Now Nomura has put some of its senior technologists’ jobs at risk

October 8, 2018, 5:43 am

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Japanese bank Nomura might now be building up its credit (and in particular its structured credit) team after making 50 people redundant in July, but this isn’t preventing it from making cuts to its trading technology business.

Insiders say that Chris Peake, Nomura’s senior software development director and the man previously responsible for the bank’s reference data platforms, has been put ‘at risk’ of redundancy, along with several members of his team. Some are out looking for new jobs already. Nomura declined to comment.

Peake joined the Japanese bank over 10 years ago, after starting his career at Lehman Brothers in London. During his decade at Nomura, he worked as a vice president in equities technology and an executive director in global markets technology. As an executive director with responsibility for reference data platforms, Peake was tasked with ensuring Nomura’s data plans were compatible with regulations like MiFID II.

Peake remains at Nomura while his job is at risk. It’s usual for employees to look for new roles internally during the at risk period, which can last anything from 30 to 45 days.

Nomura is reportedly chasing a 25% increase in credit revenues under its new structure. However, it also needs to cut costs after persistent profitability problems in its UK and US businesses.

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This is how much you’ll really earn working for Boston Consulting Group

October 8, 2018, 8:05 am

≫ Next: Traders are studying these courses in their spare time to ensure they stay employable

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If you’re working 80 hour weeks in the investment banking division (IBD) of a major U.S. bank, chances are that you’ve toyed with moving into a consulting firm instead. After all, consultants are generally held to offer a better lifestyle than banks. Junior bankers who’ve moved to the so-called MBB consulting firms of McKinsey & Co, Bain and Boston Consulting – have assured us they are having a better time of it.

However, there’s a downside to moving into consulting: pay. The average consultant earns a lot, but earns less than the average banker. But if you manage to reach the top in a consultancy firm (ie. you come a partner) you might be paid on a par with people at the top of banks.

Boston Consulting Group has just released the results for its UK-based partnership for the year ending March 31st 2018. They show the average of its nearly 800 UK-based employees (including 484 consultants and 315 administrators) earning £94k ($123k) in wages and salaries over a 12 month period. The average of its 56 UK partners earned £967k. Both numbers were down slightly on the previous year.

While these are big numbers, banks’ numbers can be bigger still. Average pay per head at Goldman Sachs in the UK is closer to £399k. Recruitment firm Dartmouth Partners says juniors in investment banking divisions (IBD) at major banks are earning £260k within six years. After a couple of years in a front office banking job, most people are earning six figures. However, ‘code staff’ in banks in the UK (senior staff and risk takers) typically earn around £1m, putting them on a par with BCG’s partners.

The pay figures for BCG don’t include wages paid to “outsourced consultancy” staff from other BCG Group companies who came to work in the UK during the year.

For bankers who want to move into consulting, the good news is that BCG is hiring. The firm added 53 consultants and 49 administrators in its last financial year. However, both revenues and operating profits remained flat at around £270m and £88m respectively.

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Traders are studying these courses in their spare time to ensure they stay employable

October 8, 2018, 9:27 am

≫ Next: Morning Coffee: Will you need to know coding for future banking jobs? It’s complicated. Goldman Sachs’ parochial star trader

≪ Previous: This is how much you’ll really earn working for Boston Consulting Group

If you’re trying to break into finance now, you might want to think beyond the CFA qualifications. Yes, the CFA Institute has launched machine learning and crypto currency components to its courses, but these new CFA questions (when we looked) seemed pretty facile and you’re still mostly preparing for a job in asset management or equity research. If you want to work in crypto trading, or to write machine learning trading algorithms, you’ll probably need to look elsewhere.

For anyone who wants to break into machine learning or crypto, we’re not saying the courses below are definitively the best in the market. However, they do have the support of senior traders who are looking up their games. Like the CFA qualifications, they can be done in the evenings. Unlike the CFA, they won’t take the 300 hours of study required for each CFA exam – most require commitment for an 11 week period. They won’t guarantee you a job (what will?) – but they will demonstrate your interest and might help you secure a job in either area in future, particularly if you’re already working in a quant finance role and want to prove your skills are current.

Andrew Ng’s machine learning course on Coursera

If you want to break into machine learning without studying a quantitative Masters or PhD, by all accounts you want to look at Andrew Ng’s machine learning course on Coursera. Ng is an adjunct professor at Stanford University and a former head of Google Brain and Baidu’s AI Group.

Ng’s 11 week course covers everything from neural networks to unsupervised learning and is rated by top machine learning experts like Oxford University’s Professor Stephen Roberts.

Andrew Ng’s machine learning course on the Stanford University website

Having completed Ng’s 11 week Coursera course as an intro, some traders tell us they’ve moved on to his longer course on the Stanford University website. With 20 lectures in total, this isn’t finance specific but will give you a good grounding in all areas of AI (including the autonomous control of drones).

Princeton University’s Coursera course on Bitcoin and Crypto

Lastly, traders are topping up their machine learning skillsets with Princeton University’s course (also on Coursera), which looks at how Bitcoins and cryptocurrencies work. Taught by Arvind Narayanan, an associate professor of computer science at Princeton, it’s considered one of the best introductions in the industry and might be a good place to start as banks like Morgan Stanley prepare to set up crypto trading desks.

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Morning Coffee: Will you need to know coding for future banking jobs? It’s complicated. Goldman Sachs’ parochial star trader

October 9, 2018, 12:07 am

≫ Next: My SMU MWM gave me the technical knowledge I needed to boost my career

≪ Previous: Traders are studying these courses in their spare time to ensure they stay employable

Do you need to know how to code if you want to work in banking? It’s the new perennial question that we’ve addressed here and here, but J.P. Morgan and Morgan Stanley have provided a more comprehensive answer: sort of.

You’re clearly going to need to know how to code a bit. J.P. Morgan has begun teaching its junior asset managers and some of its junior bankers how to write code as part of their basic training – this year, 300 of the bank’s asset management analysts and a third of its corporate and investment bank (CIB) trainees are receiving instruction in the coding way. “Coding is not for just tech people, it is for anyone who wants to run a competitive company in the 21st century,” says Mary Callahan Erdoes, head of J.P. Morgan Asset Management. Right then.

Except that, if you want a job as a trader or a portfolio manager you’re not going to need to be the sort of highly accomplished coders’ coder who might get a job in the JPM technology division. In her next breath, Erdoes explains that junior finance types don’t need to know how to code so that they can actually write code for the bank’s systems. They simply need to know how to code so that they can talk to the people who do. “By better understanding coding, our business teams can speak the same language as our technology teams, which ultimately drives better tools and solutions for our clients,” Erdoes says.

Knowing how to code if you’re a finance professional is therefore like knowing a few phrases of French before you visit France – you’re not aiming to be as proficient as native speakers, but you do want to make yourself understood when you’re ordering a beer in a bar (or a tweak to a pricing tool).

A similar sentiment is being expressed at Morgan Stanley, where the bank is busy redesigning its offices with the sorts of brown leather sofas, stone floors, pouffes and semi-industrial aesthetic it thinks will appeal to “the next generation of the best and brightest.” 9,000 “seats” have been upscaled so far (in New York, Houston, Frankfurt, Chicago, Glasgow, Budapest, London, Mumbai and Bangalore) and more are coming soon. Like J.P. Morgan, Morgan Stanley just wants its technology people and its traders to talk: “Our traders need to be with our techies,” says the bank’s head of technology. “You’ll see a very different trading floor in five years time than you see today.” If you work in trading, you need to learn the language now.

