European banks have got a new bete noir. It’s not the “ugly ducklings” of Tidjane Thiam’s nightmares, it’s their contractors. That legion of hired guns on £500+ ($647) a day who work on short projects and then saunter out the door to work for rivals.

Deutsche Bank was the first to get the contractors in its sights. John Cryan’s ‘Strategy 2020’, announced in 2015, involved cutting 6,000 external contractor positions across technology and operations. Cryan was clearly onto something; this week, Credit Suisse and Barclays took aim at contractors too.

On Wednesday, Credit Suisse CEO David Mathers told analysts the bank is trying to minimize job losses among full time employees as much as possible: they’re “protected.” Instead, it’s contractors and consultants are being cut.  Today, Barclays’ CEO Jes Staley said the bank plans to hire 2,000 new technology employees over the next two years. Barclays has decided that technology is a “core competency”, said Staley: it wants to bring its tech people “in-house”.

If you’re a contractor in banking technology, this means that the bank you work for will be trying hard to persuade you to join full time. As the leader in this field, Deutsche has already coined its own vernacular for the process: it’s called “internalisation.” In the past two years, Deutsche has “internalised” 1,900 contractors. 200 were internalised in the last three months alone.

What if you’re happy as a contractor though? In this case, banks have ways of making you comply.

The most commonplace is the non-negotiable rate cut. Employed by most banks over the years and by Morgan Stanley and Credit Suisse in 2016, this involves a sudden reduction in pay by 10% mid-way through a project. Most contractors suck it up (“You shouldn’t throw your toys out of the pram midway through delivery, it’s not good form,” says Paul Bennie at IT recruitment firm Bennie MacLean). But it might make them think twice about remaining in contracting if permanent positions are offered instead.

Ostensibly for tax reasons, London banks also put a limit to the amount of time contractors can work for them becoming employees. “It’s called tenure,” says Kamal Jain, a technology recruiter at Hudson. “After 18 months to two years, you either have to become a permanent employee or find work somewhere else.”

In this sense, therefore contractors are powerless. They can’t protest the sudden cuts in their pay and they can’t carry on working somewhere in a footloose and carefree fashion if they outstay their welcome. As the new most vilified people in banking they have good reason to go in-house.

Except, the contractors we spoke to seemed perfectly happy with their lot. “The contractors here get treated very well,” says one senior technology banker and recently ex-contractor we spoke to. “They know there’s these cuts in pay and sudden requirements that you take two weeks’ holiday at the end of the year to keep within budget, but that’s all part of the lifestyle.” Another contractor at Deutsche Bank said he hadn’t been asked to go in-house and had no intention of doing so anyway: “I have no intention of accepting internalisation.” By increasing technology project work, Brexit has increased openings for IT contractors, he said: “There are loads of possibilities for work, all across the EU.”

So, how can banks persuade their recalcitrant contractors in-house? Bennie said carrots are more often used than sticks: “If you’re a contractor with a niche skill-set, you usually ride the cycle of activity but if demand for you skill wanes you may have to spend some time out of the market and pay for yourself to be retrained. If you go permanent, banks are effectively offering to retrain and redeploy you internally without that period outside the market. They’re only converting the brightest – they’re effectively saying you’re the sort of person we want onboard.”

There may be pay inducements too. Contractors usually earn a hefty premium compared to permanent staff. Bennie says internalised contractors won’t be paid more than existing permanent employees, but that they’re often paid at the top of the permanent pay range. So maybe being a contractor isn’t so bad after all?

Follow @MadameButcher
Contact: sbutcher@efinancialcareers.com

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““

When you work in banking, you need to understand the vernacular. Banking has its own code language and its own culture and the bosses are known to be passive aggressive. This means they might say one thing, whilst meaning something entirely different. The more senior the banker you’re dealing with, the more immersed he or she is in the culture, the greater the likelihood of this happening. You have to make sure you know what they really mean.

So, here are a handful of the euphemisms I heard over my 18 years in finance. Sometimes I still use them myself ;-)…

1. When you are leaving for a 2-week holiday

What they say: “Have a great time Jim.”

What they mean: Maybe you don’t need to come back.

2. When you make a mistake in an important deck or blow a deal

What they say: “Don’t worry about it Jim, its no big deal.”

What they mean: I will probably never trust you with anything again.

3. When you complain about your compensation

What they say: “Let me see what I can do Jim.”

What they mean: I’m going to pretend this is something I can’t change, but I can and I’m not paying you a dollar more.

4. When you ask to get promoted

What they say: “Well you know there is HR policy around this, so it seems like our hands are tied.”

What they mean: We just don’t think we need to promote you. Where are you going to go anyway?

5. When you come back from an hour long lunch

What they say: “Hey I was looking for you on this deal, why don’t you catch up on your emails and then swing by my office?”

What they mean: I have just wasted 15 minutes looking for you and am going to kick your ass when the door closes.

6. When your boss asks to speak to you 3 months before comp time

What they say: “The firm is having a really hard time, the other divisions have just not been performing. The comp budget is down 15-20%.”

What they mean: You’re not going to get paid this year and I’m going to manage your expectations way down, so when I pay you flat you are going to be doing cartwheels in the hallway.

7. When you roll in at 915am, after pulling an all-nighter

What they say: “Hope you’re feeling rested Jim!”

What they mean: You lazy d-bag, what kind of time is this to come in?

8. When you wear your best tie for the client meeting

What they say: “That’s a great Hermes tie Jim, great choice.”

What they mean: Looks like we are overpaying you Jim. 

9. When you share problems you are having with your boss

What they say: “Thanks for sharing that Jim. Let me come back to you with some solutions.”

What they mean: Thanks for wasting 30 mins of my life, with your problems. Remind me not to  schedule 1-on-1’s with you again

10. When you need to take some time off to run errands

What they say: “Work-Life balance is critical for us Jim. Do what you got to do.”

What they mean: What do you think you are doing. This isn’t the firm’s problem.

Now you know the code. Good luck!

Follow @MadameButcher
Contact: sbutcher@efinancialcareers.com

The author is a former Goldman Sachs managing director and blogger at the site What I Learnt on Wall Street. This article has been written for comedic value and is not intended to disparage any firm on its policies. 

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Last month, the U.S. federal reserve raised interest rates for the second time in three months, the first of three rate hikes expected in 2017. While other markets — Japan, Europe and Canada — are maintaining record-low rates, inflation in the U.S. is returning to target levels, leaving the era of perpetual low rates behind. Despite fears of instability in the wake of the presidential election, the economy is growing and markets are embracing rising rates.

This is welcome news for the fixed income, currencies and commodities (FICC) market, which has strengthened in the first quarter of 2017, compared to 2016. New issue volumes and average daily trading volumes of U.S. corporate bonds have gone up by 17.8% and 14.2% respectively in the first two months of 2017, compared to the same period last year. This continues to grow upon a 9% increase in bond trading revenue over 2016 — the first such increase since 2012.

Outdated bond markets

The current state of bond markets, compared to equity markets, is still considerably archaic. There is no centralized information source for bond pricing data and 75% of global investment grade corporate bonds are traded via phone call.

Digitization, however, is gradually taking place in FICC market. Electronic bond trading, in particular, has made some promising progress. Replacing the old “request for quote” (RFQ) electronic trading system is the new all-to-all trading system where all market participants, regardless of buy side or sell side, can make a market. The electronic match-making algorithm has reinvigorated the FICC trading to some extent. According to Greenwich Associates, roughly 50% of U.S. Treasuries are now traded electronically.

With the penetration of digitization in FICC market, automation can be achieved. For example, many hedge funds have started programming algorithms to trade bonds.

The digitization in FICC is here to stay and will benefit all parties involved.

In the short-term, banks may increase their headcount in FICC as a result of the recent rate hikes, but the long-term trend will see employee numbers decreasing as a result of increased digitization and automation on both the buy side and sell side. This was precipitated by the low-rate environment but will not be reversed with the end of record-low rates. Investment firms, having first embraced digitization in response to a challenging fiscal environment, will continue to do so.

As the economy regains its footing, the digitization of capital markets will allow investors, issuers, and brokers to reap the benefits of greater efficiencies. Resistance to this trend, and the preservation of outdated and inefficient practices will only slow growth. While short-term increases in hiring may restore confidence, the reality is that those jobs, founded upon archaic transaction practices, cannot be permanent.

Evolve or get left behind

Automation and AI should not spur fears of reduced employment in FICC markets — rather, they are indicative of a re-allocation of skills towards automation that will spur employment growth. At Goldman Sachs, where the equities trading desk had been reduced to only two employees, jobs were not eliminated entirely but instead shifted to those with the digital skills required to upkeep a robust automated trading network.

