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Morning Coffee: Banks of the future will only employ a tiny handful of elites. Why you should hire your children

outsourcing, automation, technology, financial technology, fintech, Wall Street, banks, banking, bankers, Bear Stearns, Ace, Ace Greenberg

Only the creme de la creme will be employed by banks in the near future.

If you want to work in banking in 2030, you’ll probably need to be in the front office – part of a small coterie of highly charismatic or highly numerative people who come from prestigious schools. Middle- and back-office jobs will still exist, but they won’t be in banks anymore.

So says Thomas Garside, a partner in the financial services practice at Oliver Wyman. Writing in a Financial News op-ed, Garside says that as banks look to cut costs in their swollen risk and compliance functions, they will either automate them or outsource them to third-party vendors. In the short term, Garside says most banks are conservatively expecting a 10% to 20% reduction in risk resources. In the long term, he says full-time risk staff could fall by up to 80%.

Garside isn’t the only one advocating banks outsource entire middle- and back-office areas to third parties. Sergio Ermotti, the CEO of UBS, is a big fan. He recently told Bloomberg that the impact of technology over the next 10 years is going to be very similar to the impact of regulation over the last 10 and that a “utilities” concept could create the cost-efficiency benefits of consolidation in the middle and back office without the front-end or shareholder complications. As this model evolves, Ermotti said UBS could end up with 30% fewer staff.

Once as many middle and back office staff as possible have been devolved to shared services and jobs have been automated, who will be left? The relationship bankers who bring in the clients and the “automators” who create the systems should endure. If you want to survive in banking long term, you’d better make these your niche.

Separately, Ted Greenberg, the son of the late Bear Stearns chairman Alan “Ace” Greenberg, is a stand-up comic who formerly wrote for Late Night with David Letterman. Now he’s written a one-man show called, well, Ace, in which he plays both his father and himself.

The play explores the younger Greenberg’s relationship with his father and the latter’s career on Wall Street, according to Bloomberg. The elder Greenberg transformed Bear Stearns from a small brokerage into a publicly traded international behemoth and instituted an anti-nepotism rule, going against the grain of Wall Street’s Ivy League-leaning insularity. The playwright says he and his sister had hurt feelings because they “took the anti-nepotism rule somewhat personally: We were like, ‘God, we’re not even allowed to work for our own dad.’”

Meanwhile:

In a play for a second term, Federal Reserve Chairwoman Janet Yellen said bank rules shouldn’t be overly burdensome. (WSJ)

Even so, President Trump has put together a short list of candidates, including Gary Cohn, to replace her. (Bloomberg)

Nomura’s equities agency broker Instinet has brought in a former Deutsche Bank electronic-trading specialist as its new head of international electronic sales. (Financial News)

As the co-founders continue to feud, more than 60 bankers, traders and analysts have departed Guggenheim Parters the last two years and the firm recently offered some senior managers bonuses to stay on for at least a year amid frustration over money, management style and personnel. (Bloomberg)

Do you suffer from groupthink or dumbfounded bullishness? Many traders and portfolio managers do. (Bloomberg)

Josef Ackermann, the former Deutsche Bank boss, doesn’t acknowledge the giving back of bonus money as an admission of mistakes. (FiNews)

The genius alumni of New York City’s Stuyvesant High School do everything well except raise money, but now a Wall Street clique is seizing control. (Bloomberg)

Michael Scronic allegedly cheated at least 45 people who thought they were investing in his Scronic Macro Fund, but instead he used the money to pay back other investors and to finance a lavish lifestyle. (Bloomberg)

“Ramp it,” a former head of foreign exchange at HSBC allegedly told one of his traders just before he executed a $3.5bn currency transaction. (Bloomberg)

Asif Aziz, founder and CEO of the real estate investment company Criterion Capital, is using a novel defense in a divorce case as he tries to hold onto his $1.3bn fortune. (Bloomberg)

The Brevan Howard master fund fell 4.61% this year through September and the firm’s AUM has shrunk from $40bn in 2013 to around $11bn today. (Business Insider)

Jobs are not safe at Carlson Capital’s Black Diamond Thematic hedge fund, which is down 19% after fees this year through September 30. (Business Insider)

Blockchain is approaching a tipping point on Wall Street because cryptography has figured out how to keep transaction data private. (Bloomberg)

Workplace chat groups on Slack and WhatsApp can act like a virtual water cooler, but they are also risky. (FT)

To land a good job after college, get excellent grades and do as many internships as possible. (WSJ)

Experiments involving monetary allocations found that economics students behave more selfishly than other students. (Plos One)


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