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The financial services industry will be hit hard by Brexit, but could the U.S. benefit if London struggles to maintain its title as Europe’s leading financial center?

How Brexit will impact financial services hiring on Wall Street

"And so castles made of sand fall in the sea eventually."

The UK’s unexpected vote to exit the European Union has made Brexit a household word. Even those who had not paid attention to the vote were affected by it, as most of the stock markets around the world plummeted last Friday and the value of the British Pound fell to a 30-year low versus the dollar. At least in the near term, Brexit will cause a hiring freeze, because uncertainty makes banks reluctant to add headcount.

In the short-term, most companies will probably be very conservative in their hiring, taking a wait-and-see attitude as the process begins to unfold this fall. Even many U.S. companies that are mostly shielded from the Brexit fallout will be cautious as they look for signs to validate the notion that this event will not lead to another financial crisis.

The ultimate outcome of Brexit will in all likelihood hit UK and Europe harder than it does the U.S., so U.S.-based financial services companies whose revenue streams are predominantly domestic will probably escape relatively unscathed.

In the U.S., the large international banks and broker-dealers are most at risk, as many have significant operations in the UK and other EU countries. These companies are sure to be cautious in their hiring over the near-term and probably even longer, as they will be directly affected by how the process evolves and concludes.

Smaller banks and broker/dealers, with business primarily in the U.S., as well as independent wealth management firms in the U.S., will be impacted less directly by the results of Brexit, but they will be affected by how their clients and customers react to the uncertainty that the world now faces.

Self-fulfilling Brexit prophecy

If many people predict that the UK and perhaps Europe go into recession in 2017 as a direct result of Brexit, then that pessimism is sure to impact U.S. economic growth negatively, even if it does not push the U.S. into a full-blown recession.

But if the businesses of banks’, broker-dealers’ and registered investment advisers’ clients slows, and if people remain cautious and on the sidelines from an investment point of view, then these firms are also sure to slow their recruitment initiatives or even curtail their hiring altogether.

In the worst-case scenarios, financial services firms, even some based here in the U.S., would have to begin layoffs.

Having said that, this latter group, while perhaps taking a cautious wait-and-see attitude in the short-term, are more likely to increase the recruitment once things shake out and the picture becomes clearer – perhaps by mid-2017.

Doom and gloom

Brexit has the potential to shake-up the international community as no other event has since Lehman Brothers went under. Firms have learned from past market downturns not to over-hire in good times because it means they have to make significant layoffs during the next downturn.

Having said all this, as always firms will make opportunistic hires even when the outlook is uncertain. Just don’t expect this process to be easy or widespread. If you are in the market for a financial services job, make sure that you distinguish yourself and can clearly articulate the unique value that you are able to add to potential employers.

Andy Klausner is the founder and principal of AK Advisory Partners, a financial services consultancy. Previously, he has worked at Citizens Bank, Janney Montgomery Scott, Morgan Keegan and UBS.

Photo credit: oversnap/GettyImages

AUTHORAndy Klausner Insider Comment

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