How to Position Yourself If Your Bank is Firing to Hire or to Cut Costs

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Layoffs are happening. They are happening at Bank of America Merrill Lynch in equities and they are happening at Goldman Sachs, across all lines, but especially trading.

At Bank of America/Merrill Lynch, we are informed by Bloomberg that some senior equity traders have been let go after the bank informed employees in equity sales, trading and research, and that it was planning some layoffs in mid-March. Workers reportedly were told that the dismissals were meant to free room to hire outsiders while leaving headcount almost unchanged.

At Goldman, meanwhile, Reuters reports that staff are being let go as part of the annual review process and that many of the cuts are aimed at traders who can be replaced with new technology, or back-office, technology and operations staff who can be replaced with less expensive employees, Reuters quotes a source as saying. Reuters also reports that one equities unit at Goldman has been asked to reduce staff by 10 percent and bonuses by 25 percent even though it met its targets last year.

From this we conclude that:

1. You are going to be vulnerable if you’re an expensive, long-tenured employee who could be replaced by a subordinate. Bank of America has dismissed Steven Milunovich, who had been in the business for 20 years and was undoubtedly expensive. It wants to hire “outsiders,” who may be cheap.

2. You are going to be vulnerable if you’re either a trader in a business that will be conducted electronically in the future (for example, a far greater proportion of the fixed income market), or if you work in a technology role that could be undertaken more cheaply in a remote location.

3. Therefore, we see two sweet spots: structured products that don’t lend themselves to exchange trading (but also don’t require a large capital commitment) and technology roles that require a presence alongside sales and trading teams. "Credit solutions" professionals and quant developers both look like safe bets.

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