Separately, the most feted trader of the year at Goldman Sachs is not in London, talking to coders. Nor is he in New York. He’s out in Calgary in the further reaches of Canada. Business Insider says Shane Lee, who runs Goldman’s Calgary-based natural gas trading desk has managed a team which made $100m for the bank in the first half of the year. Lee, then, seems to have been an important contributor to Goldman’s first half fixed income trading renaissance – although the bank’s revenues were up $900m in total, so there were clearly some other contributors too.

Meanwhile:

Banks in London will have until 2022 to move trading jobs to Europe. – The European Central bank is giving them until this date to curtail their use of “back-to-back” trading models that would allow them to manage risk (and locate traders) in London and to simply process trades in the EU. (Financial Times)

Credit Suisse hired Ben Lawrence from Deutsche Bank for its corporate broking team. Financial News)

Average pay per partner at BDO, the UK’s sixth largest accountancy firm, was £531k ($695k) for last year. This was more than the £519k KPMG paid its partners. (Financial Times)

Why the Big Four firms might be made to spin out their consultancy arms in the UK: In 2017, the big four earned a total of £2.1bn from auditing but another £8.4bn from non-audit consultancy. Just over £1bn of that income came from firms they also audited. (Guardian)

Goldman Sachs has cut its loan origination target for Marcus after new market data raised concerns about the stage in the credit cycle. (Business Insider)

Goldman Sachs already has from six to 15 bankers in its new offices in Seattle, Atlanta, Dallas and Toronto as it seeks to win clients by going local. (CNBC)

You probably don’t want to be a trader for Louis Dreyfus right now. (Bloomberg)

A senior Commerzbank compliance officer won a court case arguing that she was marginalized after returning from maternity leave. (PeopleManagement)

Never let anyone know that you’re exceptionally good at Excel.“People say, ’Oh, this is just a really quick thing. Then I look at it, and it’s not a quick thing.” (WSJ)

Photo: Getty

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My SMU MWM gave me the technical knowledge I needed to boost my career

October 9, 2018, 2:22 am

≫ Next: An ex-MD in Nomura’s structured credit business got a new job on the buy-side

≪ Previous: Morning Coffee: Will you need to know coding for future banking jobs? It’s complicated. Goldman Sachs’ parochial star trader

Chuck Ng, Head of Distribution and Partnership at Manulife Asset Management, became interested in finance when he was an undergraduate at university.

Singapore-based Ng’s first degree was in chemical engineering, but he knew he wanted a career in finance before he had even graduated. “I’d already developed an interest in financial markets, and I’d often take the campus shuttle bus from the engineering faculty to the business faculty to read the Wall Street Journal, Euromoney and Institutional Investor. It was 20 years ago so you couldn’t get these things on an app,” he says.

When Ng heard that Citibank was visiting the campus on a recruitment drive, he jumped at the chance to apply and secured a place on its management associate programme. Citi’s programme gave him a strong grounding in banking. He worked across the marketing department, front office and back office, and ran projects for the quality management team. “I had a very good time experiencing the broad swathe of what banking has to offer,” says Ng.

Despite his work experience with Citi, Ng was still keen to obtain an academic grounding in finance. “When I joined the industry, I had no academic background in banking or finance, so I was looking at an academically-rigorous programme that would equip me with the requisite knowledge ,” he explains.

Ng also wanted to enrol in a specialised programme that focused on wealth management, and Singapore Management University (SMU) was a pioneer in this area. “I was by then a CFA charterholder, but I wasn’t accredited from a school in the traditional sense. The Master of Science in Wealth Management (MWM) offered by SMU met all my needs and enabled me to further develop my passion,” he says.

It’s now 12 years since Ng graduated from the MWM programme but much of what he learned in the programme still stand out in his mind. “The courses that had the most engagement were the ones with the market practitioners. That’s not surprising because what matters at the end of the day is practical knowledge,” he says.

One of the great things about SMU’s MWM is that the programme is not static but develops as the industry changes, he adds. “I’ve looked at the curriculum for the next cohort and there are fintech and blockchain elements included, all of which didn’t exist in my time but are very relevant today,” says Ng. “This reflects the DNA of SMU. It’s always at the forefront of what the business world is facing and where the challenges are in the financial industry.”

The SMU MWM is ranked third in the world by the Financial Times in its Global Masters in Finance Post-experience Ranking 2018.

Ng also found the international element of the programme very helpful, and enjoyed spending time at one of SMU’s partner institutions in Switzerland. The diversity of the students taking the MWM was another factor that enhanced his learning experience. There were many students from across the world and across Asia – including from China, Malaysia, Vietnam, Indonesia and Japan – enabling him to be part of an alumni network that was connected regionally and globally.

“It’s very important to have global representation,” says Ng. “It’s increasingly critical in our ever-more connected world to understand how people elsewhere operate and what their worldview is.”

Ng still keeps in touch with many of his classmates. “. Many have become friends and some have helped me in various capacities while others moved on to different careers.”

Ng spent 17 years in banking – in roles including running the EAM (multi-family office platform services) business for Credit Suisse that spanned Singapore, Hong Kong and Switzerland – before moving into asset management four years ago.

“That move has been great for reinvigorating my sense of adventure, especially at the start when I was setting up the Singapore branch of an asset management company, building a team and fundraising,” he says. “It was a very challenging time and I was learning new things really fast. Most of the important milestones in my life have been times when I was in a state of change.”

For potential students who have spent time working in another industry, Ng thinks SMU’s MWM is a fast way to gain the knowledge they need to get up to speed. “It’s almost like a shorter route that prepares you in a way that few other programmes can,” he says.

He also advises people to take the time to get to know their fellow students while they are in the programme. “A very important aspect is the bonding and the network formed as a result of the growth you experience. Those will be priceless years down the road.”

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An ex-MD in Nomura’s structured credit business got a new job on the buy-side

October 9, 2018, 2:55 am

≫ Next: The TMT associate who just left Deutsche Bank has a fancy new job

≪ Previous: My SMU MWM gave me the technical knowledge I needed to boost my career

Nomura is supposed to be all about structured credit these days. As we’ve noted, the Japanese bank is going for a 25% increase in credit trading revenues and has special hopes for structured credit in particular after hiring John Gousias from hedge fund Millennium Capital Management to run credit trading in September.

However, the new Nomura arrivals seem to be rocking the existing boat. The bank already made 50 redundancies in July, but there have been departures in recent weeks too. They include Shaun Barlow, the bank’s main distressed debt trader, who reportedly left last week because Nomura is pulling back from distressed debt trading. They also include Juan Grana, a former managing director in Nomura’s structured credit business who officially left last month after resigning in June, and who has just turned up on the buy-side.

Grana is now an MD (and seemingly the only employee) at the London office of ArrowMark Partners, a Colorado-based asset management firm with $18 billion in assets. He’ll be helping the firm’s U.S. team with origination, structuring and oversight of investments, based out of the UK.

Grana isn’t the only Nomura escapee to find alternative employment. Omar Ghalloudi, the Japanese bank’s former head of flow credit for EMEA joined BNP Paribas last month.

