There is a persistent City fairy tale which goes something like this: work hard enough, for long enough, and you’ll retire rich and live happily ever after.
In this heart-warming fable, “hard enough” equals a minimum 90-hour week. And, “long enough” means somewhere between five and ten years…
To have reached thirty five and not already retired was once thought of as a little déclassé. Working beyond that age was the sort of thing that only corporate lawyers, PR boys and accountants did.
So it may come as a surprise to some to hear about a university friend of mine, Zack, who, like many from our elite institution, was hoovered up by the great Golden Sacks for a job on their trading floors. Eight years on, his net assets still add up to the square root of nothing and he’s facing an existential crisis. Worse still, he’s wondering where the best years of his life went.
He was not a spendthrift. Zack actually lived a very simple life. He took holidays, but never more than two a year. Not going somewhere warm over the summer and taking at least one skiing holiday a year would have made him practically a social outcast amongst his team. And fitting in is key to doing well and getting promoted in an investment bank. So he gritted his teeth and pulled on his snow shoes every January.
He rarely goes clubbing, so he has no expensive “models and bottles” habits. His clothes are more Banana Republic than Prada. His watch is his one moderate extravagance, but that doesn’t explain his paltry net worth.
He has worked hard, but not excruciatingly so. He bought a modest flat after a few years, on an interest-only deposit. He hasn’t managed to pay down much of the principal, so he still only owns a thin sliver of equity.
How can this be? Quite easily, in fact. Most of his cash was invested in his Personal Account (PA) stock portfolio, which is now worth nothing. Naturally, “compliance rules” meant that he had to buy most of these financial products from GS itself. The firm paid him, and then promptly recycled his spare cash into its own wares. Not a bad business model if you ask me.
No one forced him to do this – he could have put his money into a savings account. But the fees are mostly waved for employee PA trades, so it seemed like a cost-effective way of investing – until he checked the valuation for his wildly bullish options and stock trades, mostly placed in 2008 and then in 2009 when markets still believed there would be a quick bounce back in stock prices.
Perhaps he drank the Kool-Aid he heard being peddled to the firms’ clients every day. Maybe listening to the constant sales patter made him feel overly bullish. I’m pretty sure he regrets it now.
The author works as a banker in London.