I don’t think it would surprise anyone who has worked in a client-facing area of financial services to discover that big financial services firms view some clients as “2nd rate”.
The Harvard Business Review ran a piece a year ago about this phenomenon last year. Therein, it cited several McKinsey employees whose treatment of clients had been less than desirable. These McKinsey employees had compromised other of the firm’s clients in order to benefit benefit Raj Rajaratnam and his colleagues at hedge fund Galleon. Their motivation was simple; Galleon paid more in fees than the rest of their clients, and allowed them, as individuals, exclusive investment opportunities in his successful funds. One of these individuals went on to serve on Goldman Sachs’ board.
The reality is that clients are often viewed as either stupid or low-margin - and therefore ‘not deserving’ of high quality work. In my time in banking I saw work done for one client fed to another totally different one. “Just make sure to change the client logo at the top of each page. They won’t know any better,” I was routinely told. It goes without saying that the work was often presented as new and totally bespoke to the company in question: analysis ‘slaved over for weeks on end just for that particular customer of the bank.’
From management consulting to corporate finance, asset management and accounting, the views secretly held about clients by those providing premium services to them are equally scornful. Regardless of whether the clients are investors waiting to have their ‘eyeballs ripped out,’ or captains of industry paying huge fees for financial and strategic advice. It’s all the same. Those supposed to be cherishing and holding in high regard the fee-payers actually pour scorn on them from behind closed doors. ‘Muppets’ would be an understatement.
Maybe it’s because the bakers and consultants are often paid much more than their clients. In a world where money rules, it’s hard to look up to someone driving a Ford Mondeo when you roll up to the meeting in a Maserati.
As a graduate in a large US bank’sLondonM&A group, I was staffed on a transaction with an up-and-coming senior banker, Doug. He had survived mergers, layoff rounds, scandals and internal politics. He knew where a lot of bodies were buried, but he was also very smart and clients loved him.
One particularly profitable client was tipped as being a cash cow for the bank. As soon as they finished their internal restructuring, they would start deploying a massive cash pile. Underwriting fees, M&A work, bond issues, it was all heavily anticipated. Many other Managing Directors smelt blood and were envious of Doug’s trusted position as advisor to the recently appointed new CEO.
For the time being however, they paid the bank a retainer for outsourcing their restructuring work to our team. The fee was substantial in the real world, but paltry in the eyes of us bankers who were used to million-dollar credit-boom era fees.
Doug, although charming, was not a patient man. The CEO had scheduled a daily 9am strategy call which we all had to join, as part of the client’s inner circle.
After a particularly heavy Tuesday night, Doug wandered into his office to find us all there already, waiting for him to call the client team to review work streams, and, much more importantly in his view, to exchange bon mots and subtly condescending small talk with the CEO and CFO.
He listened to the CEO, a former manager at Bain, drone on and on from the conference phone in the middle of the desk. Carefully muting the unit, he purred to us: “this is what happens when you put a management consultant in charge of a real business.”
In the final analysis I blame the clients themselves for this attitude. Time and time again in my years in the City I saw clients who would rather be second tier customers of Goldman and the other “too big to fail” firms than prized and cherished high priority clients of smaller, newer entrants into banking. Until the people who ultimately pay the fees decide to change their attitudes, they will, like scared partners too scared to leave their abusive spouses, stay stuck in this same bad place.
The author has worked in several roles across front office banking.