Why investment banks are faring badly in the war for young talent

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Every year, while speaking to third- and fourth-year bachelor of commerce students, Ellen O’Brien poses the following question: Who here has landed a position at an investment bank?

Each time, a number of hands shoot up.

Then, Ms. O’Brien – who is a director at financial services recruitment firm Vlaad and Co. Inc. – asks a follow-up question: Who here sees investment banking as a stepping stone to private equity?

Typically all of the hands stay up.

“These individuals have already made the decision that they’re not going to stay in banking,” Ms. O’Brien said. “They see it as a training ground.”

Investment bankers provide clients with advice on their capital-raising efforts – how to structure debt or equity deals and which markets to tap for the cheapest access to capital. Typically, bank recruits begin as research analysts whose duties include building financial models, preparing PowerPoint presentations for clients, etc.

Increasingly, young business graduates are eschewing investment banking careers in favour of roles in private equity, at hedge funds or in trendy industries such as cannabis and technology. While attrition has always existed within Canada’s investment banks, Bill Vlaad, the owner of Vlaad and Co., says it has accelerated in recent years.

“It’s becoming almost chronic,” Mr. Vlaad says.

Investment banking is suffering from a branding problem, says Jennifer Reynolds, president and chief executive of Toronto Finance International.

“When I graduated, it was cool to go into investment banking; that was considered one of the top jobs that you could get,” says Ms. Reynolds, who spent a decade as an investment banker at Bank of Montreal and also served as president and CEO of professional development association Women in Capital Markets.

Today, perceptions of investment banking have changed – and the 2008 financial crisis is partly to blame, Ms. Reynolds says. But, she adds, another big reason for the shift is that today’s young workers are seeking greater work-life balance and the opportunity to add value in their jobs.

"People don’t want to work the way they once did; to give up everything for just the paycheque,” Ms. Reynolds said.

The gruelling hours don’t help either. In 2013, Moritz Erhardt, a 21-year-old intern at Merrill Lynch’s London offices, was found dead in his shower after reportedly working for 72 hours straight. While an inquest ultimately issued a verdict of death by natural causes, the coroner noted Mr. Erhardt died of an epileptic seizure, which could have been triggered by exhaustion. The tragic incident made investment banks pay closer attention to the workload being shouldered by junior employees.

“An image change needs to happen, because these young people are influenced by what is cool, interesting and sexy,” Mr. Vlaad says.

Virtually all of Canada’s big-bank-owned investment dealers have introduced initiatives in recent years in a race to retain talent. These initiatives include offering their staff time off, greater flexibility to work from home and even “dress for your day” policies that allow employees to don business-casual garb on days when they don’t have client meetings.

“Attracting good people isn’t really a huge problem for us,” says Robbie Pryde, head of corporate and investment banking at TD Securities. “Really good people apply. I think the hardest thing is just keeping them.”

Earlier this year, the dealer announced an accelerated promotion track for its analysts, who will now be eligible to become associates after two years rather than three.

But while a pay bump and a title change can be enticing, Mr. Pryde says what’s even more important is giving junior level employees more meaningful work to do earlier in their careers.

“We’re not promising 35-hour workweeks. That is not something that is possible. But you absolutely can work smarter with more tools and technology and fewer mundane tasks.”

Carries Zhu, an associate at TD Securities who specializes in diversified industries, recalls how, just six months after starting her role, her managing director brought her along to New York to present in front of a client.

“It was very interesting because you get to see how the work that you’ve done materializes on the client relationship end,” said Ms. Zhu. “That was a really gratifying experience.”

BMO’s capital markets arm has also undergone a number of cultural changes in a bid to retain young workers. For instance, the bank now offers health and wellness seminars for employees that tackle everything from managing stress and personal finances to meditation – a signal of the company’s efforts to promote greater work-life balance.

“One of the things I always encourage the junior professionals to do is to be as committed and passionate about your hobbies and pastimes as you are about your profession,” said John Armstrong, deputy head of investment banking at BMO Nesbitt Burns. “When you do that, it’s amazing how much you can fit into a day.”

CIBC World Markets’ approach includes a junior advisory council – a forum composed of 21 analysts and associates who are encouraged to express their ideas about how to improve the workplace.

“This generation is different than previous ones,” said Julia Moynihan, the managing director who chairs the council. The rise of social media – and, in general, a greater transparency about their salaries and work environments – are responsible, Ms. Moynihan said.

“That may lead to fear of missing out – thinking everything they see on their friends’ Instagram is great and they should be doing the same.”

But in spite of the banks' best efforts, many young workers simply aren’t drawn to the advisory role of investment banking – they want to have a lasting impact and effect change. Ms. O’Brien says she frequently hears some version of the following:

“In investment banking I’m an adviser, and I want to become an investor.”

“You can’t really change that aspect of investment banking," she said.