Senior-level hiring in the bulge bracket banks has changed dramatically in recent years. There was a time when most senior bankers would get recruited by another bulge bracket bank – a cycle that would occur every few years or so. However, an increasing number of senior bankers are now moving to boutique banks or even starting their own investment bank, rather than moving to another bulge bracket opportunity.
Boutiques have been grabbing M&A market share from the bigger banks ever since the financial crash. In 2005, bulge bracket firms were credited with almost 95% of global M&A volume. However, by 2016 that figure had shrunk to 87.6%, according to Mergermarket, while the boutiques’ market share had risen from 4.9% to 12.4% over the same period. Research by Dealogic shows that in 2016, boutiques worked on 32% of all global deals in terms of value.
Leaving larger Wall Street banks has become an increasingly attractive option for many senior bankers. Big banks are well known for being regulation-heavy, a trend that has increased even more since the mortgage crisis.
Today, the government has a magnifying glass on the bulge bracket banks, making it increasingly difficult to run deals and get things done quickly. As a result, many senior employees are keen to escape the red tape that comes with being employed by a large organization, and spend more of their time on client-related activities.
The government is not as focused on regulating smaller firms, so being at a boutique or owning a practice, gives senior bankers more freedom to operate and build out their businesses. Shifting strategies within big banks often causes turmoil and high turnover, as senior bankers often clash over which clients are ‘theirs’ and into which sectors each client falls. Clients often contain cross-coverage between different verticals, which can make it more complicated for bankers to share at larger institutions.
Benefits of Boutiques
It is the benefits of smaller practices, not just the challenges of larger ones, which have led many bankers to make the switch. For example, many boutique banks allow senior bankers to bring in a whole team and build out their practice as they see fit.
What makes this even more interesting is that most boutique banks do not match the guaranteed compensation from the larger banks, but instead provide greater upside on deals originated. Many senior bankers have faced the harsh reality of not receiving bonuses or receiving differing bonuses despite their hard work. These differed bonuses are often a split between vesting stock and cash, which accumulates over a number of years. Some bankers have even forfeited their vested compensation to take a job at a boutique where they receive cash bonuses, making the opportunity it even more lucrative.
According to Vault’s 2017 list of best banks for compensation, Centerview offers the highest compensation, with boutiques typically paying better than the bigger banks across the board. Additionally, if you close a deal at a boutique, the rewards can be considerable not just monetarily, but also in terms responsibility and impact on the business.
Regarding strategy, most bankers are given free rein to do business as long as it generates fees. At the large banks, there are more rigid boundaries in place. If a client or business falls out of the defined boundaries, the banker is not at liberty to pursue.
Managing Directors Striking Out on Their Own
As more senior bankers leave to start their own boutiques, dozens of small investment banks have appeared over the last decade.
Earlier this year, Andrew Kass, former MD in Deutsche Bank’s internet investment banking team launched Blackwatch Advisors, while Matteo Canonaco, former global head of financial sponsors at HSBC teamed up with James Simpson, former co-head of advisory for EMEA at HSBC to launch DuCanon Capital Partners. More recently, Nick Hassall, former global head of consumer products and retail investment banking at UBS, went it alone and started Sequor Partners Limited.
While senior bankers at bulge brackets are looking to move to boutiques, some senior bankers at boutiques are keen to downsize further still, setting up their own private equity companies.
Most of these small banks employ between five and 100 professionals. Many operate ‘under the radar’ but are extremely successful. These firms typically operate in the middle market and lower-middle market, leveraging past relationships and clients to generate deals and fees.
These small banks have become successful partially because the culture and environment are unparalleled. In Vault’s 2016 list of the best banks for work-life balance, boutique firms held seven of the top 15 spots on the list.
Many of these banks have created a family-like atmosphere that promotes a healthy working environment, which often helps get deals across the finish line. Additionally, many of these small firms’ clients choose to work with them over some of the long-established institutions because of the quality of service they receive. When a deal is in the works at a small boutique, the whole bank puts its energy and attention into that deal. This is possible because they are not working on hundreds of deals each day, as is the case in the larger institutions.
The boutiques close a handful of deals a year and the bank prospers accordingly. Although this model can be risky at times, many of these banks experience long-term success and continue to operate and win great deals.
As these boutique banks continue to prosper, the movement of senior bankers from the large Wall Street institutions to these smaller firms is likely to continue. The big banks must address some of these issues, and adjust their employer value proposition, if they hope to retain their senior level talent.
To learn more about recent trends in bulge bracket hiring, or if you are looking to hire senior level talent for your organization, get in touch with Selby Jennings today.
Selby Jennings is a leading specialist recruitment agency for banking and financial services. For more than 15 years, we have given clients and candidates peace of mind that the recruitment process is in expert hands. Our continual investment in best-in-class technologies and consultant training enables us to recruit with speed, precision and accuracy. Today, Selby Jennings provides contingency and retained search recruitment across 11 offices in 6 countries. Contact us to find out how Selby Jennings can help you.