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The TMT associate who just left Deutsche Bank has a fancy new job

October 9, 2018, 3:44 am

≫ Next: A reminder that banks did not have a great Q3. And this means one thing

≪ Previous: An ex-MD in Nomura’s structured credit business got a new job on the buy-side

The good news is that Nicholas de Vibe, the technology media and telecommunications (TMT) team associate who left Deutsche Bank last month hasn’t gone to another bank. The bad news is that de Vibe has got himself the sort of job (on the buy-side) that might make all Deutsche’s other TMT associates wonder whether they ought to be leaving too.

As we reported last month, the exit of several associates from Deutsche’s seemingly demoralized investment banking division has had a few people in a state of minor anxiety. Is this a sign that the German bank is now crumbling from the bottom up? Well, not exactly, but it doesn’t help when the AWOL associates turn up doing something more exciting instead.

De Vibe seems to have found himself the sort of job that would have any ambitious associate in a state of excitement. – He’s resurfaced at Axa Venture Partners, the $275 million venture capital and growth equity fund run by Axa, where he’ll be focusing on later-stage venture investments in finfech, enterprise/software as a service (SaaS), digital health and consumer technologies. It’s the kind of job most TMT associates in investment banks would aspire to. His ex-Deutsche Bank colleagues have undoubtedly taken note.

Fortunately for DB, Axa Ventures doesn’t seem to be a big hirer of investment banking talent, so other members of its TMT team are unlikely to follow de Vibe there. This doesn’t mean they won’t be tempted by rival banks though. – Recruiters in London say the market for junior investment bankers is hotter now than it’s been for a long time.

Photo: Getty

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A reminder that banks did not have a great Q3. And this means one thing

October 9, 2018, 4:59 am

≫ Next: The hottest senior role that every bank is struggling to fill

≪ Previous: The TMT associate who just left Deutsche Bank has a fancy new job

Starting next week, banks will begin reporting their results for the third quarter. This is a brief reminder not to get too excited. It is also a brief reminder that a difficult third quarter is often followed by redundancies in the fourth quarter as banks cut costs before year end. Brace yourself now.

James Mitchell, an analyst at Buckingham Research, has updated his previous gloomy prognosis about banks’ performance in the three months to October 2018. Mitchell’s latest assessment is less dire than last month’s (Eg. He now says announced M&A fees were down 14% year-on-year in Q3 instead of the 26% he estimated previously), but it’s not exactly reassuring either.

Using changes in trading volumes, spreads and volatility as a proxy for revenue changes by business, Mitchell suggests that most trading desks will have had a bad quarter compared to Q3 2017. The only exceptions are equity derivatives and rates derivatives desks.

Similarly, Mitchell thinks investment banking divisions had a feeble third quarter too. As the second chart below shows, he says equity capital markets fees, debt capital markets fees and M&A fees are all down on the same period of last year – although ECM and DCM might be spared because they had a great September.

Needless to say, none of this seems to bode entirely well for banks that are already cost constrained and hoping that rising revenues will alleviate the need for more aggressive cutting. Bank of America is already thought to have trimmed a few staff in London recently. If Mitchell’s right, there may be a lot more of this to come.

Photo: Getty

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The hottest senior role that every bank is struggling to fill

October 9, 2018, 5:22 am

≫ Next: The perfect cover letter for getting a job in wealth management

≪ Previous: A reminder that banks did not have a great Q3. And this means one thing

Big banks always seem to be in a poaching war over one particular position of importance, resulting in a game of musical chairs among senior bankers who are switching firms. Right now, Wall Street recruiters say much of the action is happening in FX sales, particularly covering corporates.

The latest big-name moves include Mark Haber, the former head of U.S. corporate FX sales at Nomura who was just hired by Morgan Stanley as a managing director in New York, according to sources. Mark Veale, a 20-year veteran of corporate FX sales and origination who spent the last 12 as a director at Citi, also departed for another gig. Insiders tell us he has accepted a similar position at Wells Fargo. Neither Haber or Veale are in the employee directory at Nomura and Citi. Morgan Stanley declined comment while Wells Fargo didn’t immediately respond to a request for comment. [Update: Wells Fargo has now confirmed it has hired Veale as an FX specialist reporting to Sharif Saba, head of the corporate rates & FX solutions].

Meanwhile, Maria Olson, a former director of corporate FX at Barclays, has joined at Deutsche Bank in New York. She started in September, according to her LinkedIn profile.

FX sales is “super-hot,” according to one recruiter who asked for anonymity. “Literally every bank has a search,” he said. These not only include big tier-1 banks, but also firms with a smaller presence in New York. “They are having problems finding people,” he said of second-tier banks. Foreign banks said to be on the lookout for FX sales talent include Commerzbank, ANZ and TD Bank, according to sources.

Of the three recent moves, Olson’s is the most interesting because it appears to go against a recent trend. Several high-level FX specialists have moved the other way, leaving Deutsche Bank to join Barclays, though many of those moves occurred in London. This list includes Jeremy Monnier, the former global head of FX structuring at Deutsche Bank who was named MD at Barclays in September, and Fabio Madar, Deutsche Bank’s former global head of foreign exchange, who joined the UK investment bank as global head of G10 foreign exchange trading and distribution in July. At least three other former Deutsche Bank executives have found work at Barclays in the last six weeks. Deutsche Bank has been cutting costs as part of its new strategic plan, though they have still had to hire in spots to refill seats left vacant by voluntary departures. Barclays, meanwhile, appears to be firmly in growth mode.

Most banks are trying to boost their corporate coverage as a way of hedging against low revenues from institutional clients. Goldman Sachs, for example, has made increased penetration of the corporate market a key component of its plan to increase fixed income trading revenues by $1bn by 2020.

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The perfect cover letter for getting a job in wealth management

October 9, 2018, 7:08 am

≫ Next: The longer you stay in banking, the lower your chance of succeeding at anything else

≪ Previous: The hottest senior role that every bank is struggling to fill

If you’re looking for an entry-level job in wealth management, you’ll need to craft a cover letter that conveys a specific understanding of the actual skills required to succeed. Talk yourself up as a stock-picker and you’re unlikely to end up getting an interview. A strong wealth management cover letter will accentuate your ability as a salesperson and relationship-builder who has a large network of potential customers.

Structure

No cover letter should ever exceed one page in length, according to Afzal Hussein, a former member of Goldman Sachs’ asset management team and founder of Official CV Doctor. Three quarters of a page – or between 300 and 500 words – is a good length to shoot for. If avoidable, don’t begin the letter with: “To Whom It May Concern.” In this day and age, you should be able to track down the name of the hiring manager – an action that will suggest you put in the appropriate effort and aren’t blasting your cover letter and resume all over town.

The letter should begin with a brief introduction about yourself and what you’ve been up to over the last 1-3 years, as well as detail why you want to work for that specific firm, Hussein said. Dropping the name of the company (more than once), any employees you’ve met, networking events you’ve attended and details about the firm will show that you’ve done your homework. This should represent one-third of your cover letter.

Selling yourself

At this point, you’ll want to transition to the most important aspect of the cover letter: why you are suited for the role and company in question, both in terms of your relevant experience and your skillset and personality. This is particularly important in wealth management because many inexperienced candidates don’t understand the realities of the position, according to a current Morgan Stanley broker who now runs a small team.

