Technology professionals in investment banks are the new Masters of the Universe. Sort of. Technology is creeping into every facet of investment banking, from trading to advisory work and equity research. In theory, those who write code hold the trump cards, and banks are working harder to attract and retain them.
We asked nearly 500 technology professionals which financial services-focused tech firms they'd like to work for. Their answers were clear: Goldman Sachs and J.P. Morgan. The banks tied for the top spot in 2017 eFinancialCareers Ideal Employer rankings among technology professionals, easily beating Bank of America Merrill Lynch which finished third. In fact, the only firm that beat J.P. Morgan and Goldman Sachs among tech professionals was Google - which finished third in the overall rankings.
J.P. Morgan and Goldman Sachs are arguably the biggest employers of technologists in investment banking. 25% of Goldman's employees now work in technology, or around 9,000 people, while J.P. Morgan has 10,000 technologists working for its investment bank alone globally - and 40,000 across the bank.
J.P. Morgan spent $9.6bn on technology last year, and Goldman is estimated to have a tech budget of over $3bn. The focus at both firms has been about getting people with tech skills through the door. Goldman said that 37% of its new analysts last year came from science, technology, engineering and math (STEM) backgrounds. Even if they're not going directly into technology roles, they want their new hires to be more quantitative.
Technology's influence is creeping across banking, reaching into areas previously sheltered from the march towards digitisation - the investment banking division. J.P. Morgan has recently rolled out a programme called the Emerging Opportunities Engine, which uses machine learning to allow its equity capital markets bankers to find clients most in needs of follow-on equity offerings. Its investment bank chief information officer Lori Beer told us that the bank was "beginning to look at using machine learning within our advisory business".
Meanwhile, Goldman has recently elevated Marty Chavez from CIO to CFO. He said in a recent speech that there are some elements of the investment banking process that are "begging to be automated". Meanwhile, the bank has also started a project called Data Lake, which allows clients to interact automatically with the bank without ever having to speak to a salesman. Anyone who acts as a middle man to relay information to clients could soon be replaced by an application programme interface, he said. Chavez said that it was "redesigning the whole company around APIs".
The implications for front office staff are not great. Chavez said that 600 equity traders in 2000 at Goldman were reduced to just two people today, replaced by algorithms supported by around 200 computer engineers.
Big investment banks take the opportunity to promote themselves as "technology companies" at every opportunity and have been revamping to appeal to technology professionals used to cool office space and agile working environments. J.P. Morgan's office on 5 Manhattan West in New York is a hipster paradise - offering snooker tables, mini-markets and stations to play guitar.
But maybe technologists want more than football tables. Only 34% and 29% of techies who selected Goldman or J.P. Morgan respectively as their employer of choice suggested that perks were important to them, and 36% said they expected them from working for the banks.
Instead, the big draw for technologists to investment banking is pay. 89% of people who chose J.P. Morgan said a good salary was important to them, while 82% of those wanting to join Goldman said the same. 70% expected a high salary at J.P. Morgan, while 82% who voted for Goldman Sachs said the same.
Interestingly, technologists also said that they desired a big bonus to work in banking. Despite their elevated status in investment banks, technologists still receive much smaller bonuses than most front office staff. It's here they face stiff competition from big tech firms - Facebook paid an average of $188k for each of its 17,048 employees.
Tech pros are also less accepting of burning the midnight oil. While investment bankers begrudgingly accepted working long hours as part of the job, tech workers were much less likely to take it. 64% of those who voted for J.P. Morgan said that manageable working hours were important to them, but just 34% expected them at the bank. At Goldman, just 11% of respondents thought they'd have manageable working hours, but 61% of technologists wanting to work for the bank said they wanted them.
Reassuringly for banks, however, technologists do view them as interesting places to work. Tech companies are viewed as being at the heart of innovation, but banks are not seen as entirely unexciting places to work. 64% of technologists voting for J.P. Morgan said they expected challenging or interesting work, and 68% of respondents who chose Goldman Sachs said the same.