The best way for the FICC markets to transition out of a low-rate environment and into a market that seems perpetually marked by volatility is to embrace, not resist, the move towards digitization. While interest rate hikes may increase profits and hirings, this should not vindicate outdated methods. Ultimately, maintaining faith in innovations originally meant to offset a struggling economy is the best course of action. Those innovations were good then, and remain so.

Vuk Magdelinic is the CEO and co-founder of Overbond, which digitizes bond origination and issuance. Prior to that, he led digital transformation programs at Deutsche Bank and BNY Mellon and also previously worked at CIBC, PwC and Deloitte.

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““

The spate of redundancies at global banks in Asia over the past year – from i-bankers at Goldman Sachs to technologists at Barclays – had one common characteristic: senior employees were disproportionately affected.

As we’ve already reported, many of these experienced banking professionals are now struggling to return to work in Hong Kong and Singapore.

If you’re a 30 or 40-something in Asian banking, you need to get the basics right when looking for a job – and that starts with your CV.

Senior finance candidates are being rejected for roles because of badly constructed resumes that don’t do justice to their long careers, say recruiters.

“Older bankers are often very careless with their resumes, claiming they’re too busy and don’t have time to properly update them,” says Eunice Ng, director of search firm Avanza Consulting in Hong Kong.

Here are some common CV errors to avoid at all costs.

Leaving out the bottom line 

The CVs of senior revenue generators are often too full of managerial babble and contain too few figures. When you’re adding in achievements to the jobs on your CV, make sure some of them contain your P&L or deal numbers. “That’s because hiring managers always want to know that senior people can still get their hands dirty and contribute to the bottom-line,” says Sinan Atahan, an executive director at headhunters The Laurus Group in Hong Kong.

Hastily updating your CV on your smart phone

“Senior execs tend to use their smart phones to update and send their CVs and they often don’t get around to spell checking the updated version or the cover later,” says Atahan. “I’ve seen resumes from senior people where even their job title or current company name is misspelt, or they’ve addressed the cover letter to the wrong person.”

Not justifying big career changes

The more time you’ve worked in finance, the more likely it is that some of your job moves have involved major career changes. But many executive-level CVs simply state the new employer and list some achievements without explaining why the candidate took their career in a new direction, says Ng from Avanza. “Not explaining may also give the impression that you’re a job hopper,” she adds.

Not making it obvious what you do

If you’ve reached the upper ranks in a niche part of the finance sector, the person reading your resume may not entirely understand what your recent roles have entailed just from the job titles. So while your achievements are key to your CV, you also need to list your main responsibilities. “If your CV is first looked at by a junior HR or recruiter and they can’t find enough details about your responsibilities, they might not put it forward,” says John Mullally, director of financial services at recruiters Robert Walters in Hong Kong. “Don’t assume that a counterpart in your field with a good understanding of your job will be reading your resume.”

Summarising several employers into one

You’re drafting your resume and you finally reach those three junior jobs you did back in the 90s. You’re tempted to summarise them as “a variety of international investment banks”. Don’t. Keep descriptions of each job brief, but separate them out. “While summarising your technical skills can help you construct a punchy CV, condensing your employers can be a costly mistake,” says a Hong Kong-based recruiter. “Hiring managers are always keen to know all the firms you’ve work for – this can be reflective of your potential culture fit into their company.”

Hitting four pages

“You may have 10 or more years of valuable experience and undoubtedly it’s challenging to condense that into a two or three-page document,” adds the recruiter. “But hiring managers don’t have the time or resources to read through a very long CV and you may face immediate rejection just based on that. A lengthy resumes from a senior professional also raise questions about your commercial awareness, understanding of how to market yourself and your ability to get to the point.”

Omitting technical achievements 

If you helped execute a key deal as a more junior investment banker or if you have advanced programing skills from your earlier days in IT, don’t delete these from your CV because you think managerial expertise is all that matters. “Too many older candidates project a very hands-off image as they think it’s a better reflection of their seniority,” says Vince Natteri, director of headhunters Pinpoint Asia. “This usually works against them. For example, for IT roles, banks prefer senior candidates who still have their ears to the ground about the latest technology.”

Muddling your skill sets

You may have a long and varied work history, but your CV must show a focused plan for the future which is tailored to the job you’re applying for – so be careful how you describe yourself. “If a senior person puts ‘vendor manager, infrastructure manager, development manager and project manager’ all at the top of their CV, the recruiter won’t know where exactly their main skill lies,” says Natteri. “Avoid a one-size-fits-all resume – emphasise the skills that are most suited to the new role.”

Submitting a bolt-on CV

It’s among the most common mistakes made by older banking professionals: during their long careers they simply update their CVs by adding on the latest employer and they don’t make any other substantial changes. Recruiters can spot these rambling “bolt-on” resumes a mile away because older roles are given equal prominence to more recent ones, says Ng from Avanza. “Not enough of their career is simplified – it makes it hard for the reader when senior people just keep on making their CVs longer and longer.”

Follow @simonmortlock

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““

Early in his career, Rusty Vanneman worked as an analyst, manager and product manager at Thomson Financial in a group called Technical Data, which was eventually re-branded Thomson Global Markets. It provided real-time market analysis on primarily fixed income and currency markets for traders around the world, primarily over machines such as Telerate and Knight-Ridder (tools that Bloomberg eventually vanquished).

From there, Vanneman went on to Fidelity Investments, where he was a senior research analyst. In the 1990s, Fidelity started a group called Strategic Advisors to manage a variety of products, including their repurposed mutual fund wrap, Portfolio Advisory Service, to start including non-Fidelity funds into the portfolios.

“This required a high-quality, institutional due-diligence effort, and I was fortunate to be a founding analyst who was heavily involved in establishing the group’s investment methodology,” Vanneman said.

After five years at Fidelity, Vanneman joined Kobren Insight Management (KIM) initially as the director of research and portfolio manager – and eventually as chief investment officer. He was hired to build an investment process and team to support the founder Eric Kobren and create an institutional process to survive him.

After Vanneman was with the company for five years, Kobren sold the firm to E*Trade and Vanneman stayed on as the CIO for another six years.

In 2011, KIM was sold again to Advisor Investments, where Vanneman was a partner for another year before he exited the firm. Less than six months later, he became the CIO for NorthStar Financial Services Group’s CLS Investments, one of the largest ETF strategists and turnkey asset management programs (TAMPs) that manages more than $7bn. He oversees a team of 12 investment specialists.

How were you able to climb the ladder from an analyst to a management position at Fidelity?

As one of my mentors once said: make your boss look smart and do everything you can to make his or her job easier.  Step up and do the work that is required. Show initiative. It’s better to ask forgiveness than for permission. Make decisions quickly – if you’re good, you will make many more good decisions than bad. Always give more than you expect to receive.

As for colleagues and direct reports, give people the necessary structure, tools and encouragement to assume more responsibility. Believe in them.  Hire people smarter and more talented than you and let them run as fast and as hard as they can run. Always encourage people to get better.  Strongly embrace a growth orientation for individuals and the firm.

What are some candidate red flags that are deal-breakers for you?

• Not preparing for the interview and doing your research. It’s simple to at least read the company’s website!
• No enthusiasm
• No genuine interest in investing
• Lack of follow-through after the interview
• No connection
• Not asking intelligent questions – not only about the position but about the company, the team and the industry

I see interviews not only where the candidate should be impressing me, but where I need to impress them too. I really want them to be examining me, my firm and the position to decide if it is a good fit for them too.

What are some of the positive qualities and characteristics you look for when conducting job interviews?

When it comes to reading a resume, I can review one fairly quickly and know if I’m interested. It’s not just one thing I’m looking for, but a combination of factors.  In short, does the person look like they have energy?  An achievement-orientation? Are they bright and do they have discipline?

Most of this comes from extra-curricular activities, which could range from athletics to the arts and social organizations – the more the better.   If a candidate has no extra-curricular activities, it’s a non-starter for me.

Another key is to determine if there is any legitimate interest in investing. If a person is already interested in investing, that is a huge plus. I want my team members to think they have careers – not “jobs.”

Lastly, in the interviews, I want a connection.  I don’t seek to hire people like me, but team members who will augment my capabilities and diversify my decision-making.

It’s not easy to build a cohesive team – especially when you want people that want to win and are different from each other (both desired qualities) – but I think we have done so at CLS. To build a team, it’s about recruiting and having a solid company culture.  It’s about “having the right people on the bus”.   It’s about having an environment where people believe they can make a difference. They need to feel relevant, while having the support and flexibility to get things done.

