If you work in trading now, you should be concerned. First came the algorithms wiping out thousands of jobs, and now large investment banks are unveiling programmes to rapidly downsize their fixed income, currencies and commodities trading businesses.
This isn’t exactly a great advert for fresh graduates looking for their first job on Wall Street, and many of the best and brightest are now seeking jobs in the tech sector.
“There has been a drain of talent into high tech where the rewards can be great if you own the IP,” says Owen Jelf, managing director for Accenture's global capital markets.
But any suggestion that an appetite to work in tech means Wall Street’s in trouble when it comes to attracting talent is over-stating it. Rather, you need to be more selective when it comes to which roles you go for.
“You can still make a reasonable amount of money in investment banking if you are at the top,” says Jelf. “The smart money for a career focus is in development of algorithms or a focus on complex structured work.”
While trading in standard products is becoming automated, complex products and cross asset trading still require people, he said.
“Traders are increasingly being replaced by machines,” says Richard Lipstein, a New York recruiter. Trading volumes are going down and with them commissions. Fixed income is already following the automation path set by equities, he added.
“The most dangerous place to be a trader these days is in fixed income. If you have survived this long in equities, you will probably continue to survive,” he says.
It’s no secret that any trader worth their salt these days needs to learn how to code, but there are bigger opportunities outside of the trading floor. Lipstein says that Big Data analytics is the new big thing as investment banks begin to hire in talent in this area.
But if you want to make yourself indispensible in banking in five years’ time, you need to cultivate relationships. Credit Suisse’s renewed focus on wealth management and investment banking advisory work linked to that shows that it’s still people power that matters in finance.
Robin Judson, manager partner at Robin Judson Partners, agrees.
Meanwhile any trading roles remain over-subscribed. When she places an ad for traders, she is swamped with resumes from laid off sell-side traders. She places occasional buy-side positions, but funds don’t want to hire sell-side traders.
Many have lost their jobs and have a hard time finding other work because trading is not a readily transferrable skill.
“If they were lucky and smart and saved money, sell-side traders can go and buy a business and do something completely different.”
If you’re going to stick with trading, however, make sure you’re developing transferrable skills. “Make sure you get really strong grounding in fundamental analytics on equity or credit side or in investment banking,” says Judson. “Those skills are transferable outside of Wall Street.”
Lipstein says most bankers who find themselves locked out of the market are still reluctant to make the leap to something new. He tried recruiting a very successful investment banker who had left the business to take a share in his family’s bar.
“I had a job for him, but he wasn’t interested,” he says.
The challenge for banks is attracting and retaining younger talent. One recruiter told us that a young analyst who started at one of New York’s boutique investment banks left after a year and got a job at Google. “It wasn’t long after I started working full-time that I realized I wasn’t interested in doing finance for the rest of my life,” says Steve Wu, who left Moelis & Co after a year to head to Silicon Valley. “It was ultimately a decision based on my interests and passions, and investment banking helped me discover that finance was not one of them.”