Investment banks’ employees simply don’t have enough “digital savoir faire”. So says Boston Consulting Group, which believes technology should be seamlessly integrated into banks business models and that scarce technologists should be carefully recruited and nurtured.
There’s just one problem – investment banks are lagging hedge funds, mutual funds and other capital markets players when it comes hiring the best technologists and are losing market share as a result.
The new skills needed across investment banking, hedge funds, mutual funds, information providers and exchanges are, says BCG, machine learning, predictive analytics, cloud computing, robotics and automation.
Investment banks like to say that they’re now technology companies. Goldman Sachs says that 25% of its staff work in technology and J.P. Morgan has 10,000 IT staff attached to its investment bank. But, as a group banks have just 5% of people with ‘digital skills’, says BCG. This includes developers, data analytics and ‘emerging’ technologies. This is by far the smallest proportion of any capital markets firms in BCG’s study.
This is a problem. Digital skills are the key to increasing shareholder returns, believes BCG, which points to a positive correlation between talented technologists and returns. Investment banks’ revenues shrunk by just 1% last year, but buy-side firms are still generating more revenues. Banks now account for 34% of industry revenues, down from 47% in 2006, the study suggests, whereas buy-side firms comprise 46% – up from 40% before the financial crisis.
Investment banks need to ensure that compensation is “compelling when compared to packages offered by competitors” to attract more tech talent, but they should also ensure “seamless integration among business and IT functions”, it says.
J.P. Morgan has technology ‘hubs’ in 14 lower cost destinations like Dallas, Delaware and Mumbai. Morgan Stanley’s centres of excellence include Glasgow and Budapest. Even tech teams in New York and London are often housed in separate offices to encourage more collaboration between the IT professionals.
In other words, this arrangement doesn’t exactly scream ‘integration’, and this is another challenge for banks hoping to hire and retain scarce technology talent.
A new study from academics at Washington State University and University of Wisconsin, Oshkosh – featured in the HBR – suggests that employee satisfaction stems from being a ‘lynchpin’ in the organisation. In other words, programmers want to work for an organisation where technology is the product.
Even if they’re considered a core employee – namely, banks calling themselves technology companies and talking up IT publicly – they’re still considered to be peripheral to the organisation.
Contact: pclarke@efinancialcareers.com
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