Juniors have been the darlings of investment banking this year. While numerous banks showed expensive MDs the door, analysts and associates were wooed with ‘protected’ weekends, 25% pay rises and increased power over their superiors – but they left anyway. Over 35% of second-year analysts moved into private equity and 73% looked for new roles elsewhere.
How will investment banks respond in 2015? They want to hire more juniors, but new investment bankers are increasingly viewing the industry as a stepping stone – get a few years’ experience with a big brand name on your CV and move on to something easier or more lucrative. Even internships are being seen less as a route into a full-time job and more as a way of impressing potential employers in alternative industries.
“The search is getting ever wider,” says Andy Pringle, managing director of recruiters Circle Square. “The new target is ACAs from Big Four accounting firms, but previously they wanted people with corporate finance or consulting experience, now they’re recruiting from audit. It’s just a matter of time before banks start hiring from law firms.”
Banks have already largely exhausted internal mobility schemes, convincing juniors from Asia or smaller European markets to move to larger financial centres like London and New York, says Logan Naidu, CEO of headhunters Dartmouth Partners.
“All the banks' HR teams are talking about internal mobility for junior investment bankers, then it’s the big audit firms, second tier consulting firms and, to a lesser extent hiring back people from private equity when a move doesn’t work out,” he says.
However, the most obvious way of bolstering junior ranks is by increasing next year’s graduate intake. Recruiters suggest that a 10% increase on an already inflated class of 2014 is on the cards, but banks are having to make calls now on intakes down the line, says Naidu.
“There’s a much greater emphasis on forward planning on graduate intakes. Banks have to make a call now on whether 2014 was like 2010 – when they over-hired only to cut again – or 2005 when there was a genuine turnaround. It’s a tough decision,” he says.
Another tactic is the greater use of immediate summer interns conversions, says Pringle. A number of banks this year took in greater numbers of third-year university students and offered them a job to start in September, rather than waiting until the following year to start as is usually the case, he says.
All of this would, of course, be entirely unnecessary if investment banks were better at retention. Investment banking isn’t as hip as it was, and they’re losing out on top graduates who would rather go into a large technology firm or a start-up. Banks need to engage in “bold” retention techniques if they’re going to keep their juniors, according to a new report on the outlook for investment banking by Accenture. Hiring the best and brightest and turning them into spreadsheet jockeys isn’t going to cut it.
There are numerous carrots that could be dangled, it suggests. Firstly, offering juniors the chance to work in exciting, fast-growing markets like Latin America or Asia would be an easy way for multinational firms to incentivise their employees, it says. Then there’s the potential for “apprenticeships” where junior bankers work closer with senior managers that could help “flatten the organisation structure and allow high-performers to learn and advance more quickly”.
More important, however, is the nature of the work. Top graduates are more likely to be motivated if they are given “challenging, strategic tasks”, suggests Accenture while admitting this wasn’t always feasible for analysts in large investment banks.
“Even where this is not always possible, banks should consider changes that make their employees’ time more impactful,” says the report. “New platforms are emerging, such as Thinknum – which enables analyst collaboration on cloud-based financial models. This is one example of how new ideas, supported by innovations in technology, are helping to change working practices in the industry.”