Investment banks are having a harder time keeping junior employees. In the past, it was due to the allure and compensation of private equity and hedge funds, but now it also includes startups and nonprofits. Try as they might, banks won’t be able to hold on to the Millennial generation as easily as past generations. But, it’s not a bad thing, and it’ll keep the people that are willing and able to continue their banking careers.
For all intents and purposes, the investment banking world is one driven by relationships. If the prop trading and investing businesses are excluded, it’s not a stretch to compare bankers with salespeople. Bankers spend the majority of their time marketing their bank’s capabilities to their clients. Managing directors will reach out to corporate executives and/or PE fund managers to encourage transactions that will potentially utilize the bank’s resources. This could be an acquisition that uses cash (from a line of credit offered by the bank), stock (that the bank had previously helped produce with an IPO), and debt (from a new debt raise led by the bank). Capital markets help consolidate and use financing relationships in syndications to raise new debt or equity. The list goes on and on.
As with any relationship, bankers tend theirs very carefully. This is their sole revenue driver, and a lost relationship is not only lost potential fees but also a chance for someone else to pick those fees up. Credibility and trust is valued at a premium. And nothing destroys a relationship faster than a banker who seems careless. This is why it takes forever for a junior banker to even be communicating with a client in a meaningful manner. The amount of time it takes to destroy a relationship is infinitely shorter than it takes to make one, and it could be as simple as a wrong number or a misprinted page.
But the banks themselves aren’t fully innocent of blame. Ownership of work is something that’s emphasized in banking. What senior bankers don’t understand is that the junior bankers want to take ownership of their work. The problem is that they don’t understand the weight of their work, and this is an important distinction. The Millennial generation doesn’t like doing things just because “that’s the way it’s always done.” But if there’s a candid conversation, or a lively debate, Millennials can be handled without kid gloves. For example, to Steven Wu in the article, I would say: “As silly as it seems, fixing logos does help with pitches. Why else is there an entire industry devoted to making things look nice?” (i.e. marketing. And I know, marketing friends, that’s only 10% of the business, but back to my point)
The truth, however, is that startups are fundamentally different businesses that encourage conversations up and down the hierarchy. While relationships plays a role, if the product isn’t good, then no one will use it. This is why companies encourage iteration, new ideas, and general R&D attitudes. And people can see how they affect the entire process, and how they’ve contributed to the success or failure. And failure, to a certain extent, is fixable (look at all those updates on your phone).
Finance, and especially banking, is not for everyone. Intelligence is just one factor in hiring, but it’s the most visible one during the recruiting process. This trend to keep and cultivate bankers is a good one, but it’s not new. Banks have always been attractive hiring grounds for anyone ranging from corporates to funds. The best that organizations can do is make it clear that they are invested in their employees. Everything else can only be derived from crystal ball gazing.
TL;DR: Banking isn’t for everyone. And new employees are always too young to understand the consequences of their work.