Banking isn’t sexy any more. It’s a cliché, but as with all clichés it’s absolutely true. I’ve spent 14 years working in finance in NYC, latterly as a managing director. I’ve experienced the growing lack of sexiness first hand.
Ten years ago, when I went out on campus, students would flock to me. This was before the financial crisis. It was when banks still paid big money, and when up-and-coming 26-year-old associates like me were doing everyone’s fantasy job. The last time I went on campus – in fall 2016, I was ignored. People still came to our table at the careers fairs, but in much smaller numbers. For the first time, I had to go out there and search for students who might want to work for us – students who were congregating at tech firms and other industries. That’s a bad sign: these people are the lifeblood of banking’s future.
There’s a reason it’s got like this, and it’s not going to go away. Banks are trapped by their need to increase their return on equity. Most banks still aren’t covering their cost of equity and until they do, they can’t be real meritocracies in the style of Facebook or the buy-side. Their big priority is cutting costs.
This isn’t how it was in the old days. It used to be that you came into banking because you made $85k a year as an analyst and you tripled your compensation in the first three years. Nowadays, banks are simply giving their stars a 10% to 15% pay rise annually. The really high performing Millennials don’t want that – if they’re putting in the hours and the effort, they expect to get paid.
Nor does it help that today’s junior bankers look up and see a whole generation of older bankers who are kind of deflated. People like me are hanging on because we’ve got five years’ of deferred compensation and can’t see what else to do. Our pay falls every year: the guys who were on $3m are now on $1m and the link to performance has been eroded. There’s no incentive to go out and kill it now. There’s no swagger. We’re going through the motions. We should quit, but we don’t know what else to do.
This is why, when we do persuade the 21-year-olds over to our table at careers fairs and we get them through our door, they often don’t stay. Banks like mine have a huge problem keeping hold of second year analysts. These are the juniors doing the grunt work. There are fewer of them and they have to work harder than their predecessors. They look up and they see the guys like me blocking their progress. They see that they’re only going to get pay rises of 15% a year. There’s no upside in it any more. And so they go off and do something else instead. Something sexy, which banking isn’t. And that’s a shame.
Marty Smith is the pseudonym of an MD in the markets business of an international bank on Wall Street