Here are a few examples of the qualities that I look for in candidates:

• Passionate about markets and investing
• Achievement-oriented. Going above and beyond and doing what is expected of you – plus one.
• Growth orientation – always trying to get better
• Service orientation – always looking to serve
• Competitive – every basis point of performance matters
• Confident to debate/disagree with others while still maintaining a good environment
• Being a team player
• Reliability and integrity – doing what you say you will do and always acting with integrity

What advice would you give to current students interested in a career in financial services?

Always be learning – not just about investing, but communication too. Read, read, read – everything you can get your hands on, and don’t forget books.  This truly advances knowledge, but is also a marker of legitimate interest in investing.

Communication is critical for every position in the investment management industry – even the most quantitative positions.  We should always be working to improve their writing and verbal skills.

Always be networking – You never know who will provide the big breaks in your career, and which connections will turn out to be the important ones.

Invest real money – Doing this will help you feel the emotions of investing. To become an effective investment decision-maker, one needs to make many decisions. It’s best to start with your own money. Paper contests don’t really count.
Follow @danbutchrwrites

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““

If you’re a partner at Goldman Sachs aged 39, you might think you’ll be set for life financially. Maybe so, but you’ll have to sweat blood while you’re in that partner seat.

Take Adam Savarese, the 39 year-old head of distressed debt trading at Goldman Sachs. Bloomberg says Savarese works around the clock. Before markets open, Savarese reportedly visits the gym with fellow traders. Thereafter, he arrives in the office before anyone else. At lunch, he likes to take juniors out “to talk about the careers.” When markets close he stays behind in the office later than anyone else. And in the evenings he’s been known to host “dinners and other events for clients.” That’s not a lot of time to himself.

Like plenty of people in finance, Savarese is clearly a grafter. ““He wasn’t a brainiac but did very well in school because he worked very hard,” the head of alumni relations for his high school tells Bloomberg.

To the extent that Savarese managed to join Goldman Sachs as a partner before his 40th birthday, this work ethic has paid off. More recently, however, things have come unstuck for the 39 year-old: Bloomberg suggests losses in Savarese’s division contributed to Goldman’s miserable first quarter in fixed income trading (although Goldman insists the structure of its business and its focus on institutional rather than corporate clients was to blame). Aspersions are also being cast upon Savarese’s performance at Morgan Stanley, which he left for Goldman in 2015, and where the distressed debt book allegedly performed badly after his departure. Could it be time for a more leisurely pace?

Separately, if you want an entry-level banking job that pays $270k, you need to study an MBA at Stanford Business School. The Financial Times’ new ranking of MBAs for finance professionals finds that Stanford MBAs are paid the most. $266k is the average starting salary for Stanford MBAs with finance jobs: 104% more than before they took the course.

Meanwhile:

David Solomon on Goldman’s poor first quarter: “Our business is levered to times when clients have a lot of conviction and one of the things that happened in the first quarter was that conviction ebbed.” (Bloomberg) 

You have more chance of supporting a hedge fund than working in a hedge fund. There are 115,000 people working in hedge funds and 275,000 people working in the auditing, legal and brokerage firms that support hedge funds. (Financial Times) 

Jes Staley, post-whistleblowing scandal: “The culture and conduct and character of this bank is deeply, deeply important to me. We’ve made a lot of progress, but it’s a long journey and we are going to continue to push forward that agenda.”  (Bloomberg) 

Credit Suisse’s initial earnings release misstated its trading figures. (Bloomberg) 

President Trump wants to increase tax carried interest but to reduce tax on income created at partnerships and other firms. This could mean that hedge fund owners pay proportionately less tax than hedge fund employees.(WSJ)

Deutsche Bank’s new CFO is a descendent of the Prussian general Helmuth von Moltke the Elder, as well as Helmuth James Graf von Moltke, who led a resistance group against Adolf Hitler. (Financial Times) 

Nomura’s hiring in America and cutting in Europe. It’s also turned profitable. (Bloomberg) 

High frequency trading needs high touch relationships. Discuss. (Greenwich) 

Why a standing desk is a bad idea in a busy office. (Quartz) 

When you’re an analyst and your boss is a tyrant with a neurotic wife. (WSO) 

Drinking coffee keeps you alive. (NY Post) 

Follow @MadameButcher
Contact: sbutcher@efinancialcareers.com

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The gold standard in consulting is making it through the doors at one of MBB: McKinsey & Co, Bain & Co and the Boston Consulting Group. They’re seen as the most prestigious firms to work for, and the most difficult to get in to. And yet, more people would rather work for the Big Four.

PwC leapfrogged McKinsey as the employer of choice among consultants and other professional services firms, according to the 2017 eFinancialCareers Ideal Employer ranking, and beats all the other Big Four firms. Generally, though, people prefer Big Four firms over large management consultants, our results suggest. The Big Four hegemony is broken up only by McKinsey, last year’s winner, which has been relegated to third this year.

PwC has traditionally been the largest Big Four firm by revenue, but the $35.9bn it generated in 2016 was surpassed by Deloitte’s $36.8bn. Deloitte is also biggest in terms of employees, as the chart below shows. EY, meanwhile, is bigger than KPMG in revenue terms – with $29.6bn in revenues compared to $25.4bn – but it remains a less popular employer in our rankings.

People voting for Big Four firms as their employer of choice are not looking for big pay packets. Compared to investment banks, where money was both expected and desired among our respondents, just 59% of respondents said they anticipated a big salary from PwC and 43% expected a big bonus. These figures were 55% and 42% respectively at Deloitte.

There’s a mismatch between what people expect and what they want, however. 80% of respondents voting for Deloitte and PwC said that pay was an important factor in their choice of employer.

But you’re unlikely to go hungry working for the Big Four. Figures from pay benchmarking website Emolument suggest that the Big Four pay their first year strategy consultants and auditors between £34-37k, with PwC offering marginally more than the competition. Partner pay can stretch into seven figures, however.

By contrast, despite McKinsey’s fall from the top spot, there’s a much more positive perception of pay there. 80% of people who voted for the firm said they expected a good salary – this is more than most top investment banks – although just 56% said they’d expect a big bonus.

People expect to work all hours in investment banking, but our ranking also suggested that few people choosing Big Four firms think they’ll be getting out out of the office early. Just 28% said that manageable working hours was a strength for PwC and 32% of Deloitte voters said the same.

This (just) beats the top banks on our list, but don’t expect an easy ride at a Big Four firm. Professional services firms parachute their employees into client locations, and these means both long hours and days away from home. 9-5 it is not.

So, why do people want to work for big professional services firms? Quite simply, it appears to be the nature of the work. Interesting work was the top strength for both PwC and Deloitte (70% for both). People also cited working with key industry players and the opportunities for promotion as being selling points for the firm.

Even here, though, the Big Four was blown out of the water by McKinsey and other large strategy consulting firms. 84% of people who voted for McKinsey said that they expected challenging or interesting work – more than any other top firm in this year’s ranking, and 93% of people said it was something they wanted from their employer. These figures were also high at Boston Consulting Group – 79% and 91% respectively.

The Big Four beat strategy consultants on a lot of ‘softer’ criteria in our survey. For example, 55% of people who voted for PwC said that it has a good culture, compared to 50% of those who chose McKinsey. Meanwhile, 50% of PwC voters suggested that the firm was progressive on issues like diversity, while 39% of respondents who named Mckinsey as an employer of choice said the same. These issues might not seem like a big deal to investment bankers – who are more motivated by what they can earn – but they’re important factors to people who chose Big Four firms. 80% of people who voted for PwC said that culture was important to them – far more than any investment bank in our rankings.

In other words, more people want to work for Big Four firms than another other professional services companies, but strategy consultants like BCG and Mckinsey maintain a certain cerebral allure.

View the complete 2017 Ideal Employer Rankings

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““

What do you if you leave your fixed income sales or trading job at Morgan Stanley? You could always try getting another one at TD Securities. The Canadian bank is hiring in London, and it’s hiring from Morgan Stanley especially.

TD just picked up Robert Newman, a former Morgan Stanley VP in German fixed income sales. Newman joins at a similar level, starting around today.

Newman isn’t TD’s only ex-Morgan Stanley hire. It also picked up Andrew Rafter, a former Morgan Stanley trader for G10 rates trading. Rafter started in January.

Morgan Stanley isn’t TD’s only London hunting ground. In the past few months it’s also recruited Antoine Berger, an FX trader from DBS Securities and Sean Smith, an FX trader from HypoVereinsbank.

TD has 122 registered people in London according to the FCA Register. Even so, it’s not exactly huge. Revenues at TD’s UK business in 2016 (the last year for which they’re available) were just £3.9m ($5m) according to a filing with Companies House.

Why would anyone leave Morgan Stanley for a small Canadian bank? It’s not particularly clear. However, Morgan Stanley let go of people in January and it’s possible that Newman at least joined the Canadian bank after the three month notice period had elapsed.

