Why Millennials Refuse to Work for Big Banks
It's that time of year again: when private equity firms start poaching investment banking analysts with less than 10 months of experience on the job.
"These kids don't even know where the restroom is yet," a recruiting coordinator at one of the big U.S. banking firms told me recently, "and they're already signing contracts to leave."
PE poachers aside, Wall Street banks have bigger problems on their hands: they're losing talent to the tech industry. Some of this talent is leaving after learning that, despite new workplace policies like Protected Saturdays and no working past midnight, a junior banker's job can be a major grind, consisting of little more than banging out spreadsheet after spreadsheet, pitch book after pitch book until 11:59 p.m. Monday through Friday.
Other talent isn't even getting that far. That is, they're not even giving a career on Wall Street the old college try. They know early on, before they even get to college, that a job in finance is no longer what it once was, that it's no longer looked at being all that prestigious, that it's no longer looked at as being all that admirable, that it's no longer where young people can gain the best learning experiences that set them up for long and prosperous and challenging careers.
And so, their backs to the wall, big banks are doing everything they can to get the best and brightest to come over to the finance side. Unfortunately, nothing's working.
Bank managers are trying to persuade younger employees to stick around and rise through the ranks, as generations of bankers did before them, instead of bolting to Silicon Valley or smaller investment firms.
According to a LinkedIn Corp. analysis conducted for The Wall Street Journal, analysts and associates who left their positions at a dozen investment banks in 2015 stayed an average of 17 months, compared with a 26-month average for those departing the same positions a decade earlier. Back in 1995, the average tenure was 30 months.
The entry-level exodus has spurred Wall Street into an uncharacteristic bout of soul searching, as leaders conclude that the industry must alter its long-held traditions and rethink its approach to management.
Indeed, and they're going to have to face a few, unpleasant facts.
One is that times have changed, and Silicon Valley has replaced Wall Street as the center of the world. Today, unlike a decade ago, if you walk down any street in any city in the world, nine out of ten people are doing the same thing: looking down at their phones. And that's where the center of the global conversation begins: with anything and everything having to do with that experience, that relationship between human being and device. And the closer one is to altering that experience, the closer one is to the center of the global conversation, and that's where young, talented people want to be.
In other words, no matter what banks offer up as a new workplace incentive, whether it's faster promotions, more money, more time off, more free food, more volunteering options, more opportunities to stream Spotify on the job, it's just not going to be able to change the fact that big banks are not the creative drivers of the world. Yes, Wall Street raises capital for tech firms, represents tech firms in M&A deals, underwrites tech firm IPOs, and performs scores of other financial services for tech firms, but they're not driving change like the Facebooks, Googles, Apples, Amazons, Ubers, and many other tech firms, both big and small, are doing these days.
Another fact is that now young people want many different experiences throughout their careers, and this means new college grads will use their first jobs as stepping stones to their second jobs, their second jobs as stepping stones to their third jobs, and their third jobs, etc., into job-hopping infinity. In fact, the average tenure in a job across all industries is now less than three years.
And so, why don't banks, which still offer excellent training for young professionals (there are still few other places than the big banks to learn all the ins and out of the three main financial statements, which are essential to know to run any for-profit concern), advertise their jobs as such? That is, why don't banks play up the fact that a job at a Wall Street firm is great training ground for other jobs in other industries, including technology?
For example, banks could say: Look who's now the CFO of Google ... the former CFO of Morgan Stanley! And look who's now the CFO of Twitter … a former technology banker at Goldman Sachs! Come work for us and you, too, thanks to the training and experience we supply, could someday join the tech industry and thrive there!
It might sound counterintuitive, not to mention crazy, to pump up the competition. However, another big and powerful industry has been doing this for years: the consulting industry. And it's working.
This is from an Economist article in 2013:
Some [consulting firms], such as McKinsey, make it easy for big firms to poach their people, by putting potential employers directly in touch with consultants who tick the right boxes for a vacancy. The idea is that this outplacement service makes McKinsey a more attractive place to work. It also keeps the talent churning, constantly refreshing the firm’s intellectual capital.
This also keeps former McKinsey consultants coming back to their former employer to hire them once they work at big firms needing consulting advice.
Here's how this could work for Wall Steet. Imagine that Jenny Doe, who began her career at J.P. Morgan and left after her third year to create a health care startup, is now looking to access the public markets, or raise a late-stage round of private financing. If she had a good experience at J.P. Morgan, I imagine her former employer will be one of the first firms she looks to for underwriting/financing help.
A third fact is that banking is no longer the most prestigous industry to work in. Which isn't necessarily a bad thing. It just means banks have to tweak their recruiting efforts a bit.
To that end, I was recently speaking with a friend who's a managing director at a top Wall Street bank. He was telling me that his firm's management asked him for advice on how to better retain junior bankers. His advice was simple: Start recruiting at so-called second-tier schools. "Go to the better state schools," he told management, "and go outside the Ivies. All our bankers at our target schools are leaving for other industries, but if we get second-tier talent, they'll be more likely to stay."
Management hated the idea. They thought so-called second-tier schools were beneath them. "They basically laughed at me," my friend the MD told me, "and so I said, 'Then you should be prepared for more people to leave.'"
Banks also need to face the fact that it's now easier and cheaper than ever to start a business (all you need is a laptop and an Internet connection) and so most of the riskiest, inventive young professionals will likely have more reason not to work at big corporations, including banks.
There's also the fact that, due to these low barriers to entry, there are now many companies solely filled with young people and solely catering to young peoeple, providing them with perks and benefits that they specifically care about, such as crazy company-wide Halloween parties. And who do you think young people want to party with: people their own age or people their parents' age?
And, last but certainly not least, there's the most important fact of all: the bottom line. That is, big banks have to swallow the fact that no matter how hard one of their employees work, no matter how many hours they put in, no matter whom they land as a client, they will never, ever be able to make Zuckerberg money while on their payroll.
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