Investment banks’ support functions are under pressure – as cost-cutting initiatives clash with swelling compliance expenditure and a need to pay bigger bonuses to top performers in the front office, it’s those in operational functions who are feeling the sharp end. Bonuses are shrinking, redundancies are being rolled out and the looming spectre of outsourcing means that alternative career options are harder to come by.
Banks are funnelling bonus allocations to revenue generators and, as they struggling to contain compliance and technology costs, are cutting in the back office. This means that bonuses are likely to be dreadful this year for back office staff, but this is the least of their worries – some firms have been cutting jobs and more redundancies are expected, while the prospect of outsourcing support functions to third-party providers is something that more banks are exploring.
“You’re unlikely to get any sort of bonus this year unless you’re in the top 10% of performers – even in the back office, banks want to keep their best people happy,” says one senior operations professional in Glasgow, who declined to be named. “Costs are being curtailed all over the place – no taking people out for lunch, a minimal Christmas party.”
Most nearshore operations functions in the UK and US are relatively mature now, with large firms employing thousands in locations as diverse as Glasgow, Manchester and Salt Lake City. This cuts salary and infrastructure costs dramatically, but also results in a shift in culture, says Mike Hartwell, managing director at back office recruiters Hartwell Buck.
“There’s not the old City culture in these places where a bonus is expected,” he says. “The only way people get significant pay rises is if they’re a flight risk and the company wants to keep them or if they’re below market rate. The broad brush approach to pay rises just doesn’t happen any more.”
In London, starting salaries for operations professionals are £35-40k, according to figures from recruiters Robert Walters. Meanwhile, similar jobs in nearshore locations like Manchester or Glasgow offer just £17k to juniors. Salt Lake City operations jobs pay 30% less than those in New York. This in itself can cause a problem for the banks who are struggling to fill the open roles they have in these locations.
Existing back office workers are not really in a position to walk if they’re not happy with their lot. For a start, recruiters suggest that large investment banks are trimming their operations headcount. The numbers are not huge – 150 people globally – but enough to keep everyone acutely aware that cost-cutting is on the agenda.
Then there’s the growing expectation that investment banks could start pooling back office functions to save costs, or outsource them to providers like Markit, Accenture or the Clearing Corporation – a route SocGen has already taken – as a further reminder that support functions are not central to banks’ business models.
“It sounds bleak, but people are just keeping their heads down and trying to keep their jobs currently. Banks have the upper hand and they know it. Morale is low,” says the senior operations professional in Glasgow.
How to keep your job as investment banking operations professional
If you want to ensure that you remain employment in the near term, both Buck and the director in Glasgow have one key piece of advice – get close to regulatory projects. If general support functions are rapidly cooling, anything to do with risk management and compliance processes is red hot.
“Banks are still willing to move people internally to regulatory projects, but it does involve managing your internal network well and being seen as someone who can adapt and get things done,” says Hartwell. “They’re struggling to fill these roles.”
“It’s a contrasting scenario – our ops guys are struggling to hold on to their jobs, but those with risk and compliance experience are switching employers for more money only too frequently,” says the senior ops banker. “Banks have no real alternative but to pay more for their skills.”