"Banks are exploiting a young, talented and largely ignorant workforce"

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We need to talk about graduate technologists in investment banks.

We need to talk about the people who've done the internship, who've got the offer; who are looking forward to interesting work, big bonuses, promotions and a true meritocracy. We need to talk about the people who find themselves stuck with miserly salary increases, updating antiquated proprietary systems, fighting vicious political battles over who gets to work on the best projects.

I've been there. When I started as a graduate technologist at Goldman Sachs, there were around forty of us in London. Most of us came through the internship or placement programmes that are heavily pushed by select universities like Imperial, Bath and Warwick. (If you’re applying to a graduate scheme at a bank without an internship to your name, good luck to you.) By the time I switched to another bank four years later, there were less than half of us left. Considering Goldman spends a colossal amount of money training their technologists the attrition rate is as appalling as it is needless.

Why the exits?

Around 18 months into the graduate program, our class had a panel discussion with a few older graduate employees along with a HR representative. One of the more outspoken members of our class asked, “Will we make £100k within four years of working here?”. The panel looked at each other half amused and half horrified. You don’t ask things like that, and looking back now it just shows how naive these graduates are. Needless to say they all said “no”. You should have seen the questioner’s look of dejection. A lot of us are in it for the money, you see.

The money is part of the problem. Whilst the graduate starting salary for technologists at banks is still pretty good, it doesn’t go up by very much in absolute terms. After four or five years, you might be pushing 30 years-old on a mid-£50k base salary. That’s not exactly going to get you a house in London is it? You might be getting married and thinking of buying a first home, or starting a family.

In the circumstances, it’s a financial no-brainer to move on. Move on, and get a 30%+ increase, taking you well into the £70k or £80k territory, with a title bump to VP if you haven’t made it yet. There's a penalty to staying in the same place. I know hedge funds who take technology graduates and their starting salary is north of £70k. In my own case, I’m now paid 56% more than I was on at Goldman, because I’m not treated as a ‘grad’ and am benchmarked against older higher earners.

So you’re being underpaid. To add insult to injury you are also likely to be working on proprietary systems or frameworks that add precious little to your résumé. At Goldman this problem is worse than at other places because of the ubiquitous SecDB risk system. SecDB is wonder of the banking technology world, and very good at what it does, but I would never advise anyone to work on it in isolation. Many graduates do. The only organisations that would value the skills acquired are Athena and Quartz teams at JP Morgan and Bank of America respectively. If you’re not careful about managing your career you can be pigeonholed into unemployability.

Whilst banks may simply accept losing graduate technologists in their droves, they ignore the effect of doing this year after year. Bruce Webster coins a term called the “Dead Sea Effect” which describes the process of organisations driving away good employees whilst those that remain are just grateful to have a job:

“…the more talented and effective IT engineers are the ones most likely to leave — to evaporate, if you will. They are the ones least likely to put up with the frequent stupidities and workplace problems that plague large organisations; they are also the ones most likely to have other opportunities that they can readily move to. What tends to remain behind is the ‘residue’ — the least talented and effective IT engineers.”

It’s certainly true that the most talented engineers in my Goldman graduate class moved on fast. The ones who stayed had drunk deeply of the corporate kool-aid, and could not countenance the thought of being ‘disloyal’ to the firm. - Either that, or they simply didn’t fancy putting themselves up for interview.

The worst thing, is that it's only when you quit that banks come clean on your true value.  In my own case, and in many others I’ve heard about, what happens after resigning is the counter offer. Michael Lopp calls it the diving save, and it is always a sign of bad management. On day X your labour is worth Y to the bank. The day after resigning you’re brought into a meeting room with the managing director (who you’ve never spoken to before) and told your labour is suddenly worth Y+25% with the promise of a promotion next January to boot. It’s disingenuous. You should almost always never accept a counter offer, because it leaves a bitter taste for everyone involved.

Ultimately what banks like Goldman are doing is exploiting a young, talented and largely ignorant workforce. They and others suppress pay for as long as possible, espousing the “long term greedy” rubbish when you complain in your annual compensation meeting.

My advice to anyone who wants to be a software developer in the finance industry is to do around two years at an investment bank, accepting that you won’t get paid large bonuses or see big increases in salary. Once you make associate you’re very employable are are paid way below market; so jump ship to another bank, consultancy, hedge fund or established FinTech company. You’ll easily be able to achieve a 30% increase or more on your base salary. You should also have a much better idea about the nature of the work you’re signing up for.

Really though, banks need to start paying their graduate technologists more money from the start. They need to increase base salaries and bonuses aggressively for the ones they want to keep around. There is simply more competition now. Banks aren't the only game in town if you want to make money as a developer. If banks do this, technologists will feel more valued, they won't lose people they've spent hundreds of thousands of dollars training, and their technology departments won't turn into Dead Seas of mediocrity.

Dan Goss is the pseudonym of a technologist who formerly worked for Goldman Sachs.

Contact: sbutcher@efinancialcareers.com

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