Deal-making reached a fever pitch last year, and that booming M&A market has created a competitive hiring climate as financial sector firms look to staff up to handle all the work.
But the pool of available banking talent in Los Angeles – and beyond – has narrowed, and that in turn has put upward pressure on salaries for top talent. Much of the evidence is anecdotal, but starting salaries for recent graduates of UCLA’s Anderson School of Management have jumped 25 percent in the last two years.
Graduation is around the corner, and there’s been lots of talk in recent years of MBA graduates ditching Wall Street in favor of the Bay Area’s tech startups or other professions.
But if the recent past is a predictor of the future, more MBA graduates from USC’s Marshall School of Business will be headed to consulting than to financial services. The tech sector was a third choice. Of last year’s MBA class, 22 percent went into consulting, 20 percent took a financial services industry job, and 17 percent went to tech firms. This year’s crop seems to be following this trend, though it’s a little too early to tell, said Mark Brostoff, assistant dean and director of Marshall’s career services.
“The hiring of MBAs in investment banking hit rock bottom at the financial crisis and slowly has been making a comeback,” he said, noting that private wealth management has become a popular financial industry alternative.
Technology has been a bigger draw than financial services at UCLA’s Anderson School of Management over the past few years, with more than 30 percent of the class of 2015 taking tech jobs and just 15 percent going into financial services.
Nevertheless, financial services remain a draw: Thirty-three members of the class of 2017 will do an investment banking internship this summer, which is highly predictive of hiring. That is on par with the class graduating this year and compares with 27 members of the 2015 class (8 percent).
And while tech startup jobs might be all the rage, Craig R. Everett, assistant professor of finance at Pepperdine University’s Graziadio School of Business and Management, said he tries to steer students away from such jobs straight out of college.
“It’s a career killer,” Everett explained. “Most startups will fail. Chances are very, very likely within a couple years that startup won’t exist anymore and they have something on their resume no one’s ever heard of.”
He generally advises students to go with a big household name if they can straight out of school for a couple of years and then make the switch.
– Marni Usheroff
The increases come as massive “bulge bracket” investment banks such as Goldman Sachs and Morgan Stanley winnowed their ranks during the recession and as new regulations prevented them from offering sky-high performance-based bonuses, making them less attractive destinations. Investment banks are also competing with other industries, such as the technology sector, for talent that might want a better work-life balance.
“The investment banking industry continues to undergo a real formative transformation in wake of the financial crisis,” said Scott Atkinson, a principal in the San Francisco office of executive search firm Heidrick & Struggles, who covers L.A.’s financial services industry. “There’s just not a deep talent pool like there was before 2009.”
He’s seen a number of people join middle-market and boutique firms, while others have jumped to the buy side in corporate roles or private equity.
Ed Bagdasarian, chief executive of Brentwood’s Intrepid Investment Bankers, said significant growth in deal activity over the last five years has spurred hiring at the more successful firms.
“At the same time, we have seen pressure come from other industries that are competing for the same talent pool outside of investment banking,” said Bagdasarian, 51.
For example, Johnny Gutierrez, 24, received his MBA in finance from Pepperdine University’s Graziadio School of Business and Management last year and opted for a job as a financial analyst at Hollywood cloud services firm j2 Global Inc. He had looked at banking and consulting, but found it harder to get those jobs, possibly because he’d done a joint undergraduate-MBA program and didn’t have a few years in the working world under his belt.
Gutierrez also noticed that many of his school friends followed their passions rather than a paycheck.
“I have a couple friends who went to banks and consulting, but I think most of them were drawn to things they like and enjoy,” he said. “They wanted to chase their dreams and they’re not so much focused on making money.”
Nishen Radia, a managing partner at West L.A. investment bank FocalPoint Partners, has also seen hiring become increasingly competitive over the last couple of years as the deal economy has taken off.
“The key demand we’re seeing out there is for managing directors who have industry specialization of some sort, a proven track record generating business,” said, Radia, 40, whose firm recently hired two new managing directors for its L.A. office.
When it comes to entry-level hires, Intrepid doesn’t see itself pitted against other investment banks vying for talent, but rather up-and-coming companies and industries hiring smart kids straight out of college.
“We’ve seen greater competition not from banks, but other segments such as the internet-based economy and tech firms,” Bagdasarian said.
Accordingly, Intrepid encourages its bankers to maintain balance, he said, and have a life with friends and family outside the office. As for in-office fun, the company has even adopted a popular Silicon Beach staple at its headquarters: a pingpong table. It also hosts social gatherings such as an upcoming Cinco de Mayo party – sombrero optional.
“It makes you a better more complete person and more effective banker,” he said of the company culture.
Before the recession, bulge-bracket firms on Wall Street offered investment bankers large performance-based bonuses. In extreme cases, some senior rainmakers reportedly saw rewards as high as $20 million in 2006.
But those outlandish bonuses were capped by financial reforms enacted after the 2008 financial crisis in an effort to avoid incentivizing excessive risk-taking.
Plus, the market crash saw those larger firms cull their ranks, especially at the vice president level, said Robert Wagner, a senior client partner at Century City executive search firm Korn Ferry.
“Companies have been trying to backfill and hire those people, but it’s harder to hire now because of the enhanced regulatory environment,” he explained.
He also noted that new graduates, MBA grads in particular, are not drawn to the industry as they once were.
USC’s Marshall School of Business has noticed this trend as well.
“They are still going to finance jobs but fewer to investment banking,” said Mark Brostoff, assistant dean and director of Marshall’s MBA career services.
Part of that, he said, can be tied to a changing marketplace of talent needs with the growth of tech startups, corporate finance, and mergers and acquisitions.
“The MBA of today is looking much more broadly at how they can jump-start an MBA career,” he said.
Atkinson has seen investment banks get creative and try to poach equity research analysts or former bankers who jumped to the buy side.
“I’m seeing a higher level of compensation being presented right now at all levels of seniority in Los Angeles,” he said.
The median annual base salary for Anderson’s full-time MBA grads who took investment banking and brokerage jobs in 2013 was $100,000, which grew to $125,000 last year. While no guaranteed bonus data were reported in 2013, more than 4 percent of investment banking- and brokerage-bound grads got such compensation last year.
To compete with richer rivals, smaller investment banks also have to offer a value proposition that’s about more than just money. Radia said FocalPoint has sought out talent with industry expertise who fit the firm’s collaborative culture and are attracted to its reputation, team, and growth opportunities.
“They feel that they can come here and really build something,” he said. “It’s a slightly more entrepreneurial type of hire.”
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