It’s no longer ok to be a middle-aged managing director in Hong Kong. In their latest wave of cost cutting, global investment banks are increasingly culling 40-something MDs running smaller teams in the territory and are putting younger people in their place.
“They wanted a more junior, less expensive team and a more junior leader to take things forward,” says a former MD in his 40s who recently lost his job at a bulge bracket bank in Hong Kong. “It’s happening more and more in Hong Kong this year and not just at my firm – HSBC has been stripping out management layers, for example.”
Global restructuring drives at Standard Chartered, Barclays and Deutsche Bank also make MDs at these banks particularly vulnerable, but headhunters say senior layoffs are an industry-wide phenomenon in Hong Kong. “You just don’t see as many MDs aged above 40 in Hong Kong this year – the 40 and 50-somethings have almost all gone unless they’re department or regional heads,” says Moncef Heddad, a former J.P. Morgan and Lehman Brothers banker, now CEO of MH Partners, a boutique advisory firm in Hong Kong.
“If you’re running a smaller desk in Hong Kong these days – managing 12 people or less – you might not even have reached MD yet and even if you have, you’ll be about 35, not 40-plus,” adds Heddad. “Most of those who’ve made MD here have been fast tracked and they’re under 40. The kids are stepping up and the banks feel there’s no need for so many senior people right now, especially if you’re in a flow business like FX.”
Sarah Harte, an executive director at search firm Sheffield Haworth in Hong Kong, says the city’s banking sector is undergoing a process of “juniorisation”. “If an MD is made redundant, there tends to be an internal promotion, with someone more junior added to the desk. Or the bank will hire a director-level candidate who’s a producer-manager and still covers clients. This trend is a by-product of a contracting market in Asia and of the cost-cutting initiatives banks are undertaking to appease shareholders – return on equity being their key focus.”
Global banks have experienced a turbulent past six months in Asia, largely thanks to market volatility in China. Share-trading volumes in the region fell 34% in the third quarter from the second, according to the World Federation of Exchanges. Asia Pacific investment banking revenue dropped 26% in the third quarter compared with a year earlier, according to Dealogic.
“Foreign banks are living quarter to quarter and increasingly think their revenues in Asia don’t justify the costs of some of their MDs, especially when mainland banks are now starting to dominate the onshore Chinese market,” says Heddad. “In the recent past MDs would create the business culture in the team, but these days banks don’t want culture, they just want to cut costs.”
Cutting 40-something MDs comes with long-term consequences for banks, says the anonymous Hong Kong investment banker. “A lot of knowledge, a lot of what happens in a bank isn’t actually written down, so when a senior person is removed you lose a lot. For example, if a deal suddenly goes in an unexpected direction, it’s likely that the younger members of the team won’t know what to do as they won’t have experienced it before. Now you have nobody to turn to.”
Older MDs who lose their jobs face a difficult labour market in Hong Kong. “If you’ve been an MD for a while like me, you’ll soon see that other banks have eliminated the next senior job you would have otherwise gone to,” says the banker. “Collapsing management structures are the key to so many firms’ plans, so I can’t really see many MD-to-MD moves happening unless it’s an unusual sort of progression, outside of your current specialism.”
“If you’re in M&A, ECM or DCM you could try a boutique. But it’s very difficult in sales and trading – these jobs are getting replaced by machines,” says Heddad from MH Partners. “I tell MDs they must be ready to downgrade in terms of pay and lifestyle. There are options out there if you don’t have a big ego – be open to applying for a risk role, for example.”
Harte from Sheffield Haworth says most unemployed MDs are trying to escape the sell-side. “Other areas of the market hiring seasoned MD are exchanges and fintech firms, but if you’re a trader the buy side is the most popular option.”