Should investment banking adopt an apprenticeship model?
In banking recruitment, the phrase “junior banker problem” probably inspires at least one of the following thoughts:
- How difficult it has become to recruit the best and brightest.
- After a few years, the best and brightest are getting frustrated and leaving banking for other industries.
- This leaves the industry with a dearth of leaders for the next generation of bankers.
If you’re a junior banker, you may have experienced the impact of these issues first hand, which to be honest, may have worked in your favor. Increased competition for recruits, especially with STEM backgrounds, can generate multiple offers, relocation assistance, signing bonuses and more. As for ambitious graduates seeking a challenging and profitable career, finance is no longer the only option and the multiple options are leading to competitive compensation packages.
In public, the blame for not being able to sign top talent is placed on the cut-throat culture of Wall Street where 90+ hour weeks are the norm, and analysts can suffer from burn-out. In private, blame is placed on the wrong assumption that millennials need coddling and trophies to be happy. But in reality, neither wholly explain the “brain drain” banks are experiencing. I believe the reason for the Wall Street exodus is because the solutions being deployed to address these recruitment and retention issues are not only archaic, they no longer work.
Many banks are throwing more money and fewer hours at new employees, which, if you’re disincentivised to do the work in the first place—and can get the same money and a better work/life balance elsewhere—doesn’t really do much to increase the appeal of the job.
Indeed, while the attrition of analysts to private equity and hedge firms are the issues most commonly talked about, they aren’t really the source of the talent drain—bankers have been switching to buy-side industries for years—instead the problem is that in addition to competing with management consulting, financial services, and asset management, Wall Street is also up against companies such as Apple, Google, and tech startups. Graduates are heading to these places in droves, attracted by the promise of creativity and an impactful career.
But, in my view, there is a secret weapon that investment banking is better positioned to deploy than the tech world: The apprenticeship model. The approach is touted in the book Most Likely to Succeed, and from a pedagogical perspective, the benefits of an apprenticeship model (high quality of work, hands-on learning, mastering of skills etc.) have long been understood. And while it could be argued that the retention and recruitment issues of junior bankers isn’t a pedagogical problem, I strongly disagree. Potential bankers aren’t lured to tech by free pizza or the opportunity to wear hoodies every day, they are looking for environments in which they can better themselves by learning directly from experts. After all, these are the best and brightest of graduates we’re talking about. They want to be on a path to a fulfilling and valuable career where they can make a real impact, they are not looking to shirk.
In my first few years in banking, I effectively “belonged” to someone; I did whatever work he requested, accompanied him to meetings, helped him pull together pitches. In exchange, he basically served as a mentor, role model, and teacher. Subsequently, he had a massive impact on and investment in my career. If I had to rise through the ranks in today’s structure, where junior bankers are pooled together and have no single individual responsible for passing on wisdom, I’m not sure I would find it as rewarding.
The pyramid structure, where junior bankers are at the bottom and the number of employees decreases as you move up the pyramid, has been mostly replaced with an hourglass one. Given this shift, could an apprenticeship model work today?
I think so, even though it would mean hiring a greater number of analysts initially. If every MD hired a dedicated junior banker, I think attrition would decrease as the MDs would be incentivized to ensure their bankers are happy, fulfilled, and learning—more so than if they just relied on a pool of talent and worked with someone new each week. Creating a micro team where if one member leaves a noticeable absence is created, could go a long way in encouraging MDs to invest in the development of their own group (bankers should always behave in the interest of the firm, but sometimes a little personal pain can be a strong deterrent to improper behavior or negative working conditions).
I don’t think an apprenticeship model would solve everything. We also need to find better ways to leverage technology to ease the burden of some of the most time-consuming and painful elements of the job, freeing up junior banker time to focus on developing career skills and tackling more complex work.
But if we can combine a tech solution with an apprenticeship model, junior bankers would feel more motivated, inspired and challenged by their job, and we could get a long way toward fixing the talent drain of Wall Street.
What are your thoughts? Have you experienced the apprenticeship model? Do you think this could be effective? Email me at email@example.com.