Times are changing in investment banking. Products which were traded via chummy bilateral agreements are being traded multilaterally on massive electronic exchanges. Banks which aspired to take over the world are having their ambitions curtailed. Banks which have already curtailed their ambitions are bouncing back.
So how can you lend your career a little longevity? If you want to ensure you're still around in 2020, you may want to go for one of the jobs below.
1. Regulatory risk manager
What? We're using regulatory risk manager as a catch-all term for anyone who can help banks work out how they need to adapt to the new regulatory environment. The best placed people in this category will, however, be able to do one better and advise traders how to make money in the new regulatory environment, says Brad Hintz, an analyst at Sanford Bernstein. "You're going to need regulatory risk advisors - people who can show traders how to stay within the rules and still make good returns. People who have that knowledge will be in big demand," he predicts.
Why? Banks are facing a whole barrage of new regulations.
2. Centralized clearing specialists
What? Over-the-counter (OTC) clearing specialists are at the forefront of moves to make sure that OTC derivatives are traded as far as possible on exchanges. They need to understand the scope of the new Dodd Frank regulations regarding centralized clearing, along with the European Union's EMIR (European Markets Infrastructure Regulations) and to help manage the shift to centralized clearing in big banks.
Why? Dodd Frank requires that centralized clearing be implemented in phases by U.S. banks from 2013. In Europe, EMIR guidelines must be implemented nationally from 2014. The move to centralized clearing is expected to revolutionize the OTC derivatives market. Individuals with strong understanding of centralized clearing and the relative advantages of different clearing brokers will be in big demand, predicts Hintz.
"Businesses are in the process of adjusting to this new world," he says. "As the model shifts, the people who really know about providing liquidity in derivatives trading, will come out on top."
3. Eurozone regulatory expert
What? Anyone with experience of working on European banking regulation, particularly in Frankfurt, is likely to be sought after.
Why? The ECB needs to hire up to 2,000 Frankfurt-based staff by around 2017 to put the European Union's planned banking union into practice. If you're a Frankfurt-based banking regulator, you will be hot predicts the head of European banking analysis at one U.S. bank in London. Demand for regulatory expertise will be compounded by the European Banking Authority's need to people to create banking rules for the European Union, he says.
4. Risk manager, electronic trading
What? As it says - a risk manager who understands about risk specifically in an electronic/algorithmic trading environment.
Why? Electronic trading is taking off - particularly in fixed income - which is in the throws of 'electronification' as simple swaps are cleared centrally (see point 2). "80% of equities products are already traded electronically. You're going to see this happening to fixed income," said a head of European bank research. "People will need a real appreciation of how risk management works in the context of electronic trading and centralized clearing," he predicts.
5. Emerging markets jobs
What? Anything to do with new emerging markets will continue to provide opportunities predicts Chris Wheeler, banking analyst at Mediobanca.
Why? "Asia, Latin America and Africa are going to continue to interest investors," Wheeler says. Last year, Morgan Stanley's head of emerging markets predicted that countries like Poland and South Korea will be the best bet for the next decade.
6. Equity researcher, oil and gas
What? Oil and gas-focused equity researchers are researchers who cover oil and gas stocks.
Why? The so-called 'shale gas revolution' is likely to generate increased focus on shale gas stocks. Equity research headhunters report consistent demand for oil and gas researchers, even as banks cut researchers in peripheral sectors.
7. M&A origination
What? M&A originators are the so-called 'rain makers' who help banks win big M&A deals.
Why? M&A will remain an area of focus for banks, predicts Wheeler. M&A doesn't generate the revenues of fixed income sales and trading, but it's not capital intensive and can offer high margins. Deal originators with strong industry contacts will always be sought-after.
8. Wealth management
What? Helping the rich manage their money.
Why? As income polarizes, the rich are getting richer: last year, investable assets of the world's rich increased by 10% according to Cap Gemini and Merrill Lynch. In the US, Hintz points out that many current wealth managers are due for retirement and a new (younger) breed of wealth management is needed to replace them. Wheeler emphasises the big need for wealth managers in Asia. Singapore now has 101,000 millionaires - up 10% from last year, for example.
9. Collateral management
What? Collateral managers ensure that counterparty credit risk (the risk that a trading counterparty won't pay-up) is mitigated by getting trading counterparties to post collateral against their trades.
Why? Collateral managers are about to become a lot more important under centralized clearing. As trades are increasingly cleared through large clearing houses, those clearing houses are expected to become more and more touchy about the kinds of collateral they'll accept.
10. Collateral transformation/change specialist
What? Collateral transformation specialists take collateral that big clearing houses won't accept (see point 9) and change it magically into collateral that they will. In March, the Financial Times described collateral transformation as the finance industry's new, new thing.
Why? The FT estimates that anything from $500bn to $10 trillion of new collateral will be required in the new centralized clearing world. Anyone who can convert ineligible collateral into eligible collateral will be hot.
11. LCR liquidity manager
What? The liquidity coverage ratio (LCR) is a concept conjured up by the Basel Committee on banking supervision. It requires that banks have enough high quality liquid assets (assets converted easily into cash) to see them through a 30 day 'liquidity stress scenario.' LCR managers need to understand how to ensure banks adhere to the ratio. They also need to work with trading businesses to ensure the ratio is met, and to ensure it's reported properly.
Why? The LCR ratio is one of the Basel Committee's key reforms. Due to be phased in between now and 2019, it represents a whole new approach to banks' liquidity. People who familiarize themselves with the LCR from the start will be hot for years to come.
12. European corporate DCM origination
What? Debt capital markets (DCM) originators help unearth companies which want to raise money by selling debt on the bond markets.
Why? Banks have been excited for a long time about the potential for 'disintermediation' in Europe as corporates turn to the bond market to raise cash, instead of taking loans from banks. Oliver Wyman and Morgan Stanley pointed out this year that the number of companies using the markets to raise debt is twice as high in the U.S. as in Europe.
13. CVA quant risk analysis
What? Counterparty valuation adjustment (CVA) quant risk experts work out the aggregate risk of counterparty exposures across the bank and calculate strategies to hedge against it.
Why? CVA risk is also an area of increase emphasis under Basel III. European banks have managed to negotiate leniency for derivatives counterparty risks based upon CVA hedging. US banks haven't. Expect European banks to place much more emphasis on CVA expertise in future.
14. Python architects
What? Python architects are simply senior developers with long experience of programming in Python.
Why? We predicted in March that Python would be an up-and-coming language for programmers in banks. J.P. Morgan is a long term user of the language and has based its Gauss counterparty credit risk calculator for its whole OTC derivatives operation on Python.
15. Compensation consultants
What? Compensation consultants help banks to work out how best to structure their pay whilst keeping shareholders, employees and regulators happy.
Why? As we noted the other day, banks have already got a rush on compensation hiring. European pay rules are due to come into force in 2014, but that is unlikely to be the end of the issue. Banks are going to need to do more with less, and compensation professionals will need to work out how to keep staff happy.