After what seems like several years of lackluster hiring in the investment banking industry, leading head hunters, particularly in London, are starting to see some positive trends develop in the hiring intentions for more junior positions. According to the Wall Street Journal, several leading investment banks are desperately seeking additional employees at the associate level, and are actually having a difficult time fulfilling demand with existing supply. This certainly will be a welcome development for more junior members of the industry looking for new opportunities.
Associate Positions Sought After by Less Experienced Professionals
The associate position is one of the more junior ranks in the investment banking world, wedged in between the entry level analyst role and the higher ranking vice president position. Individuals in such roles would have more responsibility and prestigious work than an analyst, including some client facing work, but much of the day is still comprised of the grunt work of investment banking. Salaries for these positions in London would range from £105,000 to £170,000 depending on experience. Again, this level of salary is ahead of what an analyst would expect, but the incentive compensation in particular would be much less than what is seen in more senior roles.
Lack of Hires During Crisis Led to Today’s Shortage
In the years following the financial crisis, most investment banks greatly scaled back their hiring programs for new graduates, if they didn’t shut down hiring altogether. Unfortunately for these firms, this decision has created a gap in their staffing as associates moved up to higher ranked positions or moved to another firm or out of the industry altogether.
In the view of the headhunters interviewed in the Wall Street Journal article, it is increasingly difficult to hire associates away from other firms, even with the promise of substantial pay increases. Most associates are simply uninterested in lateral moves within the industry, preferring life on the buy side or in corporate environments instead. Commenting on trend, one merger and acquisitions head at a leading international bank told the Journal that staff now considered their positions as a job, rather than a career, leading to more openness to consider opportunities outside of investment banking.
Many Graduates Sought Opportunities in Private Equity, Hedge Funds
The finance graduates of the last several years were not simply sitting idle waiting for the return to strength that the investment banking industry may be just starting to see now. Instead they sought opportunities in private equity firms and hedge funds – and many have decided to stay. While these individuals are a potential source of new associates for the investment banking industry, it may be hard to sway these employees to an industry with more work demands, even with higher compensation.
How the investment banking industry handles this shortage in coming years will be an interesting storyline. While the industry will certainly look at other potential sources in filling these associate vacancies, some firms may be forced to reconsider how their organization is structured in order to remain productive despite empty chairs. In any event, to those in the industry it certainly is interesting to see how the hiring decisions of several years ago are coming to impact investment banks today.