For the first few years, “it’s 100% a sales job,” he said. Yes, you’ll need the acumen to understand investment products and gain market knowledge, but all that can be taught. The ability to sell yourself, earn the trust others and develop a list of people to call cannot, he added. “If I get an email from some kid three years out of college who says they’re the next Warren Buffett, I delete it,” he said.

Highlight any experience you have in financial services – even if it’s only being a member of an investment club in college – and stress your background and aptitude in dealing with customers. Then explain how your experience and skillset would make you a good fit as a wealth manager. “I look for thick-skinned yet personable relationship-builders,” the Morgan Stanley broker said. Briefly include relevant figures and achievements like hitting sales quotas. At this point, you can mention your passion for and knowledge of the markets if you have no direct work experience. Many brokerage firms now hire people who worked in completely different industries who may be older and have more established networks, according to recruiters.

Using your cover letter to tease the potential power of your personal network – the people you’ll likely need to lean on to start building your own book of business – is up for debate. One recruiter who places experienced wealth managers feels a young recruit would come off as overly egotistical. The Morgan Stanley broker disagrees. “I want to know how you plan to generate revenue – through your skills as a relationship-builder and the people you know.”

Finish your cover letter by briefly reiterating your interest in the position and the firm in question and thank the person for their time. Try not to waste any sentences and avoid clichés and fluff. “You have a finite number of words to use in your cover letter in order to sell yourself to the reader,” Hussein said. Brevity is key.

Follow @BeecherTuttle

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The longer you stay in banking, the lower your chance of succeeding at anything else

October 9, 2018, 8:40 am

≫ Next: The global head of fixed income sales is leaving Goldman Sachs

≪ Previous: The perfect cover letter for getting a job in wealth management

I began my career in the investment banking division of a major European bank. Three years later, I left. Getting out of banking was the best decision I ever made.

It wasn’t just about the working hours, although they were just as back-breaking as everyone says. Nor was it just about working with senior people who see you as dispensable – although they absolutely do. It was because the longer I stayed in banking, the more I could feel the industry crystallizing my bad habits and limiting my future career choices. I had to go.

Banking will give you a process-oriented mindset

Investment banking is an advisory function. A lot of it is nothing more than processing market information when you’re trying to win business, or managing a process on behalf of a client when you’re trying to execute deals.

Only the most senior bankers are viewed as trusted advisors in the eyes of their clients – and they are a minority even among the seasoned MD cohort. In my experience, most senior investment bankers are scrapping to justify their expensive salaries in an ultra-competitive market. They rarely have an ability to form a long term view or stick to their beliefs (which would be the only way to gain the long term trust of their clients). They live by a “next quarter mentality” and when you’re a junior this locks you into an endless cycle of processing and irrelevant analysis.

Banking will make you a submissive slave to your clients

In investment banking, the client is king. The client can demand high speed turnaround of huge chunks of work. Senior bankers who want nothing more than to please clients will rarely push back on these unreasonable requests, so as a junior member of staff you are in for a lot of sleepless nights. You will learn very little – except to suppress all forms of initiative and free thought. Your main skill will become blind obedience to your clients and your seniors and if you’re not careful you will perpetuate this by indoctrinating the juniors working below you when you become senior enough to do so.

Banking will make you a dreadful manager

Success in banking is all about processing. No one really cares about staff development when thousands of talented juniors are queuing to join the industry each year. The real goal is to squeeze everybody (especially the mid-level and junior cohorts) as much as physically possible to get all the processing done. Accepting this way of working – and the associated management style – as normal will have a hugely detrimental effect on your ability manage anyone in a more balanced environment where the pay is lower and managers actually have to motivate people.

Banking will divorce you from the detail of finance

Working in banking is all about high level analysis. You’re not going to be doing any detailed work because you won’t have the knowledge, the information or the time. When you’re a junior banker, a leverage ratio become “3.5x” – the whole rich world behind this number (debt covenants, structural subordination, the security package, the acceleration rights) is lost. Ignoring this world is in effect ignoring the inner workings of corporate finance itself.

Banking will leave you with an incomplete skill-set

When I was a junior banker, I worked worked on large and small deals but I never saw a loan agreement or a term sheet. There are a lot of key work streams that investment bankers simply don’t deal with. These include negotiating legal work, supporting post-merger integration, or developing strategies for business restructuring. If you work in a finance job in the corporate sector or in private equity, you’ll need these skills. In banking, you won’t develop them at all.

Of course, not all banking jobs are this bad and some people in banking are extremely knowledgeable and well-rounded individuals. In my experience, however, they are in the minority. For me, banking started my career but it was threatening to become a blocker unless I left before I became enmeshed in the system. I’m very glad that I did.

Roger Shrubber is the pseudonym of a former analyst at a European bank

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The global head of fixed income sales is leaving Goldman Sachs

October 9, 2018, 9:30 am

≫ Next: Morning Coffee: One of the most grueling (and rewarding) jobs in banking. The man who left Morgan Stanley and made a fortune

≪ Previous: The longer you stay in banking, the lower your chance of succeeding at anything else

Goldman Sachs is understood to be parting company with John Willian, its New York-based global head of fixed income sales.

Goldman says Willian is retiring at the end of the year and will become an advisory director in future. He’s being replaced in the U.S. by Av Bhavsar and Ricardo Mora, the firm’s current heads of credit and mortgage sales, and FICC emerging markets distribution and Americas foreign exchange sales respectively.

Willian, who joined Goldman Sachs in 1990, was left as the sole head global fixed income sales in November 2017 following the promotion of former co-head Jim Esposito as COO for the fixed income division. Esposito was subsequently promoted to co-head of the whole securities business in August 2018.

Willian’s exit marks the latest change to Goldman Sachs securities business under CEO David Solomon. Solomon officially became CEO on October first, but made himself felt as early as May when Isabelle Ealet and Pablo Salame, two of the three former heads of Goldman’s securities business, left the firm. Last month, Marty Chavez – the firm’s former CFO – was made the third contemporary co-head of the securities business, alongside Esposito and Ashok Varadhan.

Goldman’s fixed income sales business has undergone various changes in recent years. Numerous partners left in 2016 and 2017, including Tom Cornaccia – the former global head of fixed income sales who had tried to implement a more equities-like approach to client service, wherein Goldman sales people were encouraged to think less about single transactions and more about the client relationship over time. Last year, the firm determined to improve its customer relationships as it sought to recover from several quarters of declining revenues.

Fixed income isn’t the only area of Goldman’s securities business that’s undergoing change under Solomon. Paul Russo, head of equities trading, also left the firm in September.

Photo: Getty

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Morning Coffee: One of the most grueling (and rewarding) jobs in banking. The man who left Morgan Stanley and made a fortune

October 9, 2018, 11:42 pm

≫ Next: Goldman’s new retail push bringing more tech jobs to London

≪ Previous: The global head of fixed income sales is leaving Goldman Sachs

With the publication of the Institutional Investor All-America Research Team awards (congratulations, JP Morgan!), some of the equity research industry’s most experienced and successful players have been talking to II about what’s changed over the course of their careers, what the secrets of success are and, possibly most important of all, whether there is any appeal at all to one of investment banking’s Cinderella roles, one which always seems to be on the verge of dying out.

Strikingly, all of the Hall Of Fame players interviewed seem to be giving the same message. Equity research, if it’s done right, is a great job and one of the best ways to develop a really comprehensive skill set in valuation, industry analysis, marketing and communication. Analysts still get to work with some of the most interesting people in the world, and start generating their own revenues and franchises at a much earlier stage in their careers than in many other parts of sales & trading or IBD.

