If there is one piece of supporting evidence you take into your next bonus meeting, let it be this one.
There has never been a worse time to be an analyst in investment banking. I’ve been through the gruelling three year programme myself and looking back it was a kind of rite of passage. You earn your stripes and you move on to bigger and better things.
It’s a bit like being in a sports team at university – you’ll be forced to do pointlessly sadistic things for the pleasure of those above you, and in return you’ll receive their acceptance and approval and all of the rewards which go with it.
The main reasons for being an analyst in M&A, despite the awful conditions the job took for granted, were the money and the experience. Take both of those away and what do you have left? A McJob, basically.
Here are the factors which mean that being an investment banking junior will soon feel a lot like flipping burgers:
a) Even worse job security and
b) The trend towards pooling analysts to deal with
c) General lack of deal flow causing
d) A lot of pitching for non-existent projects made worse by
e) A generally less pleasant atmosphere at work because of gloomy prospects all-round, exacerbated by
f) Lower bonuses across the board.
That all should be totally self-explanatory for anyone who has worked in the City over the past four years. Just in case it’s not, I’ll explain.
It was always easy to get rid of analysts who didn’t perform, didn’t fit in, or who just weren’t needed any longer for reasons they couldn’t control. Now the great Goldman Sachs is eliminating its 2 year contracts which provided just a fig leaf of safety.
Despite what the bank says about how this is actually a good thing for us, one can’t help think that it’s a zero-sum game between grunts and bosses, and if they’re winning, we’re clearly losing.
Similarly, taking analysts out of smaller teams and dumping them into huge silos (as GS and Credit Suisse recently did, and other banks have done for some time) will mean that no one ever develops enough industry or product experience to benefit them in their future career. Want to move out of banking into industry – think again?
And in a role where the trade-off of “work hard and we’ll teach you a lot” is used as a sales policy in interviews and employment presentations, suddenly one of the main reasons to work in banking just evaporated.
The game has changed. Succeeding in IBD used to be about knowing your area well. Now, it’s about being good at workplace politics. Are you a young banker? If you work in a pool of fellow analysts, you’ll need suck up to any senior guy who can bring you in on any deal at all.
Lastly and most importantly, the money has gotten significantly worse these days. Yes, base salaries have been increased to compensate for lower bonuses, but will it really last? Banks tend to pay out bonuses and salaries to their top employees that are equivalent to around five times the returns paid to shareholders. In the current and future climate, banks are expecting to earn less and less. Deutsche Bank has publicly lowered its return on equity from the 20% it held steady for years, to only 12%. Expect pay to fall by a similar amount.
The author has worked in investment banking for 6 years