On an autumn evening earlier this year, a cadre of financiers from Europe’s biggest banks convened in the heart of the City of London. The UK’s financial centre, it provided a fitting meeting point to travail the innovations and pitfalls of a changing industry.
Nametags emblazoned on black suits spelled out big names – JP Morgan and HSBC sat alongside French stalwarts BNP Paribas and Société Générale.
Competitors they may be in certain markets, but one thing banded the rivals together – MBA degrees from a leading European business school. They also had an urge to address the changing nature of the financial services sector.
From the Monet Room on the City’s King William Street, a stone’s throw away from the Old Lady of Threadneedle Street – the Bank of England – figures from flagship banks detailed the new sets of skills needed to succeed an industry with new challenges.
There are a bevy of new skills needed to succeed in a post-crisis world that has been radically altered by technology and scandal.
Thierry Foucault, also a HEC finance professor, highlighted that market focus is now on IT – every click on the internet can be a source of potential information.
Advances in technology mean that trading methods have changed. Information technology has given rise to algorithmic and high-frequency trading, Thierry said.
Investment banking was once the jewel of graduate careers in finance, but as banks have faced reputational challenges it has become a less desirable career option at many business schools in Europe.
Technology, however, has given rise to a feast of new financial trading opportunities. High frequency trading (HFT) firms in particular have been on a hiring spree, despite controversy surrounding the practice. They have also been poaching traders from investment banks, according to Astbury Marsden, a recruitment firm.
Jon Gilbert, head of quant practice at the firm, said: “The pressure that investment banks are under from regulators and shareholders to reduce their risk-taking in capital markets means that the movement of personnel from the investment banks to the specialist HFT and other trading firms will continue.”
But new skills are needed for a variety of roles outside of trading desks. Jean-Eric Pacini, head of structured equity distribution for EMEA at BNP Paribas, said France's biggest bank looks for new talent “who can drive changes in the digital space”.
“BNP sees too many people with limited skills. They are looking for people with a holistic skillset,” he added.
Thierry pointed out that changes in asset management have affected both portfolio allocation and implementation: “People need to understand these changes and the new language of the market – bankers and traders, asset managers, issuers [and] underwriters.”
While the financial sector has had its challenges, it has not stopped graduates from HEC entering banks in their droves this year. Jacques said that hiring for mergers and acquisitions, an industry that has recently seen huge global activity, is particularly strong.
He added: “Graduates are hired in overwhelming numbers into front office positions in both corporate finance and capital markets.”
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Some senior bankers believe that you need a varied set of skills to now succeed in the sector, despite a rise in the provision of sector-specific master’s courses at business schools.
Matthieu Wiltz, head of sales and investor services for some European regions at JP Morgan, said: “In banks, you don’t just stick to one thing – there are lots of different functions and departments, and thus a variety of skills are needed.”
Ole Rollag is managing principle of Murano Systems, a management consulting firm which focuses on building businesses in the asset management industry. An MBA alumnus of HEC, Ole believes that it’s important for graduates to develop a range of attributes.
“[Business] school is important… Keep studying and develop varied skill sets – it helps with transferability,” he said.
Yet several leading business schools cannot contain the exodus of MBA graduates at some of the biggest banks. At both London Business School and INSEAD, two of Europe's finest, the numbers of those entering finance at graduation has halved in the wake of the crisis.
“For us and for many competitors I talk to, they need to focus on specific universities in specific locations, which we know give us that level of quality that we want to see,” said a senior recruiter at Morgan Stanley.
“The financial sector is not the easiest brand to sell these days because we are facing a big reputational challenge. The sector is less attractive. The challenge is to be consistent and keep up with what you promised during the recruiting phase.”
Not only are the biggest banks competing with consultancies for trained financial talent, but there has been a war waging with private equity firms, which make early job offers to lure analysts away from the associate programs at banks like Goldman Sachs and JP Morgan.
Banks have in response hiked salaries for some junior employees, and reduced working hours. “People want to find a job where they have a better work-life balance,” said Matthieu.
Business schools too have been forced to adapt to meet the needs of a changed sector. Many have merged curriculums, picking the best pieces of MBA and masters of finance courses and rolling them into dual degrees, while others have made technology including big data a heightened focus.
Marguerite Gallant, director of HEC’s London office, said that their new dual finance degree was designed after discussions with recruiters.
She added: “Recruiters said: ‘People with MBAs don’t always have the right technical-expertise-to-cost ratio, and people trained in-house within the company were better and more skilled than outside hiring’.”
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Several years into the economic recovery and Europe’s biggest banks are still facing rising compliance costs and record fines levied by financial regulators.
Last month Standard Chartered, the British bank, was forced to pay a multi-million dollar fine, while BNP Paribas was fined billions in June by US regulators after violating sanctions on some countries.
Alexander Gancz, head of UK research at Société Générale, said that financial services’ evolution is very much influenced by regulatory changes.
“Research was just a wing of finance, [but] after the crash the first set of regulations came in and research was recognized as being a separate arm,” he said. He added that regulatory skills are needed for today’s graduates.
There is now a wealth of employment opportunity in areas such as risk management, compliance, auditing and financial crime – at both banks and professional services firms.
BNP has said it has increased its compliance staff by 40% to 1,600 in five years, while StanChart has increased legal and compliance headcount by 30% in the past year.
Niranjan Aiyagari, an HEC MBA graduate, has worked at JP Morgan Asset Management since the turmoil of 2008. He thinks that skills related to the digital and compliance areas are now needed for MBAs.
He said: “[The] FCA [Financial Conduct Authority] increases regulations, which leads to increased pressure to evolve and come up with solutions.”
While most banks have structured associate programs to eventually hire new talent, Sebastien Abbate, head of private banks and family offices at HSBC, said that future financial services workers should take advantage of internships during their MBAs.
Meanwhile, Jean-Eric said that BNP not only expects solid technical skills, but now seeks judgment skills in its new hires in light of the financial crisis.
“There is room for graduates with high technical skills at one extreme, and on the other for graduates with the ability to talk to clients and think – people who can strategize,” he said.
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