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Investment bankers really aren’t that special, says former banker

Banking, perhaps more than any other industry, relies on human capital. There’s no widget to sell. Really, it’s all about employing the smartest, most capable people. As such, banks go to extreme lengths to retain their best staffers, as Barclays recently did in paying out large bonuses to U.S. investment bankers. If they lose their top talent, the whole ship may sink, goes the theory. Or maybe that’s just what they want people to think.

In a scathing yet illuminating op-ed in the Financial Times, former Cazenove CEO Robert Pickering attempts to dismantle the fallacy, as he sees it, that banks need to throw money at investment bankers to keep them from leaving, and from keeping the bank from plummeting down the league tables.

Pickering recounts tales of continually being “held at gunpoint” from investment bankers who threatened to jump to a competitor – “usually for Goldman Sachs and invariably for ‘twice what they get here,” he writes. After a few years, he realized – whether he paid to keep them or not – the bank carried on. It found new people who were equally smart and competent.

In perhaps his best example, Pickering references a showdown in the early 2000s where his predecessor was told that “the very survival of our 200-year-old firm” laid with a wunderkind banker in his 20s who was threatening the leave. Cazenove did what many other banks have done and likely will continue to do. They offered to make him a partner. He left anyway.

“A few years later, I reminded my senior management team of this incident and none of us, myself included, could remember his name,” Pickering said.

The timing of the op-ed is far from random. Pickering, a Barclays shareholder, is non-too-subtly bashing the U.K. bank for increasing bonuses despite a drop in profit. Barclays Chief Executive Antony Jenkins has said repeatedly that the bank had no choice – it couldn’t rebound from the mass defections that likely would have resulted without the pay raises. Leaving bankers unhappy would have created a “death spiral,” he said.

Pickering respectfully disagrees. “What is remarkable when considered dispassionately is not how fragile these businesses are but how resilient,” he wrote. Or maybe he’s just another angry shareholder.

Hiring News Roundup (eFinancialCareers)

In this week’s hiring roundup, Citi needs capital specialists, banks are desperate for equities staffers and a regulator wants more bodies.

Tough to Fill Jobs (eFinancialCareers)

Want to know where the talent shortages are in investment banks now? Here’s a list of six interesting jobs in New York and London that banks just can’t seem to fill.

Huge Mistake (Bloomberg)

Bank of America shares plummeted after the company acknowledged that it made an error in the way it calculated its capital levels. As a result, BofA will likely need to lower its planned dividend after it resubmits its capital plans to the Fed.

More Libor Charges (WSJ)

Prosecutors have charged three more Barclays employees as part of their investigation into the manipulation of key interest rates. Two of the suspects are Americans: Alex Pabon and Ryan Reich.

Former Bankers in Need? (Financial News)

Headhunters say sell-side firms will now need to be creative in filling empty equity research seats, including hiring former analysts who left the industry years ago.

Yikes (Reuters)

Three of the traders who were fired or suspended for the alleged manipulation of FX markets weren’t even registered with the Financial Conduct Authority.

Bringing Out the Big Guns (NY Post)

Activist investing has graduated from PowerPoint presentations to the big screen. Bill Ackman’s Pershing Square Capital is debuting a documentary on how Herbalife, a company whose stock Ackman is shorting, is a pyramid scheme. Following the screening will be a panel moderated by Connie Chung.

Buzz Around the Office

Tough Day at the Office (BuzzFeed)

If you’re having a bad day at work, you can at least feel good you are not these people.

Quote of the Day: “It is possible that Mr. Jenkins will prove his doubters wrong and come out on top, but from my armchair it looks like an unequal fight and my money would be on the investment bankers.” – Robert Pickering

AUTHORBeecher Tuttle US Editor

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