A headhunter in the financial services sector talks to Joris Luyendijk about fear and foresight in the banking world
• This is part of a series in which people across the financial sector speak to Joris Luyendijk about their working lives
This is a story is about why banks, their threats notwithstanding, may not be so eager to leave London for a city with lighter regulation or lower taxes. Obviously dozens of factors must play a role in a decision to relocate, but a recruiter I spoke to recently mentioned a factor I had not heard before, and I thought: let’s share it here in the hope that financial workers will come forward to confirm or contradict.
I shall call this recruiter “Marcus”. He is a wonderfully astute man who spoke to the blog earlier about how financial recruitment works: “We have these stock tricks and invented stories to tease out information. It’s all about org charts, ‘maps’ if you will, of who in a bank works where, on what, with whom. Banks really don’t want us to have these charts as it makes poaching much easier for us.”
Marcus got back in touch when the post So, how can bankers live with themselves? went up. In it another recruiter highlights a largely ignored disconnect between national electorates and an increasingly globalised financial elite. In one quote: “Many of my clients simply don’t seem to care a whole lot about what the general public think. These are extremely well educated and multilingual professionals. Many are in mixed marriages with kids who have lived on two or three continents. They don’t belong anywhere and don’t feel beholden to any national project.”
Marcus texted that he recognised some of his clients in the description of post-national bankers, adding: “A lot of Brits and Yanks in particular are getting fed up with the anti-banker sentiment.”
We decided to meet for a chat about how bankers in his network are taking the continuing anger at the financial sector. Will they leave? But first I ask him: how are things these days in the financial sector in London?
“It’s grim. Normally there’s one round of redundancies a year. Last year there were three. In April I am expecting another round. Banks still need to cut. Until now it was mostly dead wood. The sort of people that would make me think, are you still here? Those people are now out. And the cutting continues.
“At the same time banks are being far more aggressive in targeting their bonuses towards key staff and giving a big hint to everyone else that they can stay or leave, the company is easy either way. The idea of getting a (large) bonus just for turning up and doing your job is over. Of course this may change as the economy improves. There are some who are realising that they are going to have to work hard to get their bonus! About time too.
So what are the effects of the broad anger directed at the banks?
“European bankers seem less bothered, perhaps they move in more exclusive circles, in the sense of being farther removed from British society at large. I get people telling me, they want to go to Asia. They say they can’t stand the complaining and bashing anymore.”
But will they go?
“People pissed off at the tax rates in Europe go to Singapore or Hong Kong. That happens. Japan is seen as too insular. But even Singapore and Hong Kong is not where you want to be, if you are aiming for a high-flying career in finance. Sure, for two years or so it can make your CV look good – provided you made a real impact and you got out again.
“But top people are very scarce in Asia and banks tend not to let you go easily once there. For the most ambitious bankers New York and London are still where you want to be. It’s like football. No matter what, you want to play in the Premier League, not in some far away league – no matter how much they pay you there.”
Are the banks themselves moving away, say, in response to new regulation?
“I don’t see any one making moves. For a while there was this rumour that JP Morgan was going to take the plunge. They didn’t renew the lease on a building, and were going to lease something much smaller. So everyone was going, is this it? In the end they just moved into another building.
“It’s a huge step and will have to come right from the top, boardroom level. The thing is, no one wants to be the first, have all that on your shoulders. There’s a degree of lock-in. Simply because the financial sector is in London, it’s hard for individual banks to move away from here. Hedge funds have moved to Zurich. But a hedge fund employs 30 people. A major bank employs 30,000 people.
“Suppose you decide to move your operations to Zurich. Inevitably you are going to lose a few people in the process. You need to fill their positions. Where in Zurich will you find people with the right qualifications? You won’t, so you end up having to lure people from London to Zurich. That’s going to be hard. Also, it will be become easier for competitors staying on in London to poach some of your stars – much easier for people to switch jobs than to stay in your job while moving to another country. Bankers have partners who may have got jobs as well. Their kids are in school. They’ve got a social life here. Say, this banker is married to a high-flying lawyer; is she also going to move? What will she be doing in Zurich or Dublin?
“SocGen [Société Générale] have their trading floor in Paris. They want to move part of it to London for exactly this reason; it’s so hard to hire in Paris.”
I had what I came for, a “light-bulb moment” of insight that banks leaving London or New York are bound to lose staff that will be very hard to replace. But then Marcus talked about the impact of the crisis on banks’ hiring, on the ins and outs of “arse covering”, on how Goldman Sachs is like Manchester United and why his dream is to talk to a German:
“In the old days as recruiters you’d work very hard from January to July, and take it easy the rest of time. By late December, early January you’d hear what the banks’ and financial firms’ hiring needs were going to be. Then you’d work till July to fill these.
“This year everyone in the banks is waiting for the other to move. They’re telling me, ‘We are waiting to see who we’ll lose.’ People are scared. In other years they’d have made a specific plan how they were going to make more money in the coming year, and this would come with particular hiring needs; we’re going to expand into area X, expecting to generate Y extra revenue and for that we need Z new people.
“These days, they don’t make plans because they are too scared that they won’t work out. If everyone is hiring and you fuck up, it doesn’t really matter because everyone was doing it. But now that everyone’s hunkering down, if you stand out by hiring and it doesn’t lead to extra revenue.
“It’s arse covering. It’s the same reason why people in corporations prefer to deal with bulge-bracket banks. If you hire one of those unknown boutique outfits, no matter how much better you may think they are, and no matter how much better value for money you believe they’re offering, if it all goes wrong but you hired Morgan Stanley, you can say: ‘Look, these guys are the most prestigious in the industry, what can I do?’ Whereas if you hired some unknown Ludvick Associates or something, it’ll be easy for others in your organisation to lay the blame at your feet.
“Same story in consultancy. Often management has taken the decision already, but they still hire a big consultancy firm to seal that decision with its approval.”
Earlier, Marcus said that bonuses were coming down or were even disappearing. What about salaries?
“Goldman Sachs has been most clever about compensation. Two years ago all banks doubled salaries because bonuses came under such pressure. Goldman was the only one to make this temporary, limiting it to two years. Now every other firm wishes they had done this because Goldman is bringing down the salaries again. For others this is very difficult because it means you actually have to go into the contract and change it, which is a legal nightmare.
“Goldman Sachs … I’d say it’s like Manchester United. Only Manchester United players love Manchester United, everyone else hates them, but every player in the league would secretly love to play for them. Still, Goldman has lost some of its sheen, with the appalling losses they have had.
Marcus’s first interview for this blog contained fascinating stuff about recruitment research and the hunt for the “org chart”. He had some more gems:
“Italians and Lebanese are fantastic sources because they all seem to know each other. If you get one to talk to you, they’ll go, wait, I have a cousin who works there and there, and I know someone who knows someone who is on that team. Spanish bankers are like that, too.
“So when I start doing research on a particular team at a bank, I will go down the list of people, and start by calling the person with an Italian or Spanish name. Of course this is not an iron-clad rule, but generally speaking it works well.
“Lebanese are more guarded than Italians when you establish contact. Almost impossible to get talking are the Germans and Swiss. They say nothing. It is a real shame because they are so precise. That would be my dream, to get Germans to talk to me.”
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