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““

It’s not supposed to happen like this. Investment banks are slimming down their equity research ranks, but top-ranked senior analysts in hot sectors are the stars that attract client dollars as MiFID II’s ‘unbundling’ takes hold.

Maybe Edward Hill-Wood, managing director and head of European internet research at Morgan Stanley, didn’t get the memo. He’s just left the investment bank in London for a role as investor relations director at pay-TV and e-commerce company Naspers in Hong Kong.

Hill-Wood’s departure comes after a long tenure at Morgan Stanley and a long time in TMT research in London. He joined Morgan Stanley in April 2004, so spent just over 13 years there before his departure in April. Before this, he worked as a media analyst at Citigroup.

Under MiFID II, investment banks are being forced to separate the costs related to equity research, rather than bundling it together with other trading charges.

The result has been the decimation of their research ranks, but (some) senior analysts are still being looked after. Some, according to reports, are able to command $10k for a single phone call, or even $28k an hour with a client. Even if this is not the case, banks have restructured their teams around senior analysts supported by a cadre of juniors.

Hill-Wood’s move to investor relations is not unusual among equity researchers looking for a change of scene, however, and most taking this route have stuck close to their sector of expertise.

Recent moves include Will Draper, formerly head of Telecoms research at Mirabaud Securities, who became director of investor relations at BT, James Collins, a retail research analyst at Stifel Financial, who’s now head of investor relations at J Sainsbury in the UK and Richard Burden, a managing director in insurance research at Credit Suisse, is now head of investor relations at Zurich Insurance.

More recently, Ben Sherman, who was head of European advisory distribution at UBS, joined medical transportation firm Ambulnz, in a business development and investor relations role.

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““

Deutsche Bank wants to crack the U.S. market in 2017. John Cryan personally is overseeing the bank’s U.S. operations and Deutsche has been doing some big hiring. However, the recruitment drive is proving problematic – there are suspicions within Deutsche that the new arrivals are been offered generous guaranteed bonuses as inducements to join.

Deutsche’s most recent senior Wall Street hire is Matthew Moore, a former Goldman Sachs managing director in compliance. Moore joins in a similar role at Deutsche, which plans to make 1,000 compliance hires globally this year after being stung by the threat of a huge U.S. fine in 2016. 

Moore is just the tip of Deutsche’s North American hiring iceberg, however. In the past few months, the German bank has also brought in Bill Moyer from Wells Fargo for its CMBS business, David Silber from Citi as head of U.S. equity derivatives trading,  Lori Arndt from Citadel as head of U.S. global markets client strategy, Christopher McCarthy from BNP Paribas as a director in global credit trading, and a host of senior investment bankers. 

Deutsche needs to hire. Although the bank insisted that staff turnover in the first quarter was within its normal range, there have been some big exits following the decision to withhold performance bonuses for everyone above associate-level. These exits include the three FIG bankers who went to RBC Capital markets in January and James Gray, head of Deutsche’s European ABS syndicate, who left in March. Additional recruits are also likely as Deutsche pursues its declared strategy of “deepening” relationships in M&A and ECM.

Recruiting isn’t easy for Deutsche Bank though. Following last year’s performance bonus ban there are understandable concerns that something similar will happen this year (even though CEO John Cryan has promised that it won’t.) New hires are therefore likely to need encouragement. Specifically, they’re likely to need large guaranteed bonuses.

“Deutsche have gone through a very bleak period. They need to stabilize their business and show some leadership with some strategic hires,” says one senior fixed income headhunter who covers the Wall Street market, speaking on condition of anonymity. “But you’re not going to get a big name from Citi for nothing. – The big sell for Deutsche is that it’s a turnaround trade and that if you join you’ll have the opportunity to do something different there, but people from rival firms are still going to want the reassurance of a big number to come through the door.”

Deutsche declined to comment on its hiring policies or the availability of guarantees. Existing Deutsche staff, burned by last year’s miserable numbers are said to be miffed at the arrival of senior bankers from elsewhere whom they suspect of earning more than them. These fears may not be unfounded. In 2016 Deutsche paid 25 people guarantees which were worth an average of €1.9m ($2.1m) each in the corporate and investment bank and  €1.3m each in global markets. This year, guarantees are likely to be doubly necessary for new hires.

If you’re a Deutsche managing director who was zeroed at bonus time and you’re clinging to a retention bonus that won’t pay until 2021 and that’s currently on track to be worth nothing at all, you’re going to be understandably put out….

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““

Stop me if you’ve hear this one before: A bright-eyed economics major graduates magna cum laude from an Ivy League university, works two years at a prestigious investment bank on Wall Street, followed by a two-year stint at a top-tier private equity firm before entering an impossible-to-get-into business school to get their MBA.

Yawn. How typical. Sure, that’s a tried-and-tested formula for success, but shouldn’t highly intelligent people be able to get a little creative and do things their own way? Some burnt-out investment bankers leave their job for the buy side – another well-worn career path – or go into professional services, management consulting or even headhunting. None of those is too shocking.

“A client of ours had a strong trading career but recognized the instability of that space,” said Peter Laughter, CEO of Wall Street Services. “She didn’t want to have the majority of her income be at risk because someone made a bad trade in late December which depleted the bonus pool.

“She took her experience and became a management consultant, teaching firms how to optimize their trading desks and strategies,” he said.

Few professionals think of any job as a lifetime career choice anymore, Career changes are becoming more common.

Many investment bankers also join fintech startups, but that’s not all ping pong, healthy snacks and mediation rooms, even if you know how to code, and working long stressful hours is the norm there too.

But what about bolder moves? Many ex-bankers have started their own businesses, for example, become a wine broker.

Bulge-bracket coverage banking analyst turns Hollywood talent agency trainee

You may have seen Entourage. If so, you probably have a certain affection for profane super-agent Ari Gold. That said, would you want to work for him as a trainee?

After serving as an investment banking analyst for a couple of years, one disgruntled young man decided to go west, exchanging Wall Street for Hollywood to pursue a career as a talent agent.

“To be a Hollywood talent agent, you have to be business-minded, but it’s not financial services,” says Mark Levande, recruitment consultant in the front office buy-side division at Michael Page.

“You can use some of the same skills depending on what side of the business you’re on, although it’s taking your career in polar-opposite directions, on the one side doing M&A deals, on the other [doing deals in] the media and entertainment industry,” he said.

This former IBD analyst is still in the business in L.A. and slowly but surely moving up the ranks, says Levande, so it’s safe to say he doesn’t regret his unorthodox career choice.

“For the Hollywood agent, it’s worked out great,” Levande said. “In the same way that there is a dues-paying period for investment bankers as they come up as analysts and associates, it’s similar in [a talent] agency.

Investment banker leaves financial services industry to start craft brewery

“A former colleague at a bulge-bracket investment bank had risen from analyst all the way through to VP,” Levande says. “He decided it was no longer for him and went off, left the firm and started a craft brewery.”

That business is currently profitable, and he’s reportedly much happier than he was in the IBD, so that bold move can be counted as a success.

Experienced investment banker to pastry chef

After three trips to the emergency room caused by stress and exhaustion, a well-compensated 10-year veteran of J.P. Morgan, Mark Franczyk, quit without having another job lined up. He eventually became a pastry chef.

From Morgan Stanley to robot manufacturing

Shintaro Maeda, who was an executive director within Morgan Stanley’s structuring business, departed the bank to join a household robot manufacturer, Groove X. It was founded in 2015 and is aiming to develop the “next generation household robot” that “truly touches people’s hearts and inspires real affection” by 2019.

From banking to swimwear designer

Lyn Sia Rosmarin worked her way up from an entry-level position at Natixis to Lehman Brothers, jumping to Nomura after the Lehman folded, hired as a VP at Merrill Lynch and even promoted to director there before quitting to start her own line of swimsuits. Fashion seems to be a common vocation for former investment bankers. Heidy Rehman, a former Citigroup director, now runs her own ‘ethical’ fashion label Rose & Willard, while former Deutsche Bank VP Libby Hart now dedicates herself to styling women for the office.

From Merrill Lynch to social ecommerce startup

Janny Kul left his bond trading job at Bank of America Merrill Lynch this year to kick-start what he calls the “Instagram of fashion,” Stylezz, which he says is “clothing inspiration, delivered.” It essentially allows users to see examples of people’s outfits and then go on to buy the products if they feel inspired to do so.