Where the problems come in is that it’s always been insanely competitive and difficult to get paid, and this has got worse over time. Back before the dawn of the fax machine, when today’s grandees were starting out (the economist Ed Hyman has now been top of the II rankings in his sector for 38 years!) research reports came out monthly, trading commissions were fixed and the most service many clients needed was some help in getting a “read” on a set of accounts to help make up their mind if they still wanted to own a stock.

Nowadays, it’s more like a report every day (Hyman publishes one every morning and one every afternoon), with everything disseminated simultaneously at the speed of email. The passage of Regulation FD means that the sell side no longer has access to special chats with management, but MiFID II in Europe means that analysts have to demonstrate value added information that people are prepared to pay money out of their own P&L (rather than client assets) for.

How do you deal with a market like this? The consistent answer from the people who have succeeded is “work harder”. Investors are still prepared to pay good money for industry insight and high quality thematic research from people who have put themselves at the centre of information flow in an industry, but in order to get the time to produce it, you need to first conquer the daily tidal wave of high-frequency, low importance data points. And once you’ve done that, you need to get on the road and market it.

But the advantage of all this is that being an analyst almost allows you to build your own franchise on an investment bank’s platform. Who else these days is able to design their product, produce it, market it and get instant feedback on whether their ideas worked or not? The increased pressure is likely to drive out mediocrity, but at the top of the profession, when it all works out, it still seems like a pretty good job.

One person who knows the importance of a franchise more than most is Paul Taubman. He was the highest paid executive on Wall Street in 2015, after having set up a successful boutique two years earlier as the culmination of a 30 year career at Morgan Stanley. This put him in a strong position that year when Blackstone wanted to spin off their advisory and restructuring businesses, which were causing conflicts of interest with their core investment franchise. PJT Partners Inc was born, and swiftly had its initial public offering. In the last three years, the earn-out component of this deal has seen Taubman awarded $127m worth of equity grants, plus a salary of $1m a year. The deal goes on until 2021 and could see even more shares awarded if targets are met.

The lesson here seems to be that going it alone is good, but if you’ve got the franchise to pull it off, going into partnership with one of the biggest financial firms in the world is even better. Since its formation, PJT Partners has landed big deals (including the mandate from Sky for its acquisition by Comcast) and has attracted senior bankers from JP Morgan and Goldman Sachs. Good to know it can still be done.

Meanwhile…

The former PA to Goldman Sachs CEO David Solomon, who was about to plead guilty to stealing $1.2m of Solomon’s rare wine, committed suicide by jumping out his hotel window. (NYPost)

SocGen has taken the opportunity of London Metals Week to unveil a new “robotrader” product; it’s a chatroom robot that can respond to simple commands and place small orders. This looks like a convenience tool for the human trader rather than something that might eventually replace them though – it’s designed to allow the human being to focus on large and difficult orders from valuable clients. (Bloomberg)

Kweku Adoboli has been given bail while he waits for his last-ditch immigration appeals hearing. Before he got the good news, he wrote for the Times, setting out his case and responding to some comments made by Ossie Grübel last week. He also suggests that although he admitted full responsibility previously, the whole UBS ETF team were all in on the trades that caused the losses (The Times)

After having made headlines for its announcement that it was leaving London after Brexit, fintech unicorn WB21 has made headlines for being charged by the SEC for fraud. The allegations are that WB21 never had the payments technology it advertised, and made its money by acting as what Jordan Belfort called a “rathole” – a series of nominee accounts which allowed restricted insiders to dump stock on the market without making the proper disclosures. The company and its founder Michael Gastauer are disputing the charges (FT)

Credit Suisse are the mortgage lender of record on the purchase of a $209m apartment at One Hyde Park in London (including “wine storage” and parking spaces). The buyer is, somewhat unromantically “two anonymous companies registered in Guernsey” (Bloomberg)

Few details yet, but Morgan Stanley has registered identification codes which suggest that it is going to open up a Multilateral Trading Facility (ie, a dark pool to facilitate block trades in equities) in Paris, rather than London.(Financial News)

A fun extended interview with Sugata Ray at the University of Alabama, and his research into the things that hedge fund managers get distracted by (marriage, divorce, buying houses, sports cars) and the effect on their performance (usually negative). He has found that winning a high profile poker tournament will tend to attract significant new money to a manager’s fund, but it isn’t correlated with better performance. Conversely, losing hedge fund managers often make large charitable donations, and suffer less outflows than they otherwise would as a result. (Barron’s)

On that basis, we might see some philanthropic activity from Edouard Carmignac, as his eponymous French asset manager is going through a restructuring after a period of under-performance and some material redemptions. (FT)

Max Niederhofer of Sunstone Capital talks about the things that make VC investing so psychologically painful (Maxniederhofer.com)

For the first time since Obama in 2008, financial sector donors will be giving more money to Democrat candidates than Republicans in the coming midterm elections (Times)

Women In Listed Derivatives, a trade association, held a workshop on sexual harassment in Chicago with some sound advice given (John Lothian News)

And if you’re not planning on emulating Paul Taubman or the Institutional Investor Research Hall of Famers, here’s how to conquer envy and remain happy when people around you are succeeding (Guardian)

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Goldman’s new retail push bringing more tech jobs to London

October 10, 2018, 2:43 am

≫ Next: Fear in London as banks look at moving actual trading jobs to Europe

≪ Previous: Morning Coffee: One of the most grueling (and rewarding) jobs in banking. The man who left Morgan Stanley and made a fortune

Goldman Sachs’ digital consumer bank recently made its way to the U.K., and with it are coming several new London-based jobs. A host more may soon follow as the bank said it signed up 50,000 new savings account customers less than two weeks after its launch – a number Goldman referred to as “stunning.”

Launched in the U.S. in 2016, the retail bank known as Marcus began taking shape in London a little over a year ago with the hire of Des McDaid from TSB Bank. McDaid told the FT last year that he hoped to build his then 15-person team to as many as 50 by launch, including a team of call center employees. Now, the bank appears to be reinforcing the London-based unit with tech talent.

Goldman is currently advertising five technology roles relating to Marcus. They include two associate-level Java developers with experience building transactional systems and an analyst-level QA engineer with a background in automation testing. Somewhat interestingly, Goldman lists previous fintech experience as a plus for these positions but not for others. The London team is also looking for a scrum master who would work in a leadership capacity, an IT security officer and a risk control manager.

Somewhat surprisingly, the bank doesn’t appear to have any London openings for the jobs one wouldn’t immediately associate with Goldman Sachs: call center employees. In the U.S., Goldman is hiring plenty of savings and loan specialists – many with rather interesting backgrounds – to talk customers through the digital transactions. But if the first two weeks are any indication, more of these jobs and others are sure to pop up soon. Most of Marcus’s senior-level employees in the U.S. – including several managing directors – have worked in retail banking and at credit card companies, giving people who may not have been a great fit for Goldman just a few years ago a chance to get their foot in the door.

