There’s a crush to make it to managing director in investment banking, but beware – it comes with a lot of pressure.
Making it to the top in investment banking is not what it once was. Whereas previously managing directors would be under constant pressure to produce revenues, they’re being judged on different criteria now.
Yes, the revenue pressure is still there, but the stresses placed on senior investment bankers are changing.
1. They are prisoners of compliance
Senior investment bankers now have a lot more personal liability. If something went wrong under the old regime, it was the bank that would take the blame. Now, individual culpability means that any scandal or wrongdoing falls on the shoulders of senior managers. Their bonuses will be clawed back and they can lose their jobs. Operating in this environment is incredibly stressful.
2. The positive opportunities have dried up
There have always been tough decisions to make for senior bankers, but when it was a growth industry there was a lot of positive management – who to send to build the Hong Kong office, which top talent to fast-track.
Now, the industry is in a consistent state of structural flux. This means senior bankers are thinking about efficiencies, downsizing or closing entire teams or departments. You might think of investment bankers as being hard-nosed, but it’s never pleasant and is a cause of stress for many.
3. There’s a need to squeeze clients
Investment banks are questioning the values of certain clients. A small percentage of big, core clients generate the lion’s share of profits and banks are now looking to purge smaller customers. Senior bankers are having to ensure that they’re paying their fair share – often having to ask for payment for services provided. This can lead to some awkward conversations with clients.
Smaller clients are having their services cut back.
4. The ranks are becoming over-crowded
Everyone is feeling trapped in the pyramid. Senior bankers can’t go up, and there’s queue of people underneath all baying for their blood, or feeling frustrated at the relative lack of opportunity for them. People are stuck, waiting for other to leave or get fired in order to progress.
5. Compensation is a cause of anxiety
Investment banking is now a long-term game, and this is reflected in compensation. Yes, salaries have gone up, but the cash component of bonuses has shrunk and deferrals for senior staff have increased dramatically.
This improves the risk profiles of the banks, and encourages much more patience in their employees. However, with anxiety over lay-offs currently, there’s the chance that senior bankers can lose compensation that’s been tied up for five years. Having this hanging over them is a source of pressure.
6. They have an image problem
Animosity towards bankers since the 2008 financial crisis is nothing new, but it’s still a source of pressure for senior bankers used to being viewed as hard-working role models. Coupled with this is the image crisis that the industry is suffering and how this translates to their ability to attract talent. Investment banks want the best and brightest – and senior managers are under pressure to attract this talent – but banking is no longer the go-to industry as graduates look towards tech. Senior bankers are having to work a lot harder on this.
7. They have to bring about cultural change
Imagine you were a great trader, and got promoted on the back of your numbers. Or an investment banker who brought in revenues big enough to make it to MD. Now imagine that you’re tasked with bringing about ‘cultural change’ within the organisation and are managing people used to doing things a certain way who are resistant to that change.
This is the pressure facing many senior bankers. Mediocre managers now required to be culture carriers for the new values of their organisation. They have no experience of this, but banks want to see meaningful change. This is causing a lot of headaches for senior bankers.
Nell Montgomery is an executive coach and psychotherapist at The Preston Associates, which consults with senior investment bankers. She previously worked at Goldman Sachs in London and was a managing director at Investec.