If UBS CEO Sergio Ermotti is right, 30% of today’s jobs in investment banks are going to evaporate in the next 10 years as technology takes control. There are signs it's already happening: Goldman Sachs’ finances are being managed by a technologically-minded quant and J.P. Morgan’s entire investment bank is being run by a man pushing the paradigm of technical advancement.
Managing directors are lucky; most have had long careers in finance already and may not be around to see the all changes implemented. But what does the next generation of top bankers – the senior vice presidents and the executive directors, plan to do as the industry turns on its head?
We asked a selection of senior VPs and EDs at banks like Goldman Sachs, UBS, J.P. Morgan and Nomura which finance jobs they think most likely to endure in the future. Predictably, there was no single answer: it all depends which part of the business you work in.
A senior vice president in electronic execution sales (ie. Selling banks’ electronic trading systems) says thinking simply in terms of jobs is outdated. If you’re a salesperson now, it’s all about working for a bank that has invested in its trading technology and is putting resources into continued broad product development.
“As broker lists get smaller, you ideally need to be able to offer a broad mix of solutions at ‘partnership level,’” he says. “There’s always room for firms operating in a product-specific niche, but it has to be very niche and there won’t be many of them.” For this reason, he says the best route to survival in his profession is to find a role at a leading bank with strong trading technology and a broad and evolving suite of products.
As MiFID II approaches, all equities professionals are keenly aware of the need to work for leaders in their field. The new regulations are expected to focus sales and trading activity in four or five top firms and to squeeze out the rest.
For this reason, one senior equities sales trader said survival is all about working for a leading U.S. investment bank with a strong balance sheet and a willingness to put that balance sheet to work delivering liquidity to clients. In the short term, he says the most important people in his profession will be those who can help clients navigate changes in the structure of the market.
A senior asset liability management professional, who creates products for pension funds and insurance companies, says the best jobs in finance today are those which a) can’t be replaced by machines, or b) afford the widest range of exit options when you want to quit.
In the first category he places jobs like structuring and the sale of illiquid products. Both are dependent on humans and difficult to fully automate.
In the second, he places jobs in leveraged finance or M&A. “If I could do this again, I’d do leveraged finance for five or six years, get a great understanding of credit risk and how financial sponsors [private equity funds] work and then leave.”
He cautions against jobs in flow [liquid product] sales and trading: “I know a lot of colleagues in flow roles who’ve been laid off over the years and they’ve literally had to start from scratch in a new career.”
Equity researchers face a tempestuous time because of MiFID II. One tells us he wishes he were a portfolio manager instead: “Traditional investing has lost ground to smart-beta, but the whole equity universe can’t be invested this way. You need active investors to sense check things!”
With active investment out of fashion, he predicts that competition for jobs in the area will lessen in the next few years, making it an even better place to work. Failing this, he suggests venture capital funds: “There are so many interesting companies around these days and VC is a great place to learn about them.”
As we’ve observed, emerging markets hiring has been super hot in 2017. This hasn't gone unnoticed. One senior FX trader says EM desks are the best places to be now. “There’s less electronification in emerging markets than in FX and there’s also better money to be made.”
While most FX desks are down by double-digit percentages on last year, he says emerging markets businesses are flat. More importantly, he says next year’s expected rate rises and shrinkage of central banks’ balance sheets will create volatility that will boost EM revenues: “When U.S. rates rose last month and EM was selling-off, the desks were busy in a way they hadn’t been for ages.”
A risk COO at a big U.S. bank suggests the best way to future-proof your job now is to forget banking and go work for a fintech firm. “There’s going to be a fintech revolution that will take banks by storm,” he predicts. “New technologies and techniques like blockchain, data mining and algorithmic trading underpinned by machine learning are going to change everything in the next decade. The best jobs are those which offer exposure to these new disruptive technologies.”
Lastly, a VP level M&A banker at a top boutique, said the best finance jobs in future will be those that involve creating trusted relationships with clients in a complex and increasingly risky landscape. Basically, the job he's doing already.
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