Goldman’s Marcus-related technology jobs may be welcome to its London engineering team, which has seen its importance eroded by Goldman’s new technology hub in Warsaw. Beyond the fairly straight-forward retail tech positions are a few that are certainly new to Goldman Sachs in London. One opening is for a workforce management officer, which sits in the customer support team but is more of a data analytics role. The data just happens to be employees and phone calls. The candidate would analyze inbound call volume and forecast staffing requirements to build work schedules. They would also seemingly need to play the role of big brother by monitoring service level and response time objectives. The other atypical bank opening is for a “finance artworker” – a graphic designer who can produce digital and print art for marketing, social media and even stationary, among other mediums.

Follow @BeecherTuttle

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Fear in London as banks look at moving actual trading jobs to Europe

October 10, 2018, 5:44 am

≫ Next: Young Google, Facebook alums flocking to this high-paying trading firm

≪ Previous: Goldman’s new retail push bringing more tech jobs to London

Do you believe in what the European Banking Authority says, or in what the European Central Bank says? Maybe you’re ambivalent, but if you’re currently sitting in a trading job in the City of London, the conflicting pronouncements of the two entities have big implications for your location in future.

If you like living and working in London, you will probably want to side with the European Banking Authority (EBA). Andrea Enria, the head of the EBA, which describes its purpose as ‘prudential regulation and supervision across the European banking sector,’ told the Financial Times last month that back-to-back trading, which would allow trades to take place and risk to be managed out of London, but trades to be processed in the European Union, should be permissible after Brexit. Back-to-back trading is a “backbone” of global finance, said Enria. Local European risk exposures do not need to be managed locally, he added.

Conversely, if you want to get out of London, you will want to side with the European Central Bank (ECB). The Frankfurt-based central bank, which also has a say in banking supervision and European financial stability, has reportedly written to banks asking them to limit their use of back-to-back trading models by 2022.

Under the EBA’s approach, trading jobs will stay in London. Under the ECB’s approach, trading jobs will move. As banks contemplate the worst case scenario, the ECB’s pronouncements are gaining precedence and traders in London are starting to panic.

“This week, we’ve suddenly had a big increase in enquiries coming from traders who are concerned that their jobs will move to Paris or Frankfurt,” says Russell Clarke, a partner at Figtree Search. “The presumption until recently had been that most traders would stay in London, but this has changed. Divisions of traders are now being put on standby that their jobs might move.”

Until the ECB’s pronouncement, some traders seemed sanguine about their chances of ending up elsewhere in Europe. “It’s just sales that are moving,” one senior credit trader told us last Wednesday, speaking off the record. “The only reason to move to Frankfurt is so that you can get an easy job as a managing director booking the trades made in London,” he added. “- It’s a kind of retirement post.”

Not any more. While banks are being incredibly secretive, even internally, about their Brexit plans, another senior trader says the fear is that up to 75% of London trading jobs will ultimately have to move. The salespeople and support staff who go first could yet have company.

The prospect of shifting entire trading floors is seemingly causing ructions in banks, which had based their Brexit accounting on the supposition that only a handful of trading jobs would need to be moved to Paris or Frankfurt, with the bulk remaining in London. If most trading jobs have to migrate, costs will increase dramatically. In turn, insiders say this could threaten banks’ current plans for more distributed sales offices, with local salespeople on the ground in Madrid and Stockholm as well as Paris and Frankfurt. – To save costs, European staff may yet need to be aggregated in a few big continental European hubs.

Unfortunately, forcing people to move to Paris or Frankfurt risks hiking the costs of Brexit even higher still. Headhunters say most junior and mid-ranking staff in London are happy to return to their countries of origin. French markets professionals are generally happy to return to Paris and German markets professionals are generally happy to return to Frankfurt. But Swedish salespeople have a preference for Stockholm and Dutch salespeople have a preference for Amsterdam, and will require financial inducements to move elsewhere.

The upshot is that the potential costs associated with Brexit are rising dramatically. Similarly, the complexities of staff relocation are occupying increasing amounts of time for banks’ HR professionals, who are being forced into negotiating tailored relocation packages for some senior staff. Meanwhile, salespeople and traders are seeking professional advice on their ability to resist being transplanted.

“I’ve spoken to a lot of people whose roles are potentially going to be relocated,” says Dan Begbie Clench of City of London law firm Doyle Clayton. A bank’s ability to force an overseas move will depend upon the wording of the employee’s contract, he adds (and headhunters say banks are feverishly adding more open-ended clauses to new contracts). But whatever the contract wording, Begbie Clench says it’s implied that the employer must act reasonably: “Even if there is an open-ended mobility clause, we would still need to assess whether an employer is acting reasonably. An employee could make a good argument that an enforced relocation overseas would not be enforceable and that their role had been made redundant.”

Some London markets professionals are seemingly deciding that redundancy is the best option. Another London fixed income headhunter, who says he’s now spending half his time working out of Paris and Frankfurt, says senior people are digging their heels in and waiting for redundancy payments rather than moving to Europe. Some then plan to look for a job in Europe in the future as banks get into bidding wars over employees willing to relocate. Clarke suggests that this is a risky strategy, but notes that compensation is already rising for markets professionals in continental Europe: “People who are going to Paris from London are moving on flat salaries. This is putting pressure on local pay.”

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Young Google, Facebook alums flocking to this high-paying trading firm

October 10, 2018, 6:03 am

≫ Next: COMMENT: How to pretend to be a team player when you work in finance

≪ Previous: Fear in London as banks look at moving actual trading jobs to Europe

An internship or a few years of work experience at Google and Facebook can open plenty of doors. But many fresh-faced alums have recently decided against launching a startup or heading to Wall Street and are instead leveraging their experience to move to the Midwest to join a low-profile high-frequency trading firm.

Chicago-based Jump Trading was founded in 1999, though its name first came to national prominence 15 years later following the publication of Michael Lewis’s Flash Boys, which scrutinized the world of high-frequency trading. While Jump Trading still minimizes its public visibility, the firm seems to have a sterling reputation 3,000 miles away in California, where many blue-chip recruits from Google and Facebook leap at the chance to join the Chicago firm.

At least 27 former Google and Facebook alumni currently work at Jump Trading, with the vast majority having interned at the tech firms or worked full-time for a short period of time, according to LinkedIn. The mutual attraction between Jump and former Google and Facebook juniors seems relatively new. Roughly two-thirds of the aforementioned hires have been working for Jump for three years of less. The recruiting numbers are particularly impressive considering every Chicago hire interned or worked in sunny California. Recruits who likely had multiple options in Silicon Valley instead chose to up and move to the Windy City.

“It’s becoming one of the more sought-after destinations,” said one current Google employee who counts several friends as Jump Trading recruits. He pointed to high-pay, innovation and a startup-like culture as the main selling points. No current Jump employee responded to requests for comment on the firm, which gained some notoriety for its aversion to the media following a Bloomberg report in which the only person to go on record was the co-founder’s mother. In fact, much of the firm’s Web presence can be attributed to Perkins+Will, the designer of its funky, startup-like Chicago and New York offices. Jump Trading declined to comment through its PR firm.

Quant researchers, algorithmic traders and software engineers make up most all the hires from Google and Facebook. Wall Street Oasis says that a research associate at Jump’s Chicago headquarters can make $150k base plus a bonus of up to $75k, well more than most associate-level hires would earn at large tech companies or on Wall Street.

