Young Talent Isn’t Following the Money to Wall Street
(Bloomberg Opinion) -- Deutsche Bank AG is the latest investment bank dangling a juicier carrot at prospective first-year analysts. An extra $10,000 sounds nice but, unfortunately, Wall Street is just appealing to individuals focused on short-term compensation — the kind who won’t hang around long anyway. The banks are going to have to up their game to attract and retain talent. And it’s not all about money.
“There is no substitute for hard work” has long been the industry mantra. But those first few years are brutal. There is now a number for how much toil is required to reach "base-level mastery" at an investment bank: The golden ticket to elite level is 10,000 hours or roughly three years worth of 72-hour weeks, according to Mary Erdoes, chief executive officer of JPMorgan Chase & Co.’s asset and wealth management business.
That’s not going to lure the cohort that banks are courting. A July 16 survey of 16-24-year olds’ mental health from Aviva PLC, the British insurer and wealth manager, showed that not only was this age group the most affected by the pandemic but it has also made 47% of those employed less career-oriented. Nor is the option of then going off to spend more time and money getting an MBA or CFA or both. College students know the real action no longer lies in a dealing room but in a start-up or in a major tech firm. Those may involve long hours too but they also have flexibility — along with a potential shortcut to untold riches, maybe even going into space.
A Wall Street career just isn't what it was. And that is why offering a Peloton bike just won’t cut. Banks must now compete for the best talent with private equity, consultancy and professional services. Apollo Global Management Inc. is offering six-figure bonuses just to retain associates. And everyone wants the kind of recent graduate inculcated in STEM (science, technology, engineering and mathematics) — so the banks are not just competing with private equity but tech and the world of venture capital-fueled startups too.
According to CBInsights data, nearly $300 billion has been raised so far this year globally specifically for startups, nearly matching the whole of 2020. In the first six months of 2021, 249 new $1 billion unicorns were born. And — pay attention, Wall Street — it’s fintech as well as tech. The U.K.-based payments firm Revolut Ltd.'s successful capital raise in mid-July put its valuation at $33 billion.
The new world of digital banking is going after talent in a different way. The $95 billion valuation on payments firm Stripe Inc. may have garnered most of the headlines but it has also managed to subtly change its work practices. According to its co-founder and president John Collison, the company has seen "pretty major uptake" on its offer for employees to leave high-cost city centers and WFH. The firm offered a $20,000 one-off incentive but there is a permanent catch — also a $10,000 cut in base compensation. Work-related burnout cannot be solved by return to the office alone.
The talent pool is being drawn elsewhere. Traditional investment banks can’t win them back just by upping starting salaries. It’s time to rethink the complete career offering. You can’t run with the bulls all your life.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.
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