“I left my MD job at Citi to advise bank CEOs on technology. Here’s how to survive as investment banking evolves”
Huy Nguyen Trieu would like to point out that he’s not just another investment banker quitting for fintech. The former head of macro structuring at Citigroup in London left the industry in June to start a fintech consultancy, but this was a long-term plan.
“For the past two years, investment banking was my day job, but I’d been heavily involved with fintech over that period too,” he says. “I’ve always been entrepreneurial and interested in innovation.”
Specifically, Nguyen Trieu has been (deep breath), a mentor at Startupbootcamp Fintech, a mentor at London tech accelerator Level39, a board member for Fintech HK and resident fintech expert at Saïd Business School, all while holding an MD role at Citi. And before he started in investment banking in 2003, he ran his own tech company, Ukibi, which he describes as a “precursor to LinkedIn”.
Investment banks are not technology companies, yet
Nguyen Trieu isn’t getting involved in the nuts and bolts of getting a fintech start-up off the ground. Instead, his new firm The Disruptive Group advises banking and insurance executives on how they should be thinking about technology and fintech.
“Banks talk a lot about being technology companies, or are accelerating certain fintech start-ups, but actually those at the top, who are smart people, don’t really understand the impact of technology. They didn’t need to in order to be successful in the past. It’s the number one concern for financial services organisations right now.”
The are two major issues for investment banks and other financial services organisations currently – using technology in a smart way to reduce operational costs and, more concerning, getting left behind by a new breed of tech savvy competitors.
“We’re not talking about fintech start-ups, but other financial institutions which are not weighed down by regulation and legacy technology,” he says. “Citadel and other hedge funds are eating market share in market making for derivatives, Marketaxess is eating up bond trading revenues, XTX in FX, Leonteq in structured product trading. Generally, these platforms increase disintermediation – banks used to be the main intermediaries.”
The double whammy, says Nguyen Trieu, is that banks are not just struggling to keep up with more nimble smaller players, but they’re also weighed down by compliance costs.
“On the one hand, technology has become so powerful that it allows for new entrants, but it could also be used for the traditional institutions to decrease their costs and offer new products to their clients,” he says. “So what could be seen as a risk could also be a big opportunity - but only if senior management and the board understands and is willing to invest.”
Nguyen Trieu says that investment banks will “automate everything they can automate”, which has obvious implications for people working in transactional, manual jobs that could easily be taken over by the right technology. But there will also be a division between investment banks taking different approaches. Banks which rest on their laurels will soon be left behind by the investment banks making “smart” use of technology, he says.
“If banks don’t invest properly in tech, they will continue to have very high operating costs (hiring tens of dozens of people in compliance vs. making a smart use of technology, for example), have a very high operational and compliance risk due to a lot of human intervention, and will struggle to improve their service offering,” he says.
As investment banks evolve there will be opportunities for the right skillsets, says Nguyen Trieu. These are the jobs that he believes will be in demand in the near future:
Business Development: “In an investment bank, the relationship with clients has always been through sales or relationship managers. In tech companies, the role of business development (partnership) is very important, and it involves much more than sales, but also working on bespoke technology solutions. For example, working between a bank and an asset manager to implement automated trading for certain products, or building APIs for clients to receive risk reporting in real time. This is typically what Goldman Sachs is starting to do with SecDB.”
Data analyst (not scientist): “Banks are starting to realise that data is valuable. In the old world, graduates would manually compile spreadsheets of client trades, and try to assess new opportunities by comparing clients. In the new world, graduates will analyse real-time trends to recommend new sales strategies and new products.”
Project managers: “There are no project managers in the front office, they are usually in middle, back or IT. I think there will be a real need for project managers with a very good understanding of the business (potentially coming from the front office) to implement new technologies to improve the business. For example, implementing a recommendation engine for institutional sales is less of a technology issue, and needs to start from a thorough understanding of the business and processes.”