When bankers don't retire at 40. Or even 50
Bill Gross is the new model for anti-ageist finance professionals. Aged 70 and worth $2bn, Gross is still working. He's got a new job has made no mention of the 'r' word. Investment banking professionals may look on with envy.
Across the board, finance careers are no longer seen as a luge to retirement. According to the most recent poll on the the homepage of eFinancialCareers, a majority of people (55%) in the finance industry now expect to retire aged 50+. 41% of them expect to retire when they're older than 55.
This is a change to how things used to be. As recently as 2010, early retirement was a thing. We were writing about a 26-year old FX trader who thought she'd retire in 10 years and about Geraint Anderson, the ex-equity-researcher turned writer, who retired after 12 years aged 35 in 2009 with £2.5m in net assets.
Why aren't people retiring from finance now? Pay is partly to blame. As we reported recently, pay for young bankers aged 25-30 still increases exponentially. But after that, it rises at a slower rate. Bankers in their 40s are wealthy, but they may not have made 'retirement money.' Plummeting bank stocks in 2008 didn't help much. "People I know who are still in banking are well off, but they're not any more well off than they were 10 years ago," says Turney Duff, ex-Morgan Stanley salesman and hedge fund trader.
Malingering senior bankers are creating problems. Every year, banks hire hundreds of university graduates and MBAs. People at the top have to leave to make way for this infusion at the bottom. But senior bankers haven't been budging. Banks have been forced into action. - As of 2013, Goldman Sachs has only been promoting managing directors (MDs) annually instead of biannually to ease the logjam.
At the same time. headhunters say banks have been actively encouraging senior quitters with generous leavers-terms. "People will often leave voluntarily if they're allowed to keep all their stock," says one equity-focused headhunter, speaking on condition of anonymity. When this inducement is offered, he says people will actually go. - "It's unusual to see people staying in trading roles much beyond 42. It's rare that I come across anyone over 50." Bonuses vest over three to five years, so quitters have an income for that amount of time at least.
Where do the 40+ finance professionals go?
Rather than going off the South of France, however, many ex-40-something bankers are opting to stay busy. Joshua Matthews, managing partner at Maseco Private Wealth, a London-based wealth management firm that works with U.S. bankers aged 40-60, says his clientele has aged and migrated away from banks to boutiques and the buyside.
"When you go to business school you always think you'll be retired by 45," says Matthews. "But it's our experience that they just shift to smaller firms."
In the past few years, Matthews says most of his clients aged 40+ have left big U.S. banks for private equity and hedge funds. Working into your senescence is less unusual in the asset management sector. George Soros, the now-84-year-old hedge fund manager, provided a role model long before Gross stayed on the pony. "Even if people have made a lot of money, they're not willing to stop - they still have more to give," says Maseco.
But as Citi's Michael Corbat pointed out yesterday, not everyone can work for hedge funds and private equity. Private equity funds in particular rarely hire senior bankers onto their teams. The 40+ bankers who can't get into the buy-side are reinventing themselves are real estate investors, says Maseco. It's easy, you don't need FCA approval, you just need to go out and buy some property. But property is expensive, and rental yields are already low. You need a couple of million, at least. All the more reason to hang on in a steady banking job for as long as you possibly can.
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“I retired from banking aged 37. Now I’m 40. This is how I would have designed my life"