There was a time when it was possible to ‘retire’ from investment banking in your 30s. That time has passed. As the the trajectory of banking careers changes, 30 has instead become the age at which you must be positioned at a firm that will see you through to your 40s and beyond. Swapping banks when you’re aged 30+ is increasingly challenging.
Headhunters working across business areas bemoan the lack of recruitment beyond vice president (VP) level. “Banks have become incredibly cost-conscious,” says a partner at an M&A search boutique. “They’re not making a 25% return on equity any more – they’re making a 5% return on equity. At that level, they can’t afford to buy out the bonuses of senior staff.”
With banks like UBS and Deutsche deferring some bonuses for up to five years and Credit Suisse paying a proportion of its bonuses in contingent capital which only becomes available after three years, senior bankers now accumulate large quantities of deferred pay, for which they need to be compensated when they move to a new firm. “You’re getting people at senior VP level who have deferrals worth £350k,” says the M&A headhunter. “When you add in their salary, they cost £550k. Banks can’t afford to pay that any more.”
30-something bankers are increasingly stuck working for one firm. “There’s no demand for senior people,” says a veteran debt capital markets headhunter in London. “Getting their buyouts signed off is difficult. Banks won’t swallow the pill.” Another veteran headhunter, who runs a fixed income search boutique, says all hiring now is taking place at junior levels and that senior staff are frustrated as a result: “They don’t have any options. They can’t move – they just have to make the most of life where they are.”
What about the senior people hired by Goldman, BAML and Morgan Stanley in March? Recruiters say senior bankers who change jobs now have usually already negotiated ‘escape packages’ which allow them to leave with their deferred bonuses intact. You can still find a new senior job when you’re out of work – or about to be. The 140+ RBS bankers who are moving to Mizuho are a case in point.
The upshot is that it’s become imperative for juniors to move before they become un-hireable. Instead of spending your 20s leaping from one job to the next in return for short-term pay increases, the new banking career strategy is all about ending your 20s working for a firm that will keep you in employment for the next two decades. With most banks now running ‘internal mobility programs’ (Credit Suisse even has internal headhunters), moving to the right firm has arguably become even more important than moving to the right job – once you’re in the door, you can always move into a different role within that bank. But once you’ve amassed deferred stock bonuses at a bank without a long term strategy, you’ll find it hard to move to a better firm later.
And when you’re aged 32 and in your good role with your good firm? Expect to continue working hard. Expect too to compete heavily with your internal peers to progress and stay employed.
Mark Hatz, a former Goldman Sachs and Perella Weinberg banker who now helps students prepare for banking interviews, says he saw MDs in IBD working until 10pm at night, every night. An ex- head of desk at Goldman Sachs says most banks came out of the financial crisis with a lot of senior staff: “It was a question of retaining the optionality that comes with senior expertise.” As a legacy of this, he points out what everyone knows already – banks are still very top-heavy seven years later and can’t afford to promote people. 30-something bankers today need to find their niche and then bide their time. Banking has become a career for the very patient. How things have changed.