If you're not middle class - or, realistically, upper middle class, you will find it hard to get into banking. So says today's detailed report from the UK's Social Mobility Commission, compiled by academics at Royal Holloway University of London and the University of Birmingham.
The study, which included 52 interviews with "key stakeholders" such as current bankers, retired bankers and aspirant non-privileged bankers, puts paid to the myth that banking is an entirely meritocratic profession dependent upon IQ and effort. It's not: it's about social class. If you're not upper middle class, accessing front office banking jobs is very hard indeed.
This matters, not just because non-upper middle class students struggle to access the best jobs in finance, but because finance is an important conduit of social mobility. Boston Consulting Group found that 40% of people earning more than £120k in the UK are working in the country's financial services industry.
If your family background isn't upper middle class, if your parents aren't wealthy, here's how the odds are stacked against you.
Banks are disproportionately likely to hire you if you went to a) a private school or b) a grammar school. In the UK, 82% of children attend non-selective state schools, but only 51% of people who go into banking come from these schools - and they mostly go into the back and middle office.
As you will know if you read eFinancialCareers regularly, banks like to hire from a small group of elite universities (eg. London School of Economics (LSE), University College London (UCL), Imperial College London, the Universities of Oxford and Cambridge and the University of Warwick) - and that small group of elite universities is comprised of precisely those institutions which disproportionately hire students from selective and fee paying schools.
Students at these schools, "actually have a big advantage when they come to apply because they’re able to understand what the bank is looking for or understand more about particularly the divisions they want to apply to . . . and because there are already lots of students who are applying from, maybe the year above, who have been successful in getting an internship and then a graduate role, there’s a really good network effect . . . everyone knows the process, everyone talks about it and everyone shares their stories," one banking interviewee told the researchers.
If you want to work in banking, you'll need an immaculate academic record. At J.P. Morgan, UK-educated summer interns have around 700 UCAS points. Unfortunately. UCAS points are directly related to students' socio-economic backgrounds.
Banks like you to have been involved in extra-curricular activities. Think entrepreneurial goings-on. Think running finance societies. Think leading sports teams. At Oxbridge, one interviewee told the researchers that banks automatically invite presidents of colleges' Junior Common Rooms (JCRs) to special recruiting dinners.
If your parents aren't wealthy, you may not have time for all these activities: you're more likely to be busy earning money to help pay your way through university.
If you want to play the investment banking recruitment game, you need to start early. You need to attend insight days. And you need to attend spring weeks. You need to be thinking about getting into banking during your last year at school and first year of university.
"There are things that people can apply to and join when they’re in their Sixth Form year. And that’s when the bank get their name and then they’ll be invited to it next year, and the year after, and the year after. And really, if they spot them at age 17 and they think they’re great, they’ll keep tracking them until they’re ready for summer internship. They can get them fast tracked . . . the problem is, people like me, whose parents didn’t work in this industry, I have no idea that that’s available to me at 17," one student told the researchers.
Banks won't say they only hire people with middle class accents and speech patterns as this is socially unacceptable. They will, however, say that they only hire people with "polish" - and this amounts to the same thing.
"You end up speaking colloquially in an east London school. Go to a bank and [you] realise that’s not actually how you’re meant to speak in the real world . . . half of the people interviewing you were very posh, they’d clearly gone to really good schools, spoke in a different way . . . you felt out of place when you go for those interviews. So I think that stood out for almost every interview I did," one candidate told the researchers. "I felt like my accent was a bit out of place, so I changed it. I changed it. I speak like this now . . . if I can speak properly, it gives no indication of my background whatsoever," another banker said.
You can't wear brown shoes in corporate finance, unless you're very senior. "From my experience [non-privileged students] . . . don’t have a haircut . . . their suit’s always too big . . . they don’t know which tie to wear," an interviewee told the researchers. "[In corporate finance] if you’ve got the wrong cut of suit, if you are wearing the wrong shoes, or tie, or you look awkward in a suit, you’re done before you start. And unfortunately if you’ve never worn a suit before in your life, how are you going to do it? . . . You go there, you stick out like a sore thumb," said another.
Another interviewee, who'd said he was told by a banker that he interviewed very well and "as clearly quite sharp" but that he wasn't a good fit because he wasn't "polished enough" and was wearing a loud tie.
As defined by banks, polish isn't just about speech patterns and clothing - it's about confidence. People who lack confidence "won't survive" and will be, "crushed underfoot." "Competence is equated with confidence. And if you’re not confident or if you don’t exude that sort of same sense of self-belief . . . then people don’t necessarily rate you or think you’re competent," the researchers were told.
Other interviewees pointed out that privately educated candidates are innately more self-assured. "If they come from a middle or upper class background . . . there’s a way of doing things . . . It’s about . . . appearing reasonably smooth, reasonably confident, knowing when to defer to somebody more senior than you, being able to take instruction without arguing about it, showing initiative, not being chippy about somebody you perceive as being different to you socially, not making other people feel uncomfortable..."
Banks like Goldman Sachs have made a big deal out of their new apprenticeships. These are clearly good news, but only if you want to go into the middle or back office or technology. The researchers point out that apprenticehips are no good if you want to access the highest paying front office jobs in banks.
And then there's the phenomenon of 'credential inflation.' As we've noted before, Masters in Finance qualifications are much more popular than they used to be. If you don't get into banking straight out of university, a Masters also gives you another chance to apply. But....Masters in Finance courses cost tens of thousands of pounds. The study notes that graduates from lower socio-economic backgrounds are less likely to participate in postgraduate education - and this is likely to be accentuated for Masters in Finance, which are more expensive than most.
It's harder to gain earlier exposure to banking if you live miles away from London. "We rarely saw people that were outside M25. Because of the cost factor associated with moving to London," one banking recruiter told the researchers.
It's not just in China that banks are nepotistic. The researchers were told that banks offer work experience to, "individuals whose friends and family are of strategic importance...It’s actually very calculated, profit motivated, rational thinking.. if you have your father who’s a minister in some kind of trade delegation or something, and has influence, these people are hired purely because of that . . . so these people are positioned because of their network, positioned because they recognise the network qualities in someone else, and they can make these links..."
One former banking intern cited the example of a fellow intern whose father was a client: "He couldn’t find a desk which wanted him . . . But on the last day, one of the desks, which he’d never spent time on, one of the managing directors on that desk called him out to a meeting and offered him a job . . . in the final week, like, these jobs were just coming out for these people."
It isn't just about having parents who matter to banks. It also helps to have parents or family friends who work in banks and can help familiarize you with the environment and the vernacular. One of the interviewees told the researchers that he despaired during his trading internship because he didn't seem as able to talk to the traders as his counterparts. And then he realized that the other interns, "already had those networks" - the people they were talking to were a friend of their uncle, or had been to university with their brother. - They had a "head start" and were all from independent schools. Because he couldn't develop relationships, he couldn't get anyone to sponsor him for a job: "And at that point, that’s when I kind of got really turned off investment banking."
Lastly, if haven't been brought up in a thoroughly middle class household, there are some things you simply won't understand. "They started talking about half Windsor tie and a full Windsor tie and all this kind of stuff. And automatically I felt out of my depth, out of my comfort zone," one former intern told the researchers. Later, he realized it didn't matter though: ""hen you listen to the substance of what a lot of people are saying, it was just quite a lot of hot air actually."