Morning Coffee: Avoid working in finance and still save $400k+ before you're 30. Bonus changes at UBS

If you're in your 20s and work in finance, you likely make a great deal more than most people your age. But it’s been proven many times over that a six-figure salary doesn’t always equate to savings. The cost of living in cities like New York and London is astronomical. Couple that with the expenses often associated with the lifestyle of young bankers and you’ll find that nary a few dollars get put away for a rainy day. Most junior bankers scale-up their standards of living as their salaries increase and blow their bonuses on impulsive trips and purchases, a former associate at Goldman Sachs recently told us.

One may then assume that 20-year-olds who work in tech take a similar path. After all, Silicon Valley has become the worst area for affordable housing in the entire country. The average rent for a one-bedroom apartment in San Francisco was $3,400 in 2018. In areas where Apple employees tend to live, it is now likely north of $4,000. A former Google employee recently said that, even after five years at the company, he wasn’t able to live comfortably.

Of course, there are always exceptions. One young Silicon Valley engineer has shown that creating a nest egg at a young age is possible – and he did it all without working at one of the prestigious tech giants or a thriving startup. Thirty-year-old Tong Zou was able to build up $422,000 in savings in the seven years since he graduated from the University of Toronto, according to Bloomberg. He did it while working as a front-end engineer at companies like Walmart (yes) and software provider Spigit. Zou was an individual contributor, not having yet made it to management, according to LinkedIn.

So how did he do it? It seems Zou didn’t get caught up in the expensive lifestyle that grabs many New York bankers and Silicon Valley engineers. He isn’t a “stereotypical [tech] bro bent on accumulating flashy trophies such as Lamborghinis,” Bloomberg says. Zou wrote in his blog that he plays video games and watches Japanese anime in his spare time. He also invests, “especially in stocks and real estate (mutual funds are a bad idea!) and [I] like taking risks” he wrote.

But then he decided to move back to Canada and wanted to save a few bucks on transfer fees converting his savings to Canadian dollars. That’s when he said he suffered from the ultimate “wrong place, wrong time” scenario. He bought Bitcoin, transferred it over to a digital exchange called Quadriga CX and then immediately sold it for Canadian dollars. While this was happening, the founder of Quadriga died suddenly and the $140 million in cryptocurrencies on the exchange became unrecoverable due to the fact that only he knew the passwords. That was four months ago. Zou has been living in an AirBnB with no clear path toward recovering his savings.

“I wasn’t using it for trading – I just wanted to move my money over to my Canadian bank account," he told Bloomberg. "I just got caught up in this at the wrong time, I guess." That would be a massive understatement. Fortunately, Zou also write in his blog that, "I believe true success is not just being financially secure," a statement that is now being tested to the maximum. 

Elsewhere, UBS is tweaking its bonus plan for nearly 10,000 employees. Corporate staff – including human resources, marketing and communications – will no longer earn variable bonuses based on their performance. Instead, they’ll receive fixed bonuses that equate to half a month’s salary. The move is meant to increase transparency and reduce uncertainty while freeing up time for managers, according to the bank. UBS said it still pays for performance “through salary increases, promotion decisions and developmental opportunities.”

Meanwhile:

Deutsche Bank's funding costs have gone through the roof and the bank last week issued €3.6bn of debt at these high costs even though it had no immediate need of doing so. “The high spreads reflect [Deutsche’s] high idiosyncratic risk, which is rooted in the lender’s chronic weakness in earnings.” (Financial Times)

Representatives from U.S. and U.K. banks who got together to discuss post-Brexit plans last week don’t exactly see eye-to-eye. U.S. firms appear much more open to maintaining close ties to the EU. U.K. banks, meanwhile, don’t want to be subject to the whims of EU financial regulators. (Bloomberg)

Bank of America CEO Brian Moynihan made $26.5 million in 2018, a 15% increase from the prior year. He still makes less than J.P. Morgan’s Jamie Dimon ($31 million) and Morgan Stanley’s James Gorman ($29 million), but Moynihan got the biggest raise. (The Street)

Senior bankers at RBS are reportedly upset over the size of the bonus pool for 2018 and believe it will make recruiting efforts more difficult moving forward. If reports are accurate, the bonus pool will have shrunk every year over the last 10. (The Times)

Amazon is reportedly reconsidering building a second headquarters in New York City as local lawmakers are pushing back on the tax-incentivized deal. The company said it would create 25,000 high-paying jobs as part of the move. (NY Post)

Deutsche Bank is getting a bit creative to hold on to talent that would otherwise be made redundant. It’s moved at least two emerging market M&A bankers from a desk it closed last year to other areas within the bank. The head of that desk, Philipp von Danwitz, is now leading corporate finance within the bank’s wealth management unit in EMEA. (Financial News)

European rules implemented in 2016 that hold senior managers accountable for malpractice have encouraged junior bankers to speak up and escalate issues that they come across, according to J.P. Morgan European chief Vis Raghavan. His comments come amid two scandals involving the treatment of whistleblowers. (Financial News)

The leaked nude selfie controversy surrounding Amazon CEO Jeff Bezos has opened the eyes of affluent families that now see themselves as vulnerable to risks they didn’t fully recognize just weeks ago. (Bloomberg)

A Harvard Business School professor is arguing that people would be happier if they spent their money ridding themselves of mundane tasks that take up their free time. Buy a cheaper car but pay someone else to do your yard work, cooking and cleaning, goes the theory. (HBR)