After a year in which banks cut headcount by tens of thousands in some situations, Wall Street has found more balance in 2014. Banks have continued to cut in areas like fixed income and equities trading, but have selectively added in M&A and in the back office. They’ve also had to backfill more positions as a growing number of people are leaving the industry, recruiters tell us.
It pays to be young
Looking forward to 2015, banks will continue to hire up on middle and back office staffers while filling most front office roles with younger, cheaper talent.
Banks like Goldman Sachs, J.P. Morgan and Bank of America have all announced plans to increase the size of analyst classes along with base pay as recruiting has become more of a challenge. But perhaps the best place to be if you are a banker isn’t necessarily a business unit. It’s a level of experience.
“There’s a real dearth of talent at the associate level,” said Ross Batlic, managing director of Wall Street search firm Mercury Partners. This is a particular problem on the sell-side, as buy-side firms have been picking off investment bankers with two to four years of experience, he said.
“That analytical modeling and fundamental knowledge is hard to teach,” he said. “Top-tier mid-level bankers are seeing a plethora of opportunities,” both on the buy-side and from sell-side firms that need to re-fill seats.
M&A heating up
Advisory may be the hottest area on the sell-side, Baltic said. After a blistering first half, activity slowed during the third quarter but has since picked back up. There were 98 M&A deals announced on Monday, including two that accounted for $100 billion and $316 million in fees. TMT (technology, media and telecommunications) is said to be a particularly hot area within M&A.
Big banks are hiring, but so are boutiques like Moelis, Greenhill and Paul Taubman’s new firm that he is merging with Blackstone’s M&A unit. Six boutique advisory firms climbed into the top 20 of M&A league tables through the first three quarters. Four of them – Centerview Partners, PJT Capital, Evercore Partners and Perella Weinberg – own greater market share than UBS.
The rest of front office hiring on the senior level in the US will be through a piecemeal approach with more backfills than newly created positions. With new regulations still pouring in, banks are remaining careful about expenses.
“My investment banking clients are being very cautious about 2015 and several critical ongoing projects do not have funding past January 1,” said Peter Laughter, CEO of Wall Street Services. “I suspect that that trepidation is a sign of anxiety for next year and I expect a significant amount of volatility with lots of fits and starts in the hiring arena.”
Middle office the true growth area
With new regulations and fresh scandals abound, the middle and back office will see much more hiring than revenue generating units.
Risk management, audit and compliance were hot in 2014 and will continue to be in the coming year, said Anne Crowley, managing director at Jay Gaines and Company. However, Laughter thinks the compliance hiring binge will “level off” in 2015. “The manic pace of corrective hiring to cover for gaping holes in process is just not sustainable.”
Indeed, HSBC, J.P. Morgan, Citi and BNP have all announced major compliance hiring plans for the US and abroad, but the hiring mania may slow a bit in 2015. "Banks are figuring out how to plug the holes with better processes and outsourcing," Laughter said.
Other key areas for hiring include liquidity risk management, including funding and interest rate risk management, Crowley said.
Highlighted by this summer’s J.P. Morgan breach, cybersecurity has become a huge priority – the new compliance if you will. Banks are desperate for information security specialists, especially at the senior level.
A recent report found that banks will spend roughly $2 billion on information security over the next two years alone. Some of that will be with consulting firms, but the efforts will include in-house hiring as well.