Now that the nation is slowly clawing its way back out of the recession, it’s time to take a long, hard look at the lessons we may or may not have learned. Although it’s difficult to point a finger at a single reason why a large portion of the global financial system collapsed, no one can deny that investment bankers were, in some capacity or another, at the center of it all. So, now that the dust has settled, how has the game changed for these once “Masters of the Universe”?
For one, investment banking is more centered in New York than ever, as all the major firms have either been closing or downsizing their offices in other parts of the US (or even the rest of the world) and consolidating in the Big Apple. JPMorgan Chase & Co. for example had 100 investment bankers in Chicago in 2007, but like many of the other big players has now downsized that number to 30 to 60. The job itself is being fine-tuned, as well, and the new breed of investment banker is going to be a specialist, with a tremendous amount of knowledge within his or her area of investment banking expertise.
These specializations will include industry or bank services, and the investment banker will be well versed in helping his or her client in retail or stock buybacks, for example. Specialist bankers will often work in teams that connect across time zones to bring the world to their clients and make it easy to do business internationally as well as domestically. Again, these satellite offices are expected to be smaller than they used to be, as firms concentrate their heavy-duty brainpower to their main office, but still available in certain cities.
This development isn’t new. As early as the year 2000, smaller, more boutique-style advisory firms were being set up for the savvy customer who was interested in having precise knowledge of the market. This approach didn’t gain traction with the larger firms until after the recession, when many of their customers turned against their way of doing business. The main concerns then were the perceived glad-handing, high living style of the investment banker him or herself, and the lack of specialist knowledge among bankers.
As these larger banks are slowly changing their tainted image, they are going to need this specialist knowledge to make money. The market for their services has shrunk the last few years and customers have been more discerning and can afford to be particular about who handles their money. Aside from that, the investment divisions of these institutions are being leaned on more heavily than ever before as their other units are still having trouble keeping their head above water. As the market improves year-on-year, however, these changes in style will end up making everyone involved a lot of money.