Jump continues to add to its global headcount each year, spread across its Chicago, London, Singapore, New York and Shanghai offices. It currently employs nearly 600 employees, up from around 350 in 2014, according to Bloomberg. In the U.K., Jump increased headcount from 68 at the end of 2016 to 94 as of the end of last year, according to last week’s filing on Companies House. That means Jump has doubled its number of U.K. employees in just two years (47 in 2015).

However, the 2017 additions didn’t seem to do much for Jump’s bottom line, at least in the U.K. where it is obliged to publicize its figures. Revenue fell $4m to $154m in 2017, despite the addition of 12 front-office employees. With staff costs north of $52 million, the average pay per head last year in the U.K. was $557k, down from $739k in 2016. Still not a bad wage considering it classifies roughly 60% of its U.K. employees as back-office staff. The firm currently has 55 global openings posted on its website.

Follow @BeecherTuttle

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COMMENT: How to pretend to be a team player when you work in finance

October 10, 2018, 8:04 am

≫ Next: Morning Coffee: The bank designed for bankers who remember the old days (and the old pay). Eco-Goldman

≪ Previous: Young Google, Facebook alums flocking to this high-paying trading firm

If you want to get ahead in a bank, you will need to be known as a team player. Every appraisal at every firm I’ve ever worked for has included a review on my for enthusiasm for contributing to the well-being of the team. Every appraisal conversation I’ve ever had with a manager has included something along the lines of, “You’ve worked well within your team, but now you need to expand your teamwork to the rest of the floor.” Being a team player is the sort of thing that has no end.

It is also utter cr*p. In banking you are a team player at your own risk. And yet if you don’t perfect the art of appearing to be a team player, it will be used as a stick to beat you with at bonus time. – It’s one of the common weaknesses a manager will use against you in the annual review.

So what can you do about it? The art is this: you must be a team player, but only in areas where the ramifications will not damage you. For example, you do not want to be a team player when you’re building a relationship with a client; you do not want to take your “team” to a client meeting. Every client now interacts with dozens of employees at a bank and the reality is that you need to fight for your tiny share of that – not dilute it. A former manager of mine insisted on attending all my big client meetings and seeing all the emails I sent to them. – Eventually he took over all those accounts himself. This happens a lot. Beware.

Instead of being a team player, you need to play the game. When you’re in sales, this means you need to big-up your colleagues in call reports and to mention them in a nice way in group meetings. Nothing more. Where I work, cross-selling functionality was developed in our CRM tool but no one used it – because no one wants to introduce their client to someone else.

In a bank, therefore, being a team player is an exercise in politics. It’s about saying one thing and doing another. You need to know the right words: to talk about cross-selling, to say you’re leveraging the team, to reference how important everyone else is, and to quietly get on with building your own profile. Teamwork in banking is all about dropping colleagues’ names and networking relentlessly so that people know who you are and what you do. If you’re gullible enough to do any more than that you can expect to get burned.

Arnaud LeManche is the pseudonym of a salesperson in U.S. bank

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Morning Coffee: The bank designed for bankers who remember the old days (and the old pay). Eco-Goldman

October 11, 2018, 12:22 am

≫ Next: Human Centred Design can help financial services firms differentiate from their competitors. Here’s what ANZ is doing

≪ Previous: COMMENT: How to pretend to be a team player when you work in finance

Are you an M&A banker who remembers the vibe of 2002 to 2006? Do you resent the traders and the structurers who blew-up the industry in 2007 and 2008? Do you entertain dreams of the days when pay in banking was eight figures for a mere line guy? Then Guggenheim Securities may be the place for you. Or not.

In a long article on Alan Schwartz, the ex-Bear Stearns CEO who moved to run Guggenheim in 2009, the Financial Times first explains Schwartz’s big intentions for Guggenheim and then proceeds to repudiate their existence in actual fact.

When Schwartz moved to Guggenheim, he says he was with the intention of creating something that was, “like what some of us got to be part of building in our careers.” The intention seems to have been to satisfy the nostalgia of people who, “missed what our industry was when they grew up in it.” Precisely what this thing was isn’t articulated, but the implication is that Schwartz was after some sort of old- school banking vibe with less of the regulatory ‘oppression’ that has allegedly made banking more boring than before.

Pay was part of the deal. Like Jefferies, it seems Guggenheim pays its people a lot of commission: if you kill something for Schwartz, you might get to eat quite a lot of it. For newly-recruited M&A bankers who bring in deals, this means 60% of the associated fees could turn up in their pay. In turn, this means some people at Guggenheim are floating about on a cloud of money as if the financial crisis never happened. The FT says a mere Guggenheim M&A banker who is not an executive is earning more than $24m. Someone else is earning tens of millions. Wall Street pay tsar eat your heart out.

Burned by the incineration of Bear Stearns, Schwartz also determined that he didn’t want Guggenheim to make big leveraged bets with its own balance sheet. His new place would be pure and untainted by the sorts of crazy bets that might see it sold to J.P. Morgan for $2 a share in the style of Bear Stearns.

And yet, none of this should be taken to indicate that Schwartz’s Guggenheim is a purist advisory house which is a consistently big payer. The man himself is strangely sniffy about advisory boutiques (which he refers to as “monolines”) and therefore intends to offer trading and underwriting as well as pure M&A advice (despite the associated risks). Similarly, he seems to be operating a bait and switch model when it comes to pay – which he is at least overt about. People joining Guggenheim might take home 60% of the fees they generate in the first year, but the FT says this falls to 40% in time. “We said [to potential hires], you’re going to have to risk more than you do somewhere else to make similar to what you would make somewhere else …,” says one senior Guggenheim executive. Interesting sales pitch.

So, what is Guggenheim exactly? Ultimately, Schwartz says it’s a, “full-service investment bank driven by intellectual property, not balance sheet.” If that’s what you’re looking for, Schwartz is waiting.

Separately, Goldman Sachs is burnishing its eco-credentials. Bank of America wants to be carbon-neutral by 2020. J.P. Morgan wants to use 100% renewable energy by the same date. And Goldman Sachs is doing away with plastic straws, plastic cups, and plastic lids. Henceforth, Business Insider says Goldman employees will need to sip drinks from reusable mugs. Progress.

Meanwhile:

The UK’s City Minister says London will be ok after Brexit because Haruhiko Kuroda, governor of Bank of Japan, says that “no single EU city could attempt to replicate the ecosystem that is the City of London”. (Financial News)

The UBS graduate who says she was raped also says that another senior colleague at UBS’s investment bank in London putting his hand up her skirt during a work night out. He still works there. (Financial Times)

SoftBank’s ex-Deutsche Bankers are thinking of indulging in some impressive spending with their potential bid for WeWork. “They’re spending a lot of other people’s money very rapidly.” (Wall Street Journal)

WeWork runs a cult-like three day summer camp. (PropertyWeek)

Attending an elite university might enable to you attain jobs and incomes if you come from a wealthy family from the outset. It’s less likely to do so if you’re female or have a less privileged background. (Vox)

Amazon scrapped its secret AI recruitment tool after it became biased towards male applicants, learned to like male words like “executed” and “captured,” discriminated against members of women’s chess clubs, and couldn’t be trusted to remain impartial. (Reuters)

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Human Centred Design can help financial services firms differentiate from their competitors. Here’s what ANZ is doing

October 11, 2018, 1:37 am

≫ Next: 10 questions you will be asked in systematic trading interviews

≪ Previous: Morning Coffee: The bank designed for bankers who remember the old days (and the old pay). Eco-Goldman

Opher Yom-Tov, chief design officer at ANZ, believes design can be a powerful tool for business growth. He is particularly focused on human centred design, which emphasises understanding the customer and putting them at the heart of the design process.

