The financial industry mirrors its markets: choppy, turbulent and difficult to navigate. As the economy dips and bobs, jobs in finance look likely to come and go with all the permanence of quarterly reports. In conditions like these, people planning careers in the business would be wise to gaze on the horizon, where aspects of the future first appear.
1. Like steamboats that epitomized an earlier gilded era, the model of integrated investment banks will soon be mothballed, consigned to history by a perfect storm that exposed its many flaws. Witnessing the windfalls to be reaped, everyone jumped on who could, only for the industry to founder under its own cargo. With overcapacity came competitive pressures to exploit the model’s inherent conflicts and to rush headlong into risks that went horribly wrong. Sounding the final call to port will be terrified investors and untrusting customers, all anxious to disembark, and regulators wary of any vessel too big to sail.
2. Politicians and the governments they run have hung the blame for economic woes like an albatross on banks and bankers. Knowing responsibility is also their own, don’t expect elected leaders to cede hard-won advantage: instead they will respond to popular opprobrium by beefing up financial regulation, financial oversight and financial enforcement. In spite of tight budgets and possible ramifications for competitiveness, look for regulation (and compliance functions) to defy gloom and indeed to burgeon. In short: there is going to be money to be made from being at the regulatory edge.
3. “Markets abhor a vacuum.” goes the saying, so look for the disappearing banks to be readily replaced by capital markets boutiques. Specialized, focused and conflict-free, dedicated advisory firms and execution-only outfits will flourish in the years ahead with models attuned more to client service than to self-enrichment. Technology has lowered barriers to entry and made it easier for customers to aggregate fragmented suppliers. Differentiation and real expertise will be key to success, for firms and the individuals in their employ. Don’t restrict your aspirations to the big names; look further afield: get creative in terms of whom you’re applying to.
The pendulum of consolidation swings with vengeance - a boon to courageous entrepreneurs, nimbler businesses adept at converting rules into commerce and standards into scale, and bankers willing to develop their careers at the new frontiers rather than in the firms of yesterday.
Eli Lederman is the former CEO of Turquoise, the pan-European stock market. Prior to that he was a managing director at Morgan Stanley where he had a 14 year career. He is the author of “HIGH FINANCE – a Wall Street novel” which is available now worldwide.