Wall Street banking careers have for decades followed a common pattern.
Historically, you would join a firm as an analyst right out of college — if not earlier as an intern — and you'd work your way up through the ranks of associate, vice president, managing director, and, at some banks, partner.
You'd remain loyal to the firm for 30-odd years and retire in your 50s with a million dollars in the bank.
"That rule is out the window," one veteran dealmaker at a top Wall Street bank told Business Insider recently.
A tough business cycle has made it harder for many banks to continue paying dealmakers competitive wages. Credit Suisse and Deutsche Bank slashed their bonus pools in 2015. At Goldman Sachs, employee compensation and benefits were down 40% in the first quarter this year, as revenues plunged and the firm continued to replace senior staff members with junior bankers.
Additionally, bulge-bracket firms are seeing increased competition for talent from boutique shops, which are typically smaller and specialize in mergers and acquisitions. The boutiques are starting to land big business — and they are poaching top dealmakers to do it.
"It's going to put pressure on organizations, without question," the veteran banker we spoke with said.
The big banks are also seeing top performers leave for the corporate companies they advise.
Here are some of the big moves in the past year:
- JPMorgan's Alejandro Vicente joined JAB Holdings.
- Morgan Stanley's Alban de La Sabliere joined the French drugmaker Sanofi.
- JPMorgan's Henry Gosebruch went to AbbVie.
- Blackstone's chief financial officer Laurence Tosi went to Airbnb.
Before that there was Goldman Sachs' Anthony Noto, who joined Twitter as CFO; Morgan Stanley's Ruth Porat, who became CFO at Google; and Credit Suisse's Imran Khan, who became Snapchat's chief strategy officer.
Of course, many bankers have told us that a handful of departures do not signify a real trend. Some said departures like this tend to happen in cycles.
That argument would certainly make sense in the current economic context. Business for equity capital markets bankers has dropped off a cliff in 2016, with the fewest first-quarter initial public offerings since 2009. Mergers-and-acquisitions activity is also down significantly from the past couple of years.
But the phenomenon could also turn into a more permanent trend.
"If we go into a real slowdown from an M&A and capital markets activity standpoint, the pressure will be very large on a lot of firms," the veteran banker said, though he does not believe we're there yet.
"Any banker with a brain … is saying to himself or herself, 'Do I need an exit strategy, and if so, what is my exit strategy?' And the reality is that a lot of folks in corporate America have been doing better on average."
He also highlighted the taxing lifestyle of an investment banker, typically associated with long hours and tight deadlines.
"Maybe [working for a corporate] is easier than working hard and being a banker and having to go prostrate in front of clients and grovel for business …. rather than being the CFO and having people present to you," he said.
Investment banking as a whole has become a less-attractive career option. A survey last year showed that only 4% of Harvard Business School students graduating wanted to work in investment banking. And a group of hedge fund interns told us last summer that they felt "a monkey" could do the job of an investment-banking summer analyst.
Wall Street firms are making a concerted effort to change the image associated with banking. Just in the past couple of weeks, five bulge-bracket firms have rolled out new initiatives designed to improve office culture and encourage work-life balance.
Credit Suisse is giving bankers Friday nights off, UBS is giving bankers two hours of "personal time" a week, JPMorgan is relaxing its dress code, Morgan Stanley is offering vice presidents four-week paid sabbaticals, and both Goldman Sachs and Morgan Stanley are updating their performance reviews to give more qualitative and frequent feedback to employees.
Whether that will be enough to stem the tide of departures remains to be seen. For his part, the veteran banker we spoke with does not foresee the issue going away anytime soon.
"It's started — a lot of people are thinking about the end game," the senior banker told us. "I expect that to continue."
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