Morning Coffee: The banking job where beta personalities get big bonuses. And the Deutsche traders who might have a job for life

If you’re the kind of driven stereotype of an investment banker with a burning psychological need to be the top monkey, then this job is probably not for you.  If you join Goldman Sachs you can hope to be its CEO, but it’s not realistic to join a family office and hope that you might … get adopted? - Marry the oldest son or daughter and then wait for your boss to literally die? That’s no way to manage your career.

But if you’re all about the money rather than the titles, and if you’ve made your peace with the fact that investment banking is a service industry, the family office sector is in many ways the hottest new place for young bankers.  The very top of the tree might be closed off, but you can make much more rapid progress up the lower branches, and eat some surprising fruits on the way.  According to Paul Westall of Agreus Group, a headhunter specialised in family office recruitment, one family office employee was given a bonus of “a week on the family yacht” for a really good job, which sounds more impressive when you realise that the kind of yachts these people own typically charter for between $200,000 and $1m a week.

The big advantage of the family office environment to a mid-career banker is that not only are you on the buy-side, you’re usually reporting directly to the principal.  And the activities of a family office tend to span the whole space of things that very rich people can invest in; as well as being a fund manager, you’re also involved in private equity deals, hedge fund allocations and even potentially corporate M&A.  You also have the world of “alternative alternative investments” to consider; if your principals develop a big interest in racehorses, art or fine wine, then as their advisor you immediately become a big figure at the racetrack or the auction house.

The perks are, it seems, fantastic.  But there are also the … whatever the opposite of perks are.  Although modern family offices are becoming more and more corporate in nature, you’re still basically one of the retainers, and you’ll be dealing with a lot of people who only have faint memories of the last time someone said “no” to them.  As Agreus Group director Tayyab Mohamed suggests, it’s not a job for someone with a big ego, or somebody who has principled objections to being asked to make a cup of coffee.  You are also potentially exposed to actuarial risk on your principal; when the heirs come in, they might not have the same investment goals as the former patriarch or matriarch, and they might want to shake things up.

But if you’ve got the social skills and emotional intelligence to combine the roles of banker, butler and therapist, it’s a sector that’s growing in assets under management, and unlike many other parts of the industry, it’s hiring.  The chief characteristic you might need, though, is the right kind of background; apparently families don’t generally have an HR department or diversity policy and they like to hire “people like themselves”.  Except not as rich.

Elsewhere, the genre of “whither Deutsche?” articles turns up an interesting fact; the last time management looked at the prospect of closing down the rates business, they realised that although it might be possible to fire 18 of 23 traders, at least five would still be needed to manage the run-down of legacy positions.  So you’d have a business which lost 100% of its revenues in order to cut 78% of its costs.  And we know from a presentation last year that some of those legacy swaps positions had as long as 15 years to run – so presumably they now have 14 years to run.  It therefore looks like people on Deutsche's rates desk at least can make long term plans.

While Deutsche's rates traders are settling in, the analyst community are focusing on a point we also suggested a few weeks ago; that “ironically, one of the things that might at least slow down the pace of the cuts is the simple fact that Deutsche is not exactly in a position to raise capital at the moment, and that the scale of the potential job losses rumoured would require a substantial restructuring provision to be made”.  Estimates are for a €4bn total costs and €2bn charge, which could push the company into loss for the year, breaking Christian Sewing’s promise and seriously antagonising the shareholders.  Maybe a more gradual strategy might make more sense, particularly since some things might be turning around?

Meanwhile…

The dreaded MiFID II research rules may be coming to the US market, with big asset managers lobbying the SEC to implement a similar regulation (small asset managers are less keen).  Unfortunately, the US industry appears to be in the same sort of denial that Europe was, with people thinking that top-quality research will still sell, independent houses will be commercially viable and so on (Pensions & Investments)

““This is absolutely totally unacceptable James. There are limits to ‘jokes’ you can send at work copying in all colleagues — this is extremely rude and offensive.  Please note that this will be forwarded to HR — HAPPY BIRTHDAY!”.  The insurance market sexism scandal rolls on, with news of a senior broker suspended after a lewd email about doughnuts (Financial News)

The saying in Rome is that “he who enters the conclave as a Pope, walks out as a cardinal”, and front runners for the Bank of England job tend to have a similar habit of falling at the last fence.  Like Paul Tucker in 2013, Andrew Bailey has had a media storm blow up (this time, with respect to the Woodford funds) at the most inconvenient time possible. (Bloomberg)

It seems a bit unfair to refer to Rob Casper, the JP Morgan manager in charge of cleaning up its databases, as having “no technical expertise” in the headline of his profile. He has a background in law rather than in machine learning, but he’s presumably picked up the basics while managing one of the biggest data projects on the Street today. (Business Insider)

Hot current areas… JP Morgan has hired Patrik Czornik from GS to be head of M&A for Germany (Financial News)

… while Julius Baer is making promotions in UK wealth management, the same area where Deutsche has recently been poaching from Credit Suisse (Finews)

“It’s great to hear a Scottish voice on the phone”, apparently.  A former Morgan Stanley banker who began his career as a 15 year old apprentice welder is setting up a boutique prime brokerage based in Glasgow (Insider)

And who’s sitting next to you in business class? Hopefully not somebody who plans to fake a hijacking so that he can create a pretext to ask one of the flight attendants for a date (Bloomberg)

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