From IBD to PE to Big Four professional services to social media startup

Neha Jain completed Bank of America’s investment banking analyst program and then went to grad school and landed an internship at a small private equity shop, which turned into a full-time gig. She would go on to work as a senior consultant at EY for three years before joining JLL, an investment management firm focused on commercial real estate, and eventually Milofy, a social networking platform backed by the venture capital firm Accel.
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““

I was a Slang coder at Goldman Sachs. I spent 18 months coding front office systems in Goldman Sachs’ proprietary language and then I quit, but I haven’t ruled out returning to the bank in future.

If you’re thinking of moving to GS and coding in Slang, there are a few things you need to know. Slang is something that’s generated a lot of myths – and not all of them are accurate.

Firstly, Slang is sort of similar to Python. It’s certainly no more difficult to learn than Python. Fundamentally, though, Slang is a single-threaded language that relates to SecDB, Goldman’s risk and pricing system, which is effectively Goldman’s object store. Slang has evolved over time: it’s a language with various optimizations built-in, including – for example – a calculating processing system called “Graph” which refuses to reevaluate calculations that have already been done. In this sense, Slang is perfectly designed for Goldman’s needs. It’s also deeply embedded in all the firm’s systems and risk models.

Using Slang it’s possible to load an instrument and related market data from Goldman’s database and to investigate it within the Slang environment. Goldman’s traders and risk managers are able to do this themselves without knowing much Slang themselves – they can see what’s going wrong with a trade without having to bother the IT team (as often happens at other banks). This frees up the Slang coders to do other things.

What other things? Well…If you’re coding in Slang at Goldman you’re going to be spending at least some of your time reinventing solutions you’d get for free if only you were coding in Python. In many cases those solutions would also be far simpler if you were using a mainstream coding language.

Viewing Slang data in a web browser is a case in point. Goldman typically has several different ways of accessing data through a browser – each one written at a different point in time when different technologies were in fashion. You don’t get this elsewhere: if you’re using C# or Python there’s just one standard framework. A lot of the work being done at Goldman is about this plumbing between Slang and the web. The firm has reams of documentation and huge online forums to help its engineers find solutions that work. It’s interesting, but can be challenging.

The real issue with working as a Slang programmer at Goldman is that you’re not going to get any credits for mentioning on your résumé that you’ve spent the past few years setting up GS web services. – Slang experience doesn’t translate to other organizations. Goldman isn’t alone in this – most large companies are guilty of building large systems which you have learn how to operate, only to find that this knowledge isn’t directly applicable elsewhere. However, Goldman is a particularly bad offender in this respect.

The good news is that if you’re thinking of working in programming at Goldman you might never have to code in Slang itself. Most of the coders at GS today never touch Slang. Instead, there’s a huge team busy exposing Slang functionality to the non-Slang world. Goldman’s chosen interface is Java. JavaScript is very popular at GS today: all new graphical user interfaces (GUIs) at the firm are being written for the web and they need a lot of JavaScript coders to make Slang’s functionality accessible.

To be clear, I loved my time at Goldman Sachs. The people there are great and I wouldn’t be surprised if I do another stint at GS in the future. Slang is also an excellent language that’s been honed to match Goldman’s needs, but there are some downsides and it’s best that you go in with your eyes open.

Simon Burns is a pseudonym 

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““

Do you want to work for an investment bank? Or do you want to work for Google? In the case of Gokhan Topalhan, a former J.P. Morgan and Morgan Stanley technologist, the answer appears to be the latter:  Topalhan has just quit J.P.M for Google.

After 15 years in banking (three at J.P. Morgan and 12 at Morgan Stanley), Topalhan is joining Google as a technical program manager based in NYC. At J.P. Morgan he was an executive director working on the bank’s automation initiatives.

J.P.  Morgan has big aspirations in technology. Matt Zames, J.P. Morgan’s chief operating officer, said last month that the bank spends around $9.5bn on technology and needs more staff for cyber-security in particular.  It also has an “automated code scanning” program under which code faults are automatically checked before implementation. The bank is in the process of building a cool and trendy space for 1,700 technology staff in NYC and could add around 7,000 staff across the bank this year.

How and why did Topalhan eschew J.P.M for Google? He didn’t respond to our inquiry. However, this isn’t the first time he quit banking for something different: Topalhan left banking tech to set up his own business in 2013, but came back a year later. This time his exit may be a little more permanent.

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Jefferies continues to poach senior investment bankers from its larger competitors. It’s just lured a 12-year veteran of J.P. Morgan to its Chicago office as managing director of not-for-profit healthcare investment banking.

After a long tenure as an executive director of public finance at J.P. Morgan, Timothy Wons, who has a law (J.D.) degree, joined join LHP Hospital Group as senior vice president of acquisitions and development, where he worked for close to two years before joining Jefferies in April.

Jefferies managing directors in the U.S. earn total compensation of $3.44m on average, including an average base salary of $287k and a cash bonus of $3.15m, according to Glassdoor.

Jefferies has been building the senior ranks in the U.S so far this year. It brought in John Bills as a managing director in the power, utilities and renewables group in the bank’s New York headquarters in March, and has also hired energy bankers Paul Cugno and Robert Anderson in January.  Joseph Kieffer, an MD in leveraged finance at Credit Suisse in New York, also joined Jefferies in April to head up its U.S. leveraged finance capital markets activity.

Jefferies has also been building its emerging markets sales and trading team over the past few months, and has plans to hire more people as it aims to move up the league tables.

That has meant some big hires from larger banks this year, including Aaron Fernandes, hired from Barclays to be co-head of Jefferies’ emerging markets team; Kevin Kelly, poached from Goldman Sachs to serve as the other co-head of emerging markets; and Mouloud Ameni, a trader focused on Central and Eastern Europe, and Turkey bonds lured from Nomura.
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DBS has increased the amount of “insourced” technology staff – people who used to work with its technology vendors – by 1,362% in just 12 months.

The bank was home to 658 of these employees this Q1, compared to just 45 in the same period in 2016, according to its quarterly results. DBS does not reveal their location, but recruiters say they are mainly based in Singapore.

“Insourcing enables us to create intellectual property, better manage our technology deployment, and improve cost efficiency,” says a spokesperson for DBS.

This is in line with DBS’s full-year 2016 results, which noted “certain technology functions that were insourced as part of strategic cost management efforts”.

DBS has been investing heavily in new technology recently. In February, for example, it launched its iWealth mobile platform, which gives private clients better access to data. And last year it opened DBS Asia X, a 16,000 square-feet innovation space.

About a third of Singapore-based vacancies currently advertised on DBS’s careers website are in technology.

The addition of the tech staff helped increase DBS’s workforce to 22,331, according to its Q1 results. But this was a year-on-year rise of only 1.1%.

“Tech aside, it’s been a cautious 12 months for the bank in terms of hiring because economic conditions haven’t warranted the type of expansions we’ve seen recently,” say a Singapore recruiter.

Moving more vendor-based technologists in-house has not lead to a sizeable increase in costs at DBS.

Staff costs went up by 1% overall, while costs per head – total employee expenses (such as salaries and bonuses) divided by total headcount – shrunk by 0.4% (as the table below shows).

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““

Trafigura is hiring the world’s top traders into jobs offering immediate global mobility, the potential for rapid promotions, and a fast-paced working environment.

The commodity trading and logistics company, which boasts annual revenues of more than US$98bn, has now launched its annual international recruitment drive.

It’s open to candidates with about two to seven years’ experience, both physical traders from commodities houses and paper commodities traders from banks.

“We’re one of the few companies offering jobs in physical trading at this level – the stage just before you define your long-term career,” says Greg Hertault, Head of Talent Acquisition at Trafigura.

While the jobs are in oil and metals trading, candidates don’t need to have specific experience in these fields. “We’re product agnostic in our hiring – you can still apply if you’ve been trading in energy, agriculture or other commodities,” explains Hertault.

You are also likely to move countries as well as products if you join Trafigura.

“You might shift from London to Geneva or from Singapore to Panama, for example,” says Hertault. “You mustn’t just be open to moving internationally, you must actively want it. As a new trader, we could base you in any one of our 67 locations.”

Jose Larocca, Head of  Oil and Petroleum Products Trading at Trafigura, agrees: “Anyone looking to join needs to be motivated to travel to help identify and maximise opportunities for the company. We employ some of the most ambitious, driven and loyal traders from every corner of the globe.”

Hertault says Trafigura doesn’t have headcount targets for its hiring campaign and is focused instead on “finding the best people globally and putting them into lean, efficient teams where they have the chance to make a significant impact.”

So who does Trafigura want to hire?

“We want people with trading experience, but more importantly they must show the potential ability to go the extra mile for clients,” says Hertault. “We want to hire highly motivated people who have shown they can trade successfully, but are still energised and open to learning new skills.”

New joiners must also be able to meet the demands of Trafigura’s working culture.

