New York, NY – A few weeks ago, a number of articles in the press indicated that the employment picture was improving in the financial services sector as profits rebounded and as firms try to position themselves for a recovery in the overall economy. Sell-side firms have been hiring investment bankers and traders, while buy-side firms have been hiring staff with sales and marketing backgrounds, it is unclear what this trend means for the employment outlook for financial analysts. This blog will discuss these developments.
Pickup on Sell-Side
Despite the fact that New York-based financial services workforce fell by 28,000 jobs from its peak in January 2008 to its trough in February 2010, New York securities firms have added nearly 2,000 jobs more recently, suggesting that Wall Street firms expect the U.S. economy to gather steam in the coming months. These employment gains, however, have not been limited solely to the Big Apple. For example, a few of the firms that have been on aggressive hiring campaigns include:
- JP Morgan has hired more than 2,000 employees globally since the beginning of the year;
- Nomura’s New York based securities business has added 700 positions since March 2009, with an expectation to add another 300 jobs by March 2011;
- Goldman Sachs added 600 jobs worldwide in the 1st Qtr, 2010;
- Credit Suisse has filled 600 positions in its investment bank in the 1st Qtr; and
- Deutsche Bank has hired more than 400 positions in New York since the beginning of the year.
One firm that has been consistently adding to staff during the recent recession has been Jefferies Group, Inc. For example, Jefferies has increased its global headcount by more than 25% since 2008 from 2,241 to 2,821 in the 2nd Qtr, 2010.
As a result of this rebound in employment, Wall Street compensation packages have also been on the rise — though they remain considerably lower than they were in 2006-2007. According to an April report from New York-based executive search and compensation consulting firm, the Options Group, firms are paying 30% to 40% more than employees are currently making in an effort to lure them away from their current employers.
Trends on the Buy-Side
Many buy-side firms sharply cut back their staffs in 2008 in response to falling global stock markets and the plunge in assets under management experienced by most firms. However, in late 2009 and into 2010, a number of asset managers started rehiring sales, marketing and asset-gathering professionals.
Another interesting trend that is likely to play out in 2010, is that as the hiring market improves on the buy-side many professionals are likely to make a move as they experienced stagnant salaries, eliminated bonuses, and promotion freezes in the past year or two. This is likely to create a number of open positions at existing buy-side firms as employees move on the greener pastures.
Outlook for Research Analysts
As you might guess, the improved employment outlook at sell-side and buy-side firms has started to have an impact in the demand for investment analysts. Not only have bulge bracket firms been looking to re-staff after cutting their research teams in 2008, but regional and agency brokerage firms have also been looking either enhance their research teams, or to add research where they didn’t have it before. For example,
- A few months ago, Nomura announced that it plans to hire 100 people in equity research in the US in 2010 including 20 publishing analysts focusing on financials, energy, consumer, healthcare and telecommunications, media and technology. The firm also plans to hire analysts in its London office.
- As we wrote in April, Royal Bank of Scotland has hired more than 15 analysts since September, 2009 with the plans to add at least another dozen analysts in 2010.
- Since the middle of 2009, Citigroup added approximately 20 analysts, with the plan to continue hiring analysts this year.
- Other banks, including Credit Suisse, Deutsche Bank, and Morgan Stanley are all looking to add to their analyst teams in 2010 on a selective basis.
- In the past few months we have written about agency brokers like BTIG or boutique investment bank Evercorp Partners decide to enter the research business.
Recruiters expect that as mutual fund and hedge fund assets grow, buy-side firms are likely to shift their hiring to back office and staff and investment analysts. The big question is whether the recent weakness in the stock market might cause some buy-side firms to delay their hiring plans for analysts.
Analyst hiring among independent research firms has been limited either to the larger firms or research firms that have experienced growth in the recent months. As we mentioned last week, ISI hired a number of top notch sell-side analysts in recent years including Heather Bellini of UBS and Steve Sakwa of Merrill Lynch. Roubini has also recently hired a number of analysts recently to swell its ranks.
Some analysts have decided to start their own independent research firms rather than go to work for others. Former II ranked analyst Harry Blount of DISCERN, Bill Pecoriello of Consumer Edge, Stuart Graham of Autonomous Research, or Jim Furey of Furey Research all decided to start up their own firms since 2008 to take advantage of the increased interest in independent research.
Interestingly, others have been hiring analysts recently. Last week, independent technology research provider, Forrester Research, announced that during the past six months, the company has hired 27 new research professionals in North America and Europe Forrester research and consulting services to corporate marketing executives, business strategists, and IT professionals.
Even the U.S. government has entered the market for investment analysts. A few months ago, the CIA announced on its website that they were looking to fill numerous “economic and financial analyst positions”. The CIA was looking for economists to assess foreign economic policies and foreign financial issues. These staffers would “work closely with political, leadership and military analysts through the Intelligence Community in producing current and longer-term intelligence products”.
Overall, we think the improving employment outlook for Wall Street will contribute to a continued upswing in hiring research analysts as more profitable banks and brokerage firms that are either trying to rebuild their brands, or looking to add more value to their corporate or asset management clients will try and do so at least partially by enhancing their research offerings.