Inside the new hottest investment banking jobs in the U.S.

November 15, 2017 | eFinancial Careers

Bulge bracket investment banks are ramping up in unlikely destinations across the U.S. Away from their traditional Wall Street homes, deal-makers are moving to the likes of Atlanta, Dallas, Seattle and Toronto to capitalise on a growing revenue stream of middle market business.

To varying degrees, Wells Fargo Securities, Citigroup, Morgan Stanley, J.P. Morgan and Bank of America Merrill Lynch are all in the market, and have been poaching from one another outside of New York. Now Goldman Sachs is entering the fray as well.

One recent hire is Ben Koch, an investment banker who joined Bank of America Merrill Lynch’s Dallas office as a managing director after working as a J.P. Morgan MD there for four years. Goldman is hiring senior bankers in industries where the firm lacks a top-tier presence and building out regional offices, bringing on a duo from Credit Suisse to cover business-services firms, such as consultants and staffing agencies, and a Citigroup banker to serve clients in the midstream energy space, according to Bloomberg.

“It’s quite logical that any bank expanding deeper into the middle-markets will eventually expand the financing and risk management advisory and derivatives functions into those regions as well – either by moving people away from their NY headquarters or by hiring locally,” says Greg Glickman, the founder of recruitment firm Glickman Advisors who previously worked at Morgan Stanley, Merrill Lynch and Nomura.

Despite the recent increase in attention from bulge-brackets, most middle-market companies are traditionally served by firms who specialize – William Blair, Robert W. Baird & Co., Pacific Crest (now part of KeyBank), Jefferies, Harris Williams & Co. and others. They have long-term affiliations in the arena across industry sectors, and the best regional firms also have global reach.

“Baird, Blair and Jefferies are among the bigger regional players – Blair, in particular, has a solid financial sponsor coverage model,” says Carol Hartman, managing partner and the global financial services practice leader at recruitment firm DHR International. “There is also competition from some of the larger commercial banks, which have middle-market coverage for lending-focused activities and then convert to underwritings and other offerings when appropriate.

The big news here is that a New York-based bank is strategically targeting the middle market, which has generally been served by regional firms.

“If Goldman is hiring, it will be from top regional firms with great relationships with these companies,” Hartman says.

The pay is competitive with what Wall Street peers are earning

Alan Johnson, the founder of compensation consulting firm Johnson Associates, says that pay is typically 15%-20% less in locations outside of New York where banks are moving jobs. However, the lower cost of living often makes up the difference.

On the other hand, some recruiters say the compensation discrepancy from one city to another is negligible.

“Despite the disadvantages of being outside of financial hubs, it typically doesn’t mean lower pay from one location to another,” says Cesar DeLara, a senior consultant in the investment banking recruitment practice at Selby Jennings who recently relocated from New York to San Francisco. “Does that make Dallas or Florida more enticing for some people? Yes, because there’s no income tax.”

Investment banking talent grab in smaller cities

A cautionary tale is the bulge brackets that tried to build out their middle-market business three or four years ago but did not capitalize them properly or dedicate sufficient resources to them, according to DeLara.

It should be a wakeup call for competitors that Goldman is building out a middle-market investment banking group and presumably pouring sufficient money into it to make it a success. A good chunk of change has to go toward recruitment from competitors of all sizes.

“As more of the market share moves more toward the middle market, banks are starting to spread their coverage, not necessarily to the middle of nowhere, but to new cities that they weren’t covering previously,” DeLara says. “I’d imagine [the big Wall Street banks] have to start pulling talent from smaller and regional investment banks, pulling talent from elite middle-market banks – the Harris Williams, Robert W. Bairds and William Blairs of the world.

“Rather than relocating a ton of Wall Street investment bankers, they’ll be pulling talent from existing competitors in the regions, because those people will have the best books of business, whereas a New York banker wouldn’t have books in the areas they want to grow,” he says. “When you’re going to put a MD in a satellite office, they have to be familiar with the geography and be in the know with those local social circles.”

While there are certainly great job opportunities away from Wall Street, be sure to look before you leap. There are significant differences between the roles in remote regions versus those in New York City, and investment banking professionals often do not perceive them to be positives, according to Mike Brothers, a manager of financial services recruitment at Michael Page.

Bankers often have to relocate to fulfill these positions, and inherently take on the risk of being in a location where there may not be any exit opportunities.

“If they move to somewhere in Idaho, how many other banking positions will be available in the case that it doesn’t work out?” Brothers says. “Often times, the junior execution resources will still be based in one of the bank’s major office hubs, so you have to factor in the potential lapse in communication if your analysts and associates are across the country and in a different time zone.

“I have personally received feedback from senior bankers in remote locations that the staffing model for their deal teams becomes frustrating quickly, because they will start a mandate with one set of juniors, and over the course of executing that mandate, that junior team will be re-staffed or the roster will be changed, therefore creating more work for the senior banker to get everyone up to speed on the deal process,” he says.