“We are where you come to accelerate your career once you’ve been in trading for a few years. You’ll work hard, but we’ll offer you better infrastructure than many of our competitors – for example, the ability to hedge positions for clients, a logistics service, and strong relationships with banks,” says Hertault.

Your earnings potential is high as a Trafigura trader, as are your opportunities for promotion, he says.  “You can land important new responsibilities within a year or two of joining. Everyone can step up if they perform.”

This is partly because Trafigura doesn’t “stifle” staff with the complex hierarchies typically found in large banks, says Hertault.

“The environment at Trafigura is unique and entrepreneurial – characterised by a flat management structure, strong collaboration and support, and individual and team ambition,” adds Larocca, who joined Trafigura in 1994 as one of its earliest employees. “We have an exceptionally driven culture, where success is rewarded and performance is recognised.”

Physical traders from other commodities houses typically enjoy moving to Trafigura because it provides them with a “more competitive” platform, says Hertault. “We’ll push you harder and give you wider exposure to new products and markets.”

But to cut the mustard at Trafigura you also need strong communication skills.

“As a physical trader here you develop relationships with clients and add value for them – that’s one of the critical things that differentiates us,” says Hertault. “So if you’re a candidate from a paper-trading background, we assess whether you have the relationship-building skills needed to make the transition.”

How does Trafigura make sure its new traders are the right fit?

“During the interview process we spend as much time as possible, up to 30 hours, with each shortlisted candidate. You’ll have face-to-face meetings in different locations with our traders, heads of books, and board members,” says Hertault.

“It’s important to demonstrate your technical skills during interviews, but you also need to show your personality and geo-political awareness. We’re trading real products in the real world.”

If you are lacking experience in physical trading, you might initially spend a short time on the deals desk to learn the company’s systems. But you will then go straight onto the trading desk to generate your own P&L.

“We have open trading floors where knowledge is easily shared across the floor,” says Hertault. “We’re not a large company headcount-wise – even our main offices only have 200 to 500 employees – so we need people who can work closely with teammates and solve problems together.”

The fact that Trafigura has been profitable every year since its inception in 1993 is a major drawcard for attracting and retaining elite traders.

Larocca, who is based in Geneva, Trafigura’s European trading hub, explains: “I’ve worked for Trafigura almost from the start. During this time I’ve seen it grow to become a Fortune Global 500 company, with recent years producing some of the best results achieved to date.”

““

If you’re 18-20, looking for an all-expenses paid internship that will also offer a pro rata salary higher than most jobs pay after 10 years’ experience, then investment banking was the place to be. The pay off for a ‘real’ salary was, of course, brutal hours, fetching coffee and a gladiatorial battle with your fellow interns. But, hey, $5k a month.

Now, the financial sector has a lot of competition for intern pay, and it’s largely coming from Silicon Valley. Facebook pays its interns $8k a month, Microsoft pays over $7k and even energy company ExxonMobile offers around $6.5k, according to a Glassdoor ranking cited in Bloomberg.

You have to look a long way down the list before a finance firm pops up, and even then it’s on the buy-side. BlackRock – which pays a mere $5k or so. Deutsche Bank is the highest paying bank, suggest the figures with median monthly pay of $4,640, while Bank of America offered. $4,570.

Glassdoor’s figures for banks may be a little on the low side, however. Our own research of the site’s figures around this time last year suggested Citigroup was the highest paying bank, with an average of $6.7k per month for its summer interns in New York specifically, but every investment bank paid over $5k. The average salary in the U.S. is around $4k a month.

Separately, Blackstone is the latest financial services organisation to shake-up its workspaces for hip young tech professionals, but there’s not a foosball table in site. Instead, what young technologists really want from an office is…quiet and comfort. There is a pool table, but Blackstone says that it’s primary focus is to “make the space feel like home”. Just with lots of chrome and huge screens everywhere.

Meanwhile: 

Jes Staley has waded into a battle between KKR – one of Barclays’ most powerful clients – and a Brazilian data company, on behalf of his brother-in-law (WSJ)

Bob Diamond says that Jes Staley is “solid” and the right man for the job at Barclays (Bloomberg)

Bob Diamond say that Brexit is going to be “very very disruptive”. The infrastructure for the clearing business that’s currently in London simply isn’t there in other EU states, he says. (Bloomberg)

The EU could grab location restrictions on clearing even before negotiations begin (Financial Times)

The UK refuses to acknowledge the cold hard reality – financial services is likely to suffer because of Brexit (Politico)

Theresa May: “a bloody difficult woman” (Financial Times)

Fred the Shred could be dragged into a courtroom drama, years after RBS’s rescue (Financial Times)

European banks are losing ground (WSJ)

Credit Suisse has 20 robots dealing with simple compliance queries, which have reduced the number of calls in its compliance center by 50% (Reuters)

Jamie Dimon: “I wasn’t a Trump supporter when he was running, I wasn’t a big Democratic supporter either because I really don’t like their anti-business sentiment. I wish they would use the words ‘free enterprise’ every now and then, or ‘success is a good thing’.” (Business Insider)

Bill Ackman is setting up shop in London (Evening Standard)

Anyone with a younger boss should say, “I know a lot of stuff and I’d like to be your partner in execution.” (WSJ)

How to become a top banker in China: “The Chinese are generally quiet and humble. If you think you are ten, you tend to be conservative, offer a discount and say you are eight.” (SCMP)

Follow @paultclarke

Contact: pclarke@efinancialcareers.com

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““

Now that Easter’s passed, this should be the moment hiring heats up as banks pursue strategic hiring priorities for 2017. – Except that most banks don’t seem to have any strategic hiring priorities for 2017 (or at least none that they’re talking of) and in London the inclination to staff-up is being tempered by both Brexit and the coming General Election.

To the extent that banking executives have offered any indication of their headcount intentions for the next six months during recent results calls, we’ve highlighted them below. This is what’s coming up for your job, according to the C-Suite.

Bank of America: Been “making a lot of investments” in global markets, but nothing firm in the pipe 

Bank of America CFO Paul Donofrio said the bank has been, “making a lot of investments,” in global markets, “across equity, across macro.” However, it was BofA’s credit trading business that really drove its fixed income results in the first quarter and there was no mention of further investments here.

Donofrio stressed that the bank’s trading success came from being all things to all clients in all markets (“…it’s [our] impressive products, it’s [our significant presence and scale in every major market around the world…”]. BofA isn’t going to follow Barclays and specialize in particular geographies, therefore.

Barclays: 2,000 new technology jobs in the UK over the next three years 

The headline at Barclays was the bank’s intention to hire 2,000 technology staff in the UK between now and mid-2020. 750 have already been recruited. Exciting! Except, don’t imagine that all these technologists are going to be supporting traders in London. Staley said the 750 existing hires are sitting in the bank’s technology centres in, “Radbroke, Northampton and Glasgow.”

More broadly, Barclays’ fixed income business didn’t do well last quarter. Staley declared himself “disappointed” with the performance of the U.S. rates desk, suggesting Barclays could do with some better traders here (although Staley didn’t say so).

Citigroup: No big plans but earlier equities investments (and hiring) now coming to fruition

Citi spent much of 2016 rebuilding its equities franchise. Murray Roos and Dan Keegan were appointed global heads of equities in May and Armando Diaz from Millennium was brought in to run cash equities trading globally. Roos, who joined in 2015, also made a succession of hires before and after his promotion.

Citi CFO John Gerspach, said this investment in equities is now showing results, suggesting Citi’s equities build out is probably over.  Less promisingly, both Gerspach and CEO Michael Corbat talked down Citi’s excellent performance in debt and equity capital markets in the first quarter, stressing that the revenue numbers only looked good compared to 2016 because the first quarter of 2016 was so dire. – So don’t expect any hiring there.

Credit Suisse: Dumping contractors, protecting full time staff, hiring in compliance, “right-sizing” in sales and trading

Credit Suisse is in the process of cutting costs in its global markets division from $5.3bn a year in 2016 to $4.8bn a year soon. Even so, it added 70 people in global markets in the first quarter, and 120 in its investment banking and capital markets division over the same period.

Credit Suisse CEO Tidjane Thiam said the bank continues to reduce its “fixed cost base,” but that his intention is to cut contractors and consultants whilst “protecting full time employees” as much as possible and that his “philosophy is to try and minimize job losses.” Thiam also said that in the past two years the bank has “almost doubled” the number of people in its compliance function.

Compliance aside, hiring therefore looks unlikely at the Swiss bank. Thiam said he’s “cautious in the short term” and that “political uncertainties” weighed on client volumes last month. More ominously, it’s possible that there could be further cuts in both fixed income and equities trading. Thiam said the equities business has a “right-sizing issue.” Similarly, he said fixed income has a similar requirement because, “the environment for rates has changed,” and that lower revenues in Asia seemed to be “a new normal.”

