taking a shower, going back to work and drinking 15 red Bulls. After a while, you realize you're not going to get rich and give up."
Logan Naidu, a former corporate finance analyst who worked for JPMorgan and is now chief executive of recruitment firm Dartmouth Partners, said that by the third year it's standard for 30% of an analyst class to have left: "It's a hard job - there are long hours and high pressure, and there are good exit opportunities. If you're good, you can often leave for a hedge fund or private equity."
With M&A expected to be resurgent in 2014, Naidu says banks are already understaffed and already trying to hire experienced second and third year analysts into their M&A teams. Staff shortages are only likely to worsen as M&A picks up and as weekend working restrictions take effect.
It will be 2015 before this year's expanded graduate classes are fully-functioning employees. Until then, banks will have to make do with poaching analysts from one another to plug their gaps. This can only have one outcome: pay increases.
"This year, M&A analysts will be paid more and the glamour of the job will come start to come back," predicts Naidu. That's a good thing, but based upon turnover at Bank of America and JPMorgan, analysts have been quite happy with their lots anyway.