Morning Coffee: The story of the silly banker and sensible secretary. The new route to a $200k starting salary in finance

There exists a reasonable expectation that successful bankers are good with money. After all, younger bankers who’ve raked in millions of dollars in a relatively short period of time have been specifically trained to understand the key principles of finance. Yet time and again, bankers, traders and brokers make the same mistakes as many others who’ve hit a rush a money only to find themselves destitute.

A banker with lousy personal finance habits appears, at least on the surface, to be a bit of a paradox. Not so, says Morgan Housel, partner at investment firm the Collaborative Fund and a former columnist at the Wall Street Journal. “That’s because investing is not the study of finance,” he wrote. “It’s the study of how people behave with money.”

To showcase his point, Housel broke down the story Grace Groner, an orphan and career secretary who lived a humble life that took her to age 100. Despite all the bills that come with old age, she left $7 million to charity when she died in 2010. Then there’s Richard Fuscone, former vice chairman of Merrill Lynch’s Latin America division who declared personal bankruptcy within weeks of Groner’s death. The Harvard-educated man who retired in his 40s with $66,000 monthly mortgage payments was soon overcome with debt after a period of heavy borrowing and several illiquid investments.

Housel uses the two stories to highlight several behavioral normalcies that can affect people who experience an influx of money, no matter their educational background. Financially successful people, particularly those who do well younger in life, tend to underestimate the role of luck and timing, instead tying their successes directly to their abilities. Experiencing financial success can lead to overconfidence and massive overspending – two clichés often associated with bankers in their 20s and 30s.

Early financial success can also make people susceptible to seeing the riches of older colleagues and wanting to measure up. “When most people say they want to be a millionaire, what they really mean is ‘I want to spend a million dollars,’ which is literally the opposite of being a millionaire,” Housel wrote. “This is especially true for young people.”

One recent study found that the neighbors of lotto winners are 7% more likely to declare bankruptcy in the following three years due to "conspicuous consumption" and investing in risky financial assets. While the grass is always greener for everyone, there are some particularly nice lawns on Wall Street for up-and-coming bankers to compare to. Most people don’t want to live like Grace Groner. Heck, many financiers appear to not even want to live or invest like Warren Buffett. The hare can hold more allure than the tortoise.

Elsewhere, hedge funds that are starving for data scientists have started building relationships with top universities, similar to the recruiting strategies of investment banks. Man Group has even co-founded a research facility with Oxford University that has led to a host of hires.

The competition for data scientists has resulted in the wild growth of pay packages, according to the FT. Hedge funds are paying top master’s students $90k-$120k to start while committing salaries of as much as $200k for entry-level PhD grads. And that’s not even including bonuses.

Meanwhile:

Deutsche Bank Chief Executive Christian Sewing wrote a memo to staffers who have not (yet) been given the axe, telling them not to be discouraged despite all the job cuts, the bank’s historically-low share price and the recent lowering of its credit rating. (Bloomberg)

Wells Fargo’s post-Brexit plans reportedly involve moving some of its London operations to both Paris and Dublin. (FT)

Artificial intelligence appears to be touching every business in banking. Morgan Stanley used AI to create more personal emails for its wealth management clients based on scans of social media and other online sources. (Barron’s)

The European division of hedge fund giant Caxton Associates slashed pay – and its management fee – after a disastrous 2017. (City AM)

Raj Bhattacharyya, Deutsche Bank’s head emerging-market debt and foreign-exchange in the Americas, is leaving the firm after 17 years. (Business Insider)

City stockbroker Oriel Securities, owned by U.S. investment bank Stifel Financial, is adding headcount to its equities, debt financing and M&A advisory businesses. (FT)

Citigroup spent $8 billion, or more than 20% of overall expenses, on technology in 2017. The bank plans to increase that number this year. J.P. Morgan is expected to spend $10.8 billion in 2018. (WSJ)

Commissions paid by asset management firms to banks and brokers decreased by 28% in the U.K. during the first quarter following the introduction of MiFID II rules. (FT)

A former J.P. Morgan wealth manager is suing the firm for racial discrimination after he was allegedly asked to move from the firm’s Manhattan office to its Harlem branch, where he would be “best-suited” because he is “black,” according to the complaint. (NY Post)

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