With investment banks making headcount cuts across Asia, it's no longer the expensive managing directors - or in-demand juniors - who are being targeted. Instead, those on the cusp of MD are falling victim to the axe - directors and executive directors are the new dispensable talent.
Senior cuts no longer means chopping the rainmakers at MD. Directors are now the most vulnerable, suggest headhunters.
“Directors and EDs definitely have the biggest pressure on them right now from a bank’s perspective as this costly group often has the lowest return on investment,” says Hubert Tam, managing partner at Hong Kong search firm Sirius Partners.
When Bank of America laid off 15 bankers and traders in Asia earlier this month, only three of them were MDs – the rest were directors and EDs.
And with other investment banks – including BNP Paribas, Goldman Sachs and J.P. Morgan – all upping their cutting of under-performing staff over the coming weeks and months, more directors will be in the firing line.
“In times like these, where pipelines and near-term prospects in Asia seem thin, banks focus on retaining ‘relationship talent’ (mainly MDs) and are often prepared to sacrifice senior ‘execution talent’ (directors) in the hope that more junior execution teams can manage the work,” adds Eliot Fisk, a former head of Asia equity capital markets syndicate at J.P. Morgan in Hong Kong. “It's logical for their short-term business, but terrible long-term planning.”
Christian Brun, Asia managing partner at search firm Wellesley Partners, says directors now find themselves “in the worst place in Hong Kong banking”. “Many are squashed between two sets of people in their teams. They have productive MDs ahead of them, who have great client skills and who the bank wants to retain. And they have ambitious VPs behind them, who could essentially do their job for less money.”
Brun says the “most vulnerable” directors are those who were “brilliant analysts and associates but aren’t now so good at client relationships, so the bank doesn’t see a long-term future for them as MDs”.
Worse still, in the current tight job market, “you have to be exceptional as a director” for a new bank to hire you, says Brun. “The problem is that if you’re a bulge bracket firm with an unwieldy headcount structure, you probably don’t want more directors or EDs joining you as they would add to the pipeline of potential MDs, which would be hugely politically unpopular with current directors,” adds Brun.
“The fact that most director candidates still list ‘MD track’ as their top priority when moving is now a huge turn-off for investment banks in Asia in this market as it will undoubtedly cause upset in existing teams,” says Nicholas Wells, managing director at search firm Webber Chase.
With large investment banks in Hong Kong closing their doors, directors will need to consider jobs at second or third-tier firms, says ex-Jefferies trader Warwick Pearmund, now a senior consultant at search firm at Bo Le Associates in Hong Kong.
Image credit: DragonImages, iStock, Thinkstock