Investment Banks Will Compete With Exchanges For Talent

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Recent consolidation among global stock exchanges is the latest signal that they and investment banks will soon be competing directly, according to a recent study. In the long term, the product evolution driving the trend could translate into increased demand for those with academic backgrounds, especially in areas of product design and risk.

While banks and other sell-side organizations are shifting their focus toward more sophisticated product offerings, observers do see continued demand for "smart" financial professionals in the near term. Indeed, the industry will continue to demand Ph.D.s and people with extensive industry experience, according to one employment expert.

The study - from BearingPoint, a technology and management consulting company based in McLean, Va. - flagged trends in the global stock exchange market, including Euronext's merger talks with NYSE Group and Deutsche Bourse, as indicators that exchanges will compete directly with investment banks by the year 2015.

Based on interviews with capital market executives, the study also predicts the industry will increasingly use technology to create "designer" investment vehicles -further increasing marketplace competition.

"Sell-side firms must begin preparing immediately to use technology to both capitalize on alternative revenue opportunities and identify new ones," says Peter Horowitz, who authored the study. He also believes many of the largest firms could spin off advisory and product-development arms.

Marc Baranski, principal at New York-based Mercer Human Resource Consulting, says that for some time, investment banks have been moving their product offerings up the food chain as technology affords clients access to less complicated products, like equity trading.

"This is a continued evolution, rather than a revolution. In a sense, that evolution began 15 or 20 years ago," Baranski says. "As electronic and direct trading grew, investment banks had to move upstream to structured finance and derivatives and more complicated brokering and trading."

Baranski foresees this trend translating into increased demand for those with academic backgrounds, especially in areas of product design and risk. "The straight old skills of being a good broker-trader are not going be in demand for these groups," he believes. "They're going to look for these more complicated skills."

However, Baranski says the shift is subtle, so demand for smart recent graduates with both bachelor's degrees and MBAs will always be strong in finance. "For higher performers and experience, (finance job seekers) are always going see a hot market," he says.

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