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Ten reasons there's no real alternative to investment banking careers

Life as a quant developer

Jobs in investment banking aren't what they were. They pay less. Bonuses at all European banks and U.S. banks in Europe are being capped. Bankers are being made to wait longer before they can take delivery of their bonuses. The only constant is the stress, which is still pervasive and which seems to be increasing in proportion to the extent that people in banks consider themselves underpaid.

If you're an unappreciated banking professional in need of a Xanax prescription, what can you do? The answer, unfortunately, is nothing. Once in a while people do get out of banking and do set up small entrepreneurial ventures, but entrepreneurial ventures are another well-trodden path to penury and nervous abrasion. If you need an income, you're still better off in banking.  Here's why...

1. Law is going to the dogs

Even if you wanted to go through the rigmarole of retraining to be a lawyer or barrister, it wouldn't be worth the hassle. Lawyers earn less than bankers. And lawyers are having their pay cut and being made redundant too.

The most recent PwC UK law firm survey found that top law firms have been culling both their equity partners and their fee-earning partners. They're also taking tighter control of costs and paying more performance-based bonuses (as opposed to simply allocating bonuses based upon length of service). Pay for senior staff at most large UK law firms is either static or falling.  According to PwC, non-equity partners at London-based UK law firms can make £300k, max. Equity partners can make up to £2m, but achieving an equity partnership after a mid-length career in banking will be like climbing K2 after scaling Everest.

If you're an ex-banker who becomes a newly qualified lawyer, you will spend long years earning no more than £70k.  And if you want to become a lawyer in a small UK country town? Forget it - no one can afford your fees and the dismantling of the UK's legal aid system means the government won't subsidize you. And if you want to become a barrister on legal aid? After three contiguous days working on a trial, the government is proposing cutting your fees to as little as £14 a day.

2. It will take you an entire decade to train to become a doctor

If you want to be a medical doctor, helping the sick and needy and earning around £80k (or £100k if you're a consultant on NHS work alone) you'll need to retrain for a decade - or for 14 years if you want to be a surgeon. That's a long time when you're already mature.

3. It is not easy to become an accountant

Accounting was once a nice, easy, career which took late-starters and offered them a nice steady income. Now it's become a hyper-competitive profession in which pay is shrinking and people are being laid off in callous and hurtful ways.

There were around 25 applications per place for graduate jobs in accounting in 2012, according to research firm High Fliers. Pay for accounting partners is in decline. And last year KPMG used voicemail to inform 500 of its staff that they were at risk of redundancy.

4. Consulting is only accessible to people who've worked in risk, or are willing to spend £60k ($90k) on an MBA

Maybe you want to be a consultant? Consultancy firms are, after all, hiring thousands of people. However, most of the new consultancy jobs are related to risk or control functions in banks and therefore require direct risk or control experience. Just because you've spent ten years in M&A or cash equity sales, you won't be able to walk into a financial services consulting job.

If you want to move into consulting more broadly, you will probably need to study an MBA. And an MBA will cost you big money.  London Business School (LBS)  charges £60k for its MBA course, for example. Last year, 36 of its MBA graduates went into McKinsey & Co. Another 31 went into Boston Consulting. However, 54% of the LBS MBAs who went into consulting had prior consulting experience. Another 36% of them came from the corporate sector. Only 10% of the LBS 2012 MBA graduates with consulting jobs came from financial services. Conclusion: even an expensive MBA is no guarantee that you'll be able to transition from banking to Bain & Co.

5. The buy side hires virtually no one

If you want to escape banking, you may also have toyed with the idea of moving to the buy side. Like consultancy firms, asset managers are hiring - yesterday's report on the state of UK financial services from the CBI and PwC revealed their extreme optimism about recruitment over the next three months.

So far so good, except buy-side employers are teeny tiny compared with big investment banks. Schroders, for example, has been consistently adding staff since the first quarter of 2012. However, Schroders only employs 3,059 people in total and has added no more than 50 people per quarter. Hedge funds are even harder to get into. Millennium Capital is the big hedge fund hirer right now, but so far this year Millennium has added 27 registered people, according to the FCA Register. For a hedge fund, that's a lot of people. However, it won't make much difference when it comes to rehousing thousands of refugees from investment banks.

6. Corporate finance boutiques hire virtually no one

If you work in M&A for a large investment bank, maybe you want to escape the relentless pressure to cross-sell the bank's product-palette for the sanctity of a pure advisory house. Good luck. Zaoui Capital is the new hot kid on the advisory block. So far, Zaoui has person - a junior from Morgan Stanley.

7. Private equity funds are a lot less keen on experienced bankers than they once were

It's never been the easiest transition to make, but ten years ago you could sometimes move from investment banking into a senior role in private equity. Nowadays, that's become even harder to achieve. As private equity becomes less about structuring debt for a quick return and more about investing in a company and working to improve its long term profitability, private equity funds have become commensurately less interested in leveraged financiers with amazing structuring skills and commensurately more interested in people with industry experience who know how to improve the operational efficiency of the companies they're investing in.

8. Outside financial services, most jobs pay peanuts

If you have a certain lifestyle that requires a certain income - of six figures at least, you will struggle to find this in most areas of British industry. According to the Office of National Statistics, only the top 1% of British taxpayers earn more than £150k. Even chief executives only earn an average of £85k. Some sort of lifestyle alteration may be required.

9. Even easy jobs are massively oversubscribed

Maybe you want to get out of banking and do something totally different and downsized, like becoming a barista in a coffee shop. Think again: barista jobs are nearly as unattainable as jobs in hedge funds. In February 2013, more than 1,700 people applied for eight jobs at Costa Coffee.

10. If you hang on in banking, you can collect a huge salary and wait for a severance payment

Now that bonuses are falling as a proportion of banking pay and managing director salaries in investment banks are £200k-£300k, and rising, it makes sense to sit around collecting a giant salary until such time as you are forced out. At that point you should, hopefully, be able to negotiate a handsome settlement. In the past, banks in the UK have tended to pay at least £70k in redundancy pay - thereby removing the incentive for City bankers to sue them for unfair dismissal (compensation for which is capped at £74k).


AUTHORSarah Butcher Global Editor
  • km
    2 July 2013

    So the idea is to remain in an unhappy job until we hang around long enough to be fired and receive a 70k payout? Sounds like excellent advice!

  • mo
    mog the forgetful cat
    2 July 2013

    It's a hard life. Poor souls.

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