The kind folks from Wall Street Oasis, a website and forum for aspiring and current financiers of all stripes, invited me to moderate a panel at their inaugural conference over the weekend. The panel, titled “Exit Opps,” consisted of four financiers — two from hedge funds, one from private equity, and one from a big bank — who spoke about the various paths entry-level financiers can take after their first jobs.
What struck me most about the conference was the undercurrent of confusion. Despite hearing a surfeit of wisdom from a roster of successful panelists, none of the audience members I spoke to afterwards seemed certain of the steps that would help them become Masters of the Universe. In fact, judging from my (admittedly brief) interactions with conferencegoers, it seems that the financial industry’s basic career ladder has been replaced with something much less stable and much harder to navigate.
Climbing the ladder on Wall Street used to be a relatively straightforward process, at least for entry-level financiers with good pedigrees. A young Ivy League graduate would do a two-year stint as an investment banking analyst before either (a) heading to business school, after which he’d return to the bank as an associate and continue the upward march to VP, MD, and partner, or (b) decamping to the “buy side,” the prestigious world of private equity firms and hedge funds, where the pay was more lucrative and the hours more relaxed.
There were other ways to make it — Lloyd Blankfein, for example, practiced tax law until he came into Goldman through the J. Aron side door — but the traditional path to the brass ring was well-worn and venerated.
These days, though, as Gabriel Sherman reported earlier this year, the brass ring appears to be smaller and tarnished, and the path to it seems more labyrinthine than ever. In the course of an afternoon at the WSO conference, I heard people asking questions about making lateral moves between analyst programs, the possibility of returning to the sell-side from the buy-side, the advantages of equity research over investment banking, and the wisdom of quitting banking after two years to do something else entirely.
In her book Liquidated: An Ethnography of Wall Street, Karen Ho writes at length about the liquidity of the Wall Street job market. Among her points is that the financial industry is quicker than most sectors to hire and fire its employees when prevailing winds change:
The volatility of the market does not result simply from constant cyclical movement but also from the continual shifting of financial fads and products, such as the collateralized mortgage obligations that fueled the subprime debacle. Products that predominate one year, employing entire floors of people, can be decimated the next, the departments previously devoted to them shrinking to one or two desks.
That kind of instability — the worry that I might be laid off if my specific corner of the market becomes less profitable — has always existed on Wall Street. (Bond traders, for example, had a field day in the eighties, but saw their skill sets go out of vogue in the nineties.)
What seems different today is that even the most basic assumptions of Wall Street careerism — that buy-side is better than sell-side, that front-office is better than middle-office, that bulge-bracket banks are better than boutiques — have come into question.
Take, for example, the news last week that Jefferies — a small bank that few outside the finance world have likely heard of — set aside more money in per-employee compensation during the first six months of this year than Goldman Sachs, JPMorgan Chase, or Morgan Stanley.
Imagine that you’re a Harvard senior who has investment banking offers from both Jefferies and Morgan Stanley. If your goal is to maximize your earning potential, you might still go to Morgan Stanley even if it pays slightly less, under the assumption that working at a more prestigious firm will give you more lucrative buy-side offers in the future.
But if you’re a Harvard senior who takes the long view, you might instead think: If I take a job at Morgan Stanley and end up in a unit that shrinks or is targeted by a regulatory shift (or if the bank, god forbid, decides to break itself up), I might be out of a job. And then, if I can’t find a lateral move right away, I’ll have a résumé gap, and I’ll miss the private equity recruiting cycle, and then I’ll never get that offer from Blackstone, and I’ll end up doing equities in Dallas.
And you might decide — for purely selfish reasons! — that a Jefferies offer doesn’t look so shabby after all.
There is, without a doubt, still huge demand for finance gigs among many high-achieving twentysomethings, even though (as I’ve reported before) the Occupy movement and the growth of the tech sector have made some would-be financiers think twice.
What’s changed is that in the age where the Wall Street prestige hierarchy is in such flux and the outlook for big banks so uncertain, even those die-hards who do decide to become the next Steve Schwarzmans are increasingly uncertain about how to do it. And older financiers, whose own paths to riches are quickly becoming obsolete, seem to have very little idea what to tell them.