The investment banking industry has found itself in a sticky situation: it’s losing its appeal. Wall Street banks are now stepping up to the plate with efforts to create a better environment to their young investment bankers.
How unhappy junior bankers really are in the industry became clear when a group of first-year Goldman Sachs (GS) -0.06% bankers came forward to talk about the effects the gruelling work hours were having on their mental health.
The young bankers added that working from home during the pandemic had only magnified how little work-life balance was granted to beginners in the industry, especially with deal making activity at an all-time high.
“The velocity has changed forever since the pandemic,” lecturer of finance at the Wharton School of the University of Pennsylvania, David Erickson, tells the Financial Times. “Instead of eight to 10 [presentations] a week for the team, it’s now eight to 10 presentations a day.” (Financial Times, 2021).
The issues faced by banks are not only the expected working hours, so called “grunt work” has been highlighted as problematic as well. Institutions like Goldman Sachs, Barclays (BCS) -0.10% and Moelis (MC) +0.73% are now working to automate mundane tasks like generating pitch books and valuation modelling.
“The goal with this is to allow younger bankers to do more and more of the meaningful, and less and less of the menial,” (Financial Times, 2021) says Dan Dees, co-head of investment banking at GS.
John Miller, co-head of Barclay’s investment banking says: “We’re investing to automate elements of the junior banker’s role in an effort to improve efficiency and enhance their work experience,” Financial Times, 2021).
The change in treatment of junior staff has been received with mixed reactions. While some applaud the progress, there are those who believe the gruelling working hours on mundane tasks are a rite of passage, something they went through so the next generation should as well.
These are the same execs who believe staff that cannot deal with the journey should go into a different field. Well, according to Erikson from the University of Pennsylvania, that is exactly what they are doing.
Erickson says he sees fewer and fewer of his students choosing a career in investment banking, a trend that began even before the pandemic. Instead, he says, his students opt for private equity, tech and consulting.
Long-term this is leading to staff shortages among younger bankers. Automating these mundane tasks gives junior staff the opportunity to focus on work of value, while also giving the institutions the chance to survive in times of staff shortages.
Experts believe to tackle the problems Wall Street is currently facing regarding new recruits, three major changes need to happen. Firstly, and this has been installed in most large banks by now, junior staff must receive adequate pay for their work. Secondly, exchange menial tasks with meaningful work and lastly, mentor them.
“Some bankers just will not spend time with junior people,” Stowell, a finance professor at Nothwestern University’s Kellogg School of Management, told the FT. “And some only spend time with junior bankers when they’ve made a mistake. Then these young people feel like they've been treated like machines.” (Financial Times, 2021).
_________________________________________________________________________________________________________________
*Stock percentages taken on 14.09.2021 at 10:19.
*Franklin, Joshua (14. September 2021). Financial Times: Investment banks accelerate efforts to automate junior ‘grunt work’. Last viewed on 14.09.2021 on https://www.ft.com/content/06b0a82d-b0fa-437f-b640-57bdaa508e59.