Thiam said global markets cuts are being made on the basis of a detailed examination of each business based upon returns. He added that Credit Suisse needs to allocate capital more efficiently: opportunities to generate returns of 50% to 80% are being missed, seemingly because of capital allocation problems.

Deutsche Bank: Hiring in compliance, “internalizing” contractors, regretting the decision to pull back from securitized trading in the U.S.

Deutsche continues to implement its new strategy, announced in March, of focusing on corporate rather than institutional clients. It wants to “deepen” relationships in M&A and equity capital markets this year, and to recapture market share in equities sales and trading.

Little was said of this when Deutsche presented its first quarter results though.  Instead, CEO John Cryan said Deutsche had made around 370 net hires in compliance and financial crime and “internalized” (ie. converted into full time staff members) 200 contractors. More such internalization is planned.

Deutsche CFO Marcus Schenck said the German bank suffered as a result of its decision to pull out of the U.S. securitized trading market, which had an excellent quarter. Schenck also said that April at Deutsche had been weaker than March – and more ominously – weaker than April last year. Even so, there are signs that Deutsche is hiring amidst complaints from current staff that it’s unfairly luring new hires with guaranteed bonuses.

Goldman Sachs: Spare “capacity,” the expense level “never feels perfect”, “constant discipline” on expenses

Goldman Sachs didn’t have a great quarter in the first three months of 2017.  It cut 300 people over the period after announcing $900m in cuts last year, of which new CFO Marty Chavez indicated there are still $400m to come.

Analysts asked specifically whether Goldman planned to cut costs and headcount in response to its poor performance. Chavez said the business had already been trimmed since the end of 2012, but that the bank had a “constant discipline” to look at expenses which never feel perfect, Chavez added that Goldman has a “tremendous capacity” to serve clients as activity levels improve (indicating spare capacity now) and said that clients recognize this. Goldman’s co-president David Solomon subsequently told Bloomberg that Goldman’s business is. “levered to times when clients have a lot of conviction and one of the things that happened in the first quarter was that conviction ebbed.”

The clear expectation at Goldman is therefore that things will bounce back, and that the business will be ready for it given its current size.

J.P. Morgan: Expect technology hires. Cost cutting is over, hiring in the Middle East

J.P. Morgan didn’t say much about headcount when it presented its first quarter results. However, as we’ve noted before, cost cutting at J.P.M’s corporate and investment bank is over and the bank is focused on technology hires, especially in cyber-security.  Separately, investment banking CEO Daniel Pinto said today that J.P.M plans to add 200 staff in the Middle East and North Africa, some of whom will be in the investment bank.

In revenue terms, J.P. Morgan had an excellent first quarter in equity capital markets and debt capital markets and a less good first quarter in M&A. However, don’t assume any headcount changes on the back of this. – CFO Marianne Lake said this was only relative to 2016, when M&A was “particularly strong” and capital markets were “weak.” In the past quarter, she said both were, “normalized.”

Morgan Stanley: Still executing “project streamline”, no mention of ever hiring again in fixed income

Morgan Stanley CFO Jonathan Pruzan said the bank is still executing the “roughly 200 expense initiatives” associated with the “project streamline” initiative it launched in mid-2016. These include using, “robotic process automation” to consolidate tech support and cutting back on North American data centres.

In investment banking, Pruzan echoed Citi in suggesting the excellent first quarter in equity capital markets might not last. Pruzan blamed this on European elections and policy uncertainty, which he said could affect “issuance windows”. And although Morgan Stanley had another outstanding quarter in fixed income sales and trading, CEO James Gorman said nothing about additional headcount (after Morgan Stanley cut 25% of its fixed income salespeople and traders in late 2015). Instead, the plan is, to “just keep executing; manage our expenses in the businesses where we can keep up share, pick up share in the businesses where we’re holding share, hold it,” said Gorman.

UBS: Absolutely not hiring in U.S. credit trading 

UBS had already indicated its intention of hiring senior investment bankers “one at a time” and of growing its U.S. equities business.  However, no mention of this was made by its senior managers as they discussed the bank’s performance in the first quarter. Instead, CEO Sergio Ermotti vehemently denied claims that the Swiss bank is rebuilding its U.S. credit trading business. If UBS is bullish about building anywhere. it seems to be in Asia Pacific wealth management, which it thinks will “provide compelling growth going forward.”

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You need to do at least 300 hours of study to pass each of the three CFA level exams. Or, you can always follow our guide to prepping for the CFA exams. Even so, the chances are that you could be knocked for six by the really tough questions.

We’ve spoken to training companies who coach candidates embarking on the CFA exams. These eight questions – in their opinions – are the toughest questions you are likely to encounter on CFA levels I, II, and III. Helpfully, they have also provided solutions.

1. Level I: Beth Knight, CFA, and David Royal, CFA, are independently analyzing the value of Bishop, Inc. stock. Bishop paid a dividend of $1 last year. Knight expects the dividend to grow by 10% in each of the next three years, after which it will grow at a constant rate of 4% per year. Royal also expects a temporary growth rate of 10% followed by a constant growth rate of 4%, but he expects the supernormal growth to last for only two years. Knight estimates that the required return on Bishop stock is 9%, but Royal believes the required return is 10%. Royal’s valuation of Bishop stock is approximately:

A. $5 less than Knight’s valuation

B. Equal to Knights valuation

C. $5 greater than Knights valuation

Tim Smaby, VP, Advance Designations, Kaplan Professional:

“The correct answer is A.

You can select the correct answer without calculating the share values. Royal is using a shorter period of supernormal growth and a higher required rate of return on the stock. Both of these factors will contribute to a lower value using the multistage DDM.

Royal’s valuation is $5.10 less that Knight’s valuation.”

2. Level I: John Gray, CFA and Sally Miller are discussing what they think their year-end bonus will be and how they might spend them. Miller is new to working in finance and asks Gray what people usually get and what he has got in the past. Gray explains that the firm prohibits employees from discussing their exact bonus number but also says that 30% of people get ‘good’ bonus’, 50% ‘average’ and 20% ‘low’. Gray says that he really wants a new smart watch recently released by a large tech company and says that he will definitely buy it if he gets a ‘good’ bonus, while there is only a 50% and 10% probability he will get it with an ‘average’ or ‘low’ bonus respectively.

Two weeks later, Miller sees Gray in the office and asks him if he got a good bonus. Gray reminds Miller that the firm’s policy means he cannot say, but Miller notices that he is wearing the new smart watch they were talking about. Miller goes back to her desk and calculates the probability that Gray got a ‘good’ bonus is closest to:

A: 30%
B: 53%
C: 57%

Nicholas Blain, chief executive, Quartic Training:

“Using Bayes’ Formula : P(Event|Information) = P(Event) * P(Information |Event) / P(Information)

In this case, the event is getting a good bonus, and the information is that Gray has bought the new watch.

The probability that he got a good bonus and then bought the watch is given by:
P(Event)*P(Information |Event) = 0.3*1.00 = 0.30

The total probability that he would buy the watch is given by:
P(Information) = 0.3*1.00 + 0.5*0.50 + 0.2*0.10 = 0.57

Therefore, the probability that he got a good bonus is the proportion of probability that he got a good bonus and got the watch, to the total probability he got the watch:
P(Event|Information) = 0.30 / 0.57 = 0.53.”

3. Level I:  For a European Call option on a stock, which of the following changes, (looking at each change individually and keeping all other factors constant) would an analyst be least likely confident about an up or down movement in the price of the option?

A: Share price goes up; dividend goes up
B: The demand for share increases / supply decreases; interest rates fall
C: Share increases in volatility; the firm cancels the next dividend

Nicholas Blain, chief executive, Quartic Training:

“Share price up = Option Price Up
Dividend up = Option Price Down (dividends are benefits of holding the underlying share, when holding the option, you do not receive dividend)
Share in High Demand = Option Price down as this is a benefit in holding the underlying
Interest Rates Fall = Option Price Down as this reduces the cost of carry of holding the underlying
Share increases in volatility = Option Price Up
Cancels next dividend = Option Price Up, as these dividends are not received by the option holder anyway

A is the correct answer; as the increase in the option price due to the share going up could be offset by the decrease in the price due to the dividend going up.

B results in the option price falling for both scenarios and C results in the option price rising in both scenarios.”

4. Level II: Sudbury Industries expects FCFF in the coming year of 400 million Canadian dollars ($), and expects FCFF to grow forever at a rate of 3 percent. The company maintains an all-equity capital structure, and Sudbury’s required rate of return on equity is 8 percent.

