Investment Banker or Private Equity Professional – a fork in the road

Simon RoderickResearch, insights & industry news

investment banking - talent loss - private equity

Investment Banker or Private Equity Professional – a fork in the road

Investment banking is seeing a particularly acute war on talent, with an increasing number of analysts and associates drawn to private equity.

When investment banks see an upturn in M&A activity, as has been so widely reported, and private equity finds itself in one of the best environments it’s seen for many years, then it’s not surprising we’re seeing a war for talent. You then factor in the 3 R’s: resignation, relocation, and retirement, and the war for talent becomes acute. Typically, the Private Equity Associate talent pool is the Investment Banking Analysts and Associates, and banks are having to fight hard to keep their talent.

Our experience is that many in the investment banking world want to move to a buy-side role.  The reasons are many. Hours in investment banking are famously punishing, with the industry facing a burn out crisis, and this is not helped by the pandemic and the increased focus on work-life balance. One analyst at Goldman said in a recent survey that the physical and mental stress of the job was worse than their experience of foster care. Meanwhile, the financial rewards are also greater elsewhere, and investment banking has struggled with losing staff to private equity, and also tech, for some time. Banks are trying to address the issue with overwork in various ways; Goldman is enforcing a no-work-on-Saturday rule, whilst JP Morgan is embracing technology to reduce the analysts’ work load. Salaries are also going up, with first-year analyst salaries rising from an average of £50k to £60k, and extra bonuses and perks are also becoming more prevalent.

However, whilst lifestyle is important, this actually isn’t the main reason we hear for wanting to move into private equity. Without a doubt the main reason we hear is that IB professionals want to be part of a journey. They want to see the outcome of their work, to be involved in improving a firm, and see projects through rather than just providing and advisory service. Whilst short-term earnings may be affected, many individuals like the idea of having carried interest and benefitting from longer term lucrative incentives. It’s well known that private equity can be an extremely lucrative career once your career is established.  It’s often a hard argument for banks to overcome, i.e. good pay, buy-side, and working closely with portfolio companies. For those passionate about M&A, though, in theory you may see a thinning of the field whereby there’s less competition for senior roles. There is no doubt that working in investment banking gives individuals amazing rolodex and for some the camaraderie is hard to beat.

It's hard to know when the boom in financial services will end. However, we could be in this environment for some time. Therefore, firms will need to look beyond traditional talent pools for talent. We’re already starting to see with financial services firms making great strides with their diversity programmes. A key part of this may be looking beyond traditional qualifications or Russell Group Universities to  identify highly intelligent and talented individuals from a wider range of backgrounds for the analysts of tomorrow. Until these programmes start taking effect though, the future is very bright for junior investment banking staff, as salaries will continue to rise.

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About Fram Search

Established in 2010 by Simon Roderick, a recruiter with 20 years City recruitment experience, Fram Search is a specialist financial services recruitment consultancy. We focus on permanent and interim recruitment in the UK & internationally.

Our specialist investment banking practice supports the dynamic investment banking industry, which advises their clients on raising equity or debt, M&A, restructuring, and leveraged finance.

We provide high quality contingent and retained recruitment services to boutiques and global brands. We have long established relationships and access to deep talent pools. Fram takes a highly consultative approach, and we have a quality over quantity ethos. We are proud that our contingent fill rate is nearly three the industry average and we augment our retained search methodology with rigorous psychometric testing. Champions of diversity & inclusion, all staff have undertaken unconscious bias training.

Please contact us on 01525 864 372 / [email protected] to learn more.

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