Updates from investment banking
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Less grunt work will lead to less grunt: This is perhaps the obvious conclusion upon hearing that investment banks, including Goldman Sachs, are planning to automate the data processing currently entrusted to junior bankers. Underlings have also received salary increases as Wall Street tries to avoid a potential pandemic-induced exodus among younger staff that has coincided with a bargaining frenzy. It seems logical that if a bank pays more for interns, it will want less. Banks’ framing of the automation initiative as aimed at preventing employee burnout – rather than cutting costs and improving productivity – can then seem laughable. But two things can be true at the same time.
Banks need to improve their efficiency if they are to cope with a M&A boom, with nearly $ 4 billion in deals concluded so far in 2021. Meanwhile, corporate financial services are lagging behind compared to their colleagues in commerce and sales when it comes to exploiting technology. Banks are also right to consider how automation can free employees from the monotony and mundane. Some repetition is useful in shaping the knowledge of the underlings, but there is a point of diminishing return when the juniors are forced to pay their dues.
A model of “churn and burn” has been ruthlessly pursued for decades, knowing that only a few juniors are to be kept in the ranks. Many graduates are still happy to trade for good rewards: average freshman salaries on Wall Street now hover around $ 100,000. Investment banks have reported bumper harvests of graduate applicants in 2021.
The problem is that you only keep them for two years. Even before the pandemic, attrition was accelerating as tech companies and hedge funds waved. Analysts left their posts on average after 30 months in 1995; after 26 months in 2005; and after 17 months by 2015. While the churn rate has accelerated, the pandemic has only exacerbated the blight. Working from home deprived junior workers of the camaraderie and supervision that an office brings, leading to widespread mental health issues and disillusionment. While compiling public information books at 11 p.m. in the office is painful, it can be overwhelming within the confines and loneliness of its four walls. As well, then, that the Wall Street banks have demanded that employees return to the office (as long as they are vaccinated).
But neophyte bankers should resist blowing the corks of their champagne magnums. Automation may not necessarily be good news, as lessons from the other end of the salary spectrum might suggest. Automation has, in some ways, made life easier for workers in Amazon’s vast warehouses, who once walked 15 miles a day to pick up products. Robots now bring them items. But automation also means humans are meant to keep pace with robots. Production targets have tripled.
In the banking industry, the M&A boom means little prospect of reducing 100-hour weeks in the near future. But even without the sparkling market, a bigger question remains about the culture of investment banking. Expecting interns to work 16 hours a day risks simply creating tasks to fill the time, rather than tasks defining the parameters of the day. Presenteeism and an attitude among some upper echelons that if they had to, this year’s admission should do the same, do not create a productive work environment.
The reality is that the grunt work is relative. There will always be, comparatively, the least rewarding tasks, generally falling to the less experienced, especially in a hierarchical environment such as banking. At least the grunts, rather than the robots, are given this job. For the moment.