Once upon a time advisory banking was a cosy, collaborative industry where people spent lifetimes in the same jobs serving the same clients. Sounds crazy? Maybe, but it's true. A new study of investment banking relationships by the Said Business School at Oxford, the International Monetary Fund, and the University of Virginia, pinpoints a golden age for advisory banking. It lasted from 1933 to 1970. Since then, things have...changed.
The charts below helps pinpoint the exact moment and cause of the metamorphosis.
1. Around about 1969, clients stopped faithfully using the same bank year-after-year and starting shopping around. Deprived of a steady client base, bankers had to start competing for work.
2. Around about 1964, banks massively increased the number of partners in their employment. New bankers ate old bankers' lunch.
Unfortunately, the chart below ends at 1988 and therefore fails to register the enormous increase in employment at most banks in the two decades after that. However, it does show that until c1969, the population of senior bankers was a little like the population of the world until the industrial revolution - very, very stable. Thereafter, it crept up (or exploded in the case of Merrill Lynch). The collegial, super-elitist culture of partnership banks was then disrupted by a rush of new members who brought a more cutthroat vibe.
3. Big banks started seizing market share, making it increasingly necessary to work for a big firm which housed big egos.
Between 1933 and 1969, 14% of all deals by volume and 40% of all deals by value were dealt with by the top five banks. Between 1970 and 2007 that rose to 31% and 50% respectively. Gentlemanly bankers could still work for small gentlemanly firms if they wanted to, but there was increasing pressure to work for the super-competitive firms that were vacuuming up talent (see points 1 and 2).
IBD culture started going to go the dogs more than forty years ago. Don't let anyone tell you otherwise.