EDITOR'S TAKE: Beware the juniors prepared to work for zip

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Earlier this year, we ran a survey on our Student Centre asking what students would be willing to compromise on to get a first banking job. 460 people responded; 33% of them said they'd be willing to work for nothing.

Given first year analysts (at top firms) were earning six figures not too long ago, that's a big step down. It's also an interesting indication of where pay for mid-ranking and junior bankers is heading.

Investment banking careers have always had a whiff of Ponzi about them. MBAs and graduates squeeze in at the bottom, work relentlessly, and hopefully emerge midway up the pyramid to retire early without joining the civil service. For the past few years, the pong of Ponzi has obscured by the immediacy of big rewards. It's likely to be less nuanced in future.

All the indications are that low level banking pay is set to plummet. Associates and analyst hired over the past two to three years are now out of the market and desperate to get back in, whatever the price. A senior recruiter at one bank says he now has an "inbox full of people willing to work for free."

At the same time, the supply of entry level bankers is building up behind a wall of MSc in finance courses which will begin crumbling at the end of this year. Having spent 20k+ to study these courses, who's to say graduates won't even be willing to pay banks for the privilege of getting some valuable experience. A whole new business model could be born.

Meanwhile, the top of the market looks relatively robust. Rainmakers bring revenue streams. Deutsche has poached a large proportion of Merrill's US FIG team and boutiques like Moelis, Quattro and Evercore are picking up senior staff with the right high level connections.

The outcome looks will be an industry in which senior staff collect big payouts and junior and mid-ranking staff work unfeasibly hard for peanuts in the hope of becoming senior too. It may whiff of a Ponzi scheme, but in reality it's more like a partnership structure. Investment banking is going back to its roots.

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