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GUEST COMMENT: Financial services careers are nothing but a ponzi scheme

The headlines are deafening – Goldman Sachs has committed massive fraud, Jamie Dimon’s JPMorgan bought Washington Mutual on the cheap because he belongs to a secret cabal of politicians and Wall St bankers, and Stanford and Madoff stole money from old ladies under the regulators’ noses. And yet, every day, juniors at investment banks participate in a huge Ponzi scheme -the analyst and associate programmes.

Wrap a cold towel around your head and think about this for a second. A deliberate confidence trick whereby a few people at the top make out like bandits and the rest receive relatively little or no returns. Sound familiar?

The compensation pyramid is why a lot of graduates go into banking in the first place. Sure, they tell themselves, the people at the top are paid millions. And if I work hard, I could achieve their success (and rewards) too.

So you slog it out at a top school, sweat over your online applications, work the rooms at campus employment presentations. In much the same way as Bernie and Allen could pick and choose their investors, the banks pick and choose their talent.

The smarter ones might have an inkling that the fees and commissions charged by the banks are way out of proportion to the services provided.

They might even suspect that the clients will one day make a fuss, and that these fees may come under pressure as a result. One would hope that most of them realise that their contribution as juniors will be relatively minor. There’s a lot of grunt work to be done.

Worst of all, we juniors are complicit in the Ponzi scheme. When bonus season rolls around, we each go into the corner offices for the ten minute chat we’ve been waiting all year for. It’s probably the only time in the whole year that face-time matters to your boss. He’ll spend ten minutes that he could be spending jaw-boning with clients or in the gym, telling you that you made a solid contribution, but that these are a few development points picked out by the VP’s you worked with as part of their 360 degree cross-evaluation.

In truth it’s pretty 180 degree. I doubt you’ll have the stones (or idiocy) to elaborate in writing how inefficient and sociopathic your seniors are, especially when those same seniors will be deciding your bonuses.

And when you’re given your number for the year and it isn’t what you were expecting (it’s never, ever enough), I’ll bet the comp of a top trader at GS that the first thing you’ll do is to go outside and tell your peers you were paid a multiple of your actual number. Why wouldn’t you – braggadocio comes easily to our personality types, we want our colleagues to think we’re the best.

In doing so, you’ll be reinforcing the universal suspicion in finance that everyone else is somehow doing much better than you are; that your performance is somehow lacking.

For many, this simply reinforces the urge to do better in the next bonus round. Never underestimate the capability of young, arrogant and ambitious bankers to note a statistic and then quietly dismiss it. Sure, it’s a numbers game, and it’s a slippery slope to the top. But I will be in the minority of people who make it.

You go tiger.

The author is a former junior investment banking, now on his way to riches on the buyside.

Comments (14)

  1. Not everyone on the buy side is of your mindset. To me, the bonus is exactly that a bonus. I don’t have any deluded expectations of what I’ll receive each year so I am never disappointed.

    Being a 40-something man earning a modest package, by industry standards, I fully accept I am probably seen as a loser by you young bucks. I live in an unfashionable provincial town, buy my clothes from Primark, have not bought lunch for 3 years, yet I am very satisfied with my lot.

  2. Give it a rest Jol.

    Jol The Martyr Reply
  3. Jol – you seem to proffer a remarkably similar response to every piece of commentary on this site. And can’t we please have some decent guest comments on here – every one of them runs down the tired ‘cityboyesque’ route – bankers as ambitious young sleazeballs. Am off to Primark now to eat my packed-lunch……

  4. Give what a rest? Not everyone in the industry is your stereotypical alpha male.

  5. Most of your arguments can be said about every industry – not just financial. Upper management is paid a lot, and junior level employees work to make it to upper level someday.

    I think you need to check out the Communist Party USA (www.cpusa.com). The motto is “a world where people come before profits. That’s socialism. That’s our vision. We are the Communist Party USA”

  6. Jol you’re right about that but you really do tell your story about your extremely modest life very often. Don’t get me wrong, it’s great that you’re not a superficial egomaniac but I think you have established that on multiple occassions now and maybe you indeed should give it a rest. Anyhow I’m glad that you’re happy with your lot and wish you all the best mate.

  7. At least ANALysts and ASSociates get paid fairly well in IB. I feel sorry for the poor suckers at the Big 4 accountancy firms where 1) Base salary sucks big time and 2) the only bonus is 100 worth of Marks and Spencer vouchers. Huge, huge ponzi scheme.

  8. I don’t think that the writer understands the definition of a ponzi scheme. This is where later investors are used to pay of earlier investors. Madoff ran a ponzi scheme. Pension entitlements are a ponzi scheme.

    Analysts aren’t paid very much because they don’t know anything. I certainly didn’t when I started and hence was paid pretty poorly. My only job then was to learn. Associates are generally a bit better placed and are paid as such but even so aren’t generating the big value. By the time you’re actually delivering the numbers as a VP or higher, you are paid better. If you can’t you are generally shown the door. This business model has it’s flaws, but a ponzi scheme it is not.

  9. I worked in a pub for 18 months and was paid just under 5 an hour so about 11k a year working 60 hours a week. The manager of the pub was earning at a guess 40k a year for doing very little so if I were you I’d be greatful for the standards you’ve got which are higher than you know

  10. @ Jol. Please spare me the details of your pathetic little life, no one cares you loser

  11. what @ djm said!

  12. What is it you do exactly Jol?

  13. @FXTrader

    I like to describe myself as a quantitative analyst. However, I’m not really the intellectual type though so in reality I’m the ‘go to’ man for the dirty jobs my more esteemed colleagues feel is beneath them.

  14. @Jol – Would you like to write articles for us about your moderate habits? Get in touch at editor@efinancialcareers.com. Sarah

    Sarah, Editor, eFinancialCareers Reply

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