Sudbury Industries has 100 million outstanding common shares. Sudbury’s common shares are currently trading in the market for $80 per share.

Using the Constant-Growth FCFF Valuation Model, Sudbury’s stock is:

A. Fairly-valued.

B. Over-valued

C. Under-Valued

Tim Smaby, VP, Advance Designations, Kaplan Professional:

“The correct answer is A.

Based on a free cash flow valuation model, Sudbury Industries shares appear to be fairly valued.

Since Sudbury is an all-equity firm, WACC is the same as the required return on equity of 8%.

The firm value of Sudbury Industries is the present value of FCFF discounted by using WACC. Since FCFF should grow at a constant 3 percent rate, the result is:

Firm value = FCFF₁ / WACC−g = 400 million / 0.08−0.03 = 400 million / 0.05 = $8,000 million

Since the firm has no debt, equity value is equal to the value of the firm. Dividing the $8,000 million equity value by the number of outstanding shares gives the estimated value per share:

V₀ = $8,000 million / 100 million shares = $80.00 per share

5. Level II: (Excerpt from item set)

Financial information on a company has just been published including the following:

Â

Dividends and free cash flows will increase a growth rate that steadily drops from 14% to 5% over the next four years, then will increase at 5% thereafter.

The intrinsic value per share using dividend-based valuation techniques is closest to:

A. $121

B. $127

C. $145

Nicholas Blain, chief executive, Quartic Training:

“The H-model is frequently required in Level II item sets on dividend or free cash flow valuation.

The model itself can be written as V₀ = D₀ ÷ (r – g_L) x [(1 + g_L) + (H x (g_S – g_L))] where g_S and g_L are the short-term and long-term growth rates respectively, and H is the “half life” of the drop in growth.

For this question, the calculation is: dividend D₀ = $240m x 0.6 ÷ 20m = $7.20 per share.

V₀ = $7.20 ÷ (0.12 – 0.05) x [1.05 + 2 x (0.14 – 0.05)] = $126.51, answer B.

However, there is a neat shortcut for remembering the formula. Sketch a graph of the growth rate against time: a line decreasing from short-term g_S down to long-term g_L over 2H years, then horizontal at level g_L. Consider the area under the graph in two parts: the ‘constant growth’ part, and the triangle.

If you look at the formula, the ‘constant growth’ component uses the first part of the square bracket, i.e. D₀ ÷ (r – g_L) x [(1 + g_L) …], which is your familiar D₁ ÷ (r – g_L). For the triangle, what is its area? Half base x height = 0.5 x 2H x (g_S – g_L) = H x (g_S – g_L). This is the second part of the square bracket.

Hence the H-model can be rewritten as V₀ = D₀ ÷ (r – g_L) x [(1 + g_L) + triangle].”

6. Level III: A German portfolio manager entered a 3-month forward contract with a U.S. bank to deliver $10,000,000 for euros at a forward rate of €0.8135/$. One month into the contract, the spot rate is €0.8170/$, the euro rate is 3.5%, and the U.S. rate is 4.0%. Determine the value and direction of any credit risk.

Tim Smaby, VP, Advance Designations, Kaplan Professional:

“The German manager (short position) has contracted with a U.S. bank to sell dollars at €0.8135, and the dollar has strengthened to €0.8170. The manager would be better off in the spot market than under the contract, so the bank faces the credit risk (the manager could default). From the perspective of the U.S. bank (the long position), the amount of the credit risk is:

Vbank (long) = €8,170,000 / (1.04)2/12 ˗ €8,135,000 / (1.035)2/12 = €28,278

(The positive sign indicates the bank faces the credit risk that the German manager might default.)”

7. Level III: Within the ‘Option Strategies’ section

Â

Risk-free rate continuously compounded: 4% annual

Option expiry: 6 months

Using the above data for a box spread, calculate what arbitrage profit can be achieved at the end of 6 months.

Nicholas Blain, chief executive, Quartic Training:

“First, work out the cost of the box spread. Combine the two call options into a bull spread (buy the low strike call and sell the high strike call), and the two put options into a bear spread (buy the high strike put and sell the low strike put). Combining those two gives a box spread. To calculate the initial cost, work out the net premia:

Cost = c₁ – c₂ + p₂ – p₁ = 6 – 4 + 8.001 – 0.604 = $9.397

The payoff from the box spread will be the difference between the strike levels, ie 30 – 20 = $10.

If you borrowed $9.397 at the beginning in order to enter the box spread, how much would you have to pay back after 6 months? You need to compound the cost at the risk-free rate:

$9.397 x e^{0.04 x 0.5} = $9.58683

So the arbitrage profit would be the difference between the payoff and what you have to pay back on the loan, ie $10 – $9.58683 = $0.41317”

8. Level III: Assume Felix Burrow is a US investor, holding some euro-denominated assets. Given the information below, calculate the domestic return for Burrow over the year.

Â

Nicholas Blain, chief executive, Quartic Training

“The domestic return (return in USD terms) depends on the EUR-return of the asset, as well as on the change in exchange rates:

R_DC = (1+R_FC) (1+R_FX) -1

where R_FX is the change in spot rates, using the domestic currency as the price currency (ie we require a USD/EUR quote). In this example, the exchange rate is quoted as such, so we can use the quote provided (otherwise, if the domestic currency was the base currency, we would need to invert the quote first).

R_FC = -1 = 0.0078 = 0.78%

R_FX = -1 = 0.0261 = 2.61%

R_DC = (1 + 0.78%)(1 + 2.61%) – 1 = 3.41%

Burrow’s domestic currency return was higher than the underlying asset return, because he further benefits from the appreciation of the Euro (depreciation of the USD).”

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““

There’s a new and increasingly important job in financial services – the head of machine learning. Hedge funds, investment banks and large asset managers are creating these roles and battling for expertise in big data, data science and AI, but the buy-side is currently winning the battle.

Man Group’s appointment of William Ferreira in the newly-created role of head of machine learning follows J.P. Morgan’s recruitment of Geoffrey Zweig from Microsoft in February. It’s indicative of a broader trend towards hiring in AI experts across the financial sector, both in (very) senior roles and lower down the ladder. While banks like Morgan Stanley have been hiring quants and systematic trading professionals, it’s hedge funds like Squarepoint Capital and Balyasny Asset Management which have been recruiting more in this area, according to recruiters.

“Hiring managers are looking for excellent academics and people who’ve worked in a tier-one or two shop,” said Andrew Cronin, vice president and the head of systematic trading at GQR. “A quantitative skill set is interesting to firms on the buy side and the sell side.

While investment banks have long used big data analytics to streamline risk management, operations and cost-cutting, more are looking at data science, big data analytics and AI in a revenue-generation capacity, much as quant hedge funds have been using machine learning for algorithmic execution.

“Banks have realized that machine learning algorithms can do various tasks faster than any human ever could, such as managing the data that the group holds,” he said. “On the buy side, they want people who can develop trading strategies based on machine learning algorithms that can find patterns using structured data sets, mainly quant traders, PMs and people who’ve worked with algorithmic execution products.”

Buy-side and sell-side hiring managers are looking for a strong combination of quantitative skills. In addition to computer science, they look for candidates who studied disciplines such as applied math, stats, electrical engineering, various sciences, including physics, operations research and game theory. A major in economics or finance is not technical enough for these types of roles.

“They want someone who can really drill into one area of the business and optimize that, someone who can solve mathematical brain teasers, but also has a very strong programming background in C++, Java, Python, R, Matlab, Arthur Whitney’s kdb or really any object-oriented programming language,” Cronin said.

The buy-side is set to be transformed by the move towards machine learning. This currently involves buying in huge quantities of third-party data, such as credit card receipts or information on crop yields, and attempting to extract information that could give them an edge over the competition. There are a couple of problems, however – the data is still, largely, incredibly messy and there are only a handful of people on the market who really crunch the data to generate trading opportunities.

“They want to hire people who can extract and analyze structured and unstructured data,” said Cronin. “Machine learning algorithms make decisions in a far more applied and systematic way than a human brain ever could – the processing power of a computer much more powerful than a human being – so being able to build algorithms is more important than any other traits.”

Hedge funds and asset managers account for the bulk of recruitment, says Robin Isaacson, the owner of recruiters Isaacson Search Co. (ISC), and are looking in more obscure places for talent. Some hiring managers are asking for candidates who have successfully competed in Kaggle programming contests, which require knowledge of data science and machine learning, she says.

“A lot of hedge fund firms have lost money in discretionary trading, so they want to change to systematic and compete – they’re always trying to find new ways of making money,” she said. “They’re all looking for people with a computer science or statistical background and coders with programming experience in either C++ or Python.”
Follow @danbutchrwrites

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Photo credit: PeopleImages/GettyImages
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