He says: “Design is about a lot more than just aesthetics, it is actually a way of solving problems.” Human centred design was refined in Silicon Valley in the 1970s, with early examples including the design of Apple’s first computer mouse. It borrows techniques from psychology, anthropology, product design and other fields to really understand what customers need.

Yom-Tov, who has worked with the likes of Apple and Nike during his career, has experienced first-hand the importance of meeting customer needs as part of the design process.

He says: “Many of the successful products were not necessarily the smartest engineered or the most beautiful solutions, but they effectively addressed specific customer needs.

“I have battle scars that have proved to me how critical an approach like human centred design is.” Companies are beginning to wake up to the many benefits design can bring.

Research by the UK’s Council of Design found that firms that used and valued design had significantly improved sales, profits, turnover and growth compared with those that did not.

In fact, every £100 a ‘design-alert’ company spent on design increased the company’s turnover by an average of £225. But while the benefit of human centred design may be obvious for physical products, such as a mobile phone, Yom-Tov says it also has an important role to play in services.

He explains: “ANZ has recognised that in order to be a leader in financial services, one of the most effective levers is compelling and meaningful propositions and experiences.

He adds that in order to create these experiences, the bank must uncover what customers actually need, and this is where human centred design comes in.

Yom-Tov explains that human centred design is essentially about three things: collaboration, empathy and experimentation. He says: “Collaboration involves having a cross-functional team with people who represent different aspects of the final product or experience, focusing on the problem.”

Empathy involves this team going out and spending time with the various stakeholders who will use the product, which, in the case of a financial product, includes banking staff, advisers and the end customer.

“We need to understand the world from their perspective and see how financial services fit into their life,” Yom-Tov says. The third aspect of human centred design involves experimentation.

“The notion of experimentation is that you will not get it right first time, so you need to develop a range of potential solutions and simulate (or prototype) them very cheaply, so your customers can give you feedback on which options resonate for them,” Yom-Tov says.

He points out that doing this before you invest heavily in a product or service helps to remove substantial risk. “In the world of banking, failure is not generally tolerated, but this notion of failing often on a small scale prevents you from failing on a very large scale,” he says.

Yom-Tov explains that his vision for ANZ is that all staff truly understand the value and impact design can have on the bank’s business and its customers, and, as a result, they apply a human centred design approach to everything they do.

“Whether that is solving internal problems, like business processes that are slowing us down, or looking at ways to address new competitor threats, they should take a step back and approach it with this human centred design lens to craft better customer and staff experiences,” he says.

ANZ has already used human centred design for many things including customer application processes and completely rebuilding its banking app.

Yom-Tov says: “The process involved an incredible amount of time with customers and observing people using all manner of digital services to focus on what we needed to do to create the right mobile banking app.

“Ours is incredibly simple and straightforward. We have limited the features in it so that is very clear and resonates with customers’ daily routines.”

Another area in which human centred design has been applied is in home loans. “The home loan process, most of which is invisible to customers, is highly complex. We have been helping our teams to simplify our internal processes, to create a simpler experience for customers,” he says.

He concedes there will always be trade-offs when doing human centred design in a bank, with teams often encountering regulatory obstacles or constraints, but he says the trick is not to be daunted by these issues and to still come up with fantastic solutions for customers.

Yom-Tov says human centred design also often has a positive impact on staff. He has noticed that when people work in cross-functional teams and experiment with different ideas, they naturally bring more of their creativity to the workplace.

“I have worked with many people who have had an epiphany moment in their careers when they have found that human centred design has unlocked a lot more of their personal potential and made coming to work much more exciting and engaging.

“They feel like they are having a first-hand impact on the success of the company and the lives of their customers,” he says.

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10 questions you will be asked in systematic trading interviews

October 11, 2018, 2:42 am

≫ Next: Did it get too easy to get a job at Goldman Sachs?

≪ Previous: Human Centred Design can help financial services firms differentiate from their competitors. Here’s what ANZ is doing

So you want to be the sort of systematic trader who designs trading strategies for banks or hedge funds using algorithmic trading models? This is what you can expect to be asked at interview.

1. Explain your dissertation in laypersons terms

Quantitative trading firms are big recruiters of highly qualified academics without finance experience. The downside of this is that interviews are difficult; you can’t ask Physics doctoral students questions about bond maths.

Using this question is a good tactic: it works regardless of the interviewees background. Being able to explain complex ideas simply is vital when explaining your strategies to fellow traders, and eventually to potential clients. Also people without a proper understanding of their subject will often struggle to explain it.

2. I see that you’ve studied Brownian motion. You might not have realised, but this is used in finance to price certain assets. Why do you suppose that is?

Another good question for financial neophytes, which requires some lateral thinking to answer. Hiring from non finance backgrounds only makes sense if you can work out how to apply your skills to the gritty problems of financial markets.

3.Tell me how you’d construct a risk neutral cross country trade on the 2 year – 10 year interest rate spread in Germany and the U.S.

Another source of talent for the systematic trading business is buy side analysts, whether from equity, FX or fixed income. This type of question checks your market knowledge, and will also find out if you can think rigourously about predictability and risk.

4. How can I hedge out the correlation risk in my portfolio as cheaply as possible?

You can expect this question at a buy-side quantitative firm. Here, your role will often be to monitor risk.

5. I have a strategy that is producing a Sharpe Ratio of 2. If the distribution of returns is stable how long would it be before we can be 95% confident that the distribution has a positive Sharpe Ratio?

An intuitive understanding of statistical significance is extremely important for systematic traders. Ideally you would know how to calculate this precisely, but an educated guess is better than nothing.

6. If I gave you a million dollars right now, how would you invest it?

This is an open ended question which you can use to demonstrate knowledge of different subjects. If you’re trying to show you’re plugged into current events you could relate it to what’s going on now. Alternatively you could use it to show off your understanding of portfolio theory by talking about a diversified set of investments.

7. How profitable is your trading strategy?

Some firms look to hire experienced traders who will bring in their own strategy. As a screening question this will filter out less interesting strategies or fantasists with unrealistically high returns. In a later interview it’s an opportunity to show that you understand how different risk and return metrics work, and the importance of benchmarking.

8. How does your trading strategy work?

Be careful with this question: it could be sensible due diligence, or a check to see if you can explain complex ideas. But it could be a trap: less ethical firms will interview traders without any intention of hiring to gather ideas. Keep your answers general and stick to non disclosure agreements.

9. I’m concerned about the effect of a future event our portfolio. What should I do?

Systematic traders usually have to hold back their natural instincts and let their trading systems run. This question tests whether you can think sensibly about the balance between prudent risk management and unnecessary interference.

10. Write a python program to calculate X! recursively. What will happen if X=2000? How would you solve this problem?

Coding is a big part of trading systematically, but the amount of coding experience you’d be expected to have will vary. Some firms will be looking to hire hotshot programmers who can write production ready code. At others the real programming is done by professional developers, but you’d still be expected to analyse data and build prototype strategies.

Robert Carver is a former head of fixed income at quantitative hedge fund AHL, where he recruited at all levels from undergraduate interns up to experienced hires. Robert is the author of “Systematic Trading” and “Smart Portfolios”.