Here's Affinity Resource Group Partner Peter Wagner's latest summary of current trends in the front-office financial services IT job market:
Wall Street Warming
I think it’s significant that this is the first year since the Credit Crisis that major banks have not instituted a hard freeze on hiring as the end of year approaches. We continue to see offers this late in the year. Buyouts are unlikely to happen at this time of year, so deals are likely to culminate after bonuses are paid, but that scenario is not unusual even when the market is strong.
Priorities have Shifted
As I mentioned previously, risk taking is down, and there’s less focus on trading. Consequently hiring for IT/quant needs directly related to trading is down significantly. Hiring in areas affected by regulatory changes continues to be strong.
Basel III and CCAR are driving a lot of activity. In addition, the migration of OTC derivatives trading to exchanges mandated by Dodd Frank is requiring a lot of systems development in electronic trading. Most of this work is pipes and plumbing, but firms are also figuring out how to automate market-making on these exchanges. It’s worth noting that these significant new requirements have not come with an open pocketbook for hiring. As one senior IT manager reported to me, they have huge new build requirements to support regulatory initiatives, yet budgets are down 25%.
Banks are emphasizing businesses where they can make money w/o incurring high capital costs. Processing client trades doesn’t require (expensive) capital, so winning market share in the routing of client orders is a very active area. We’re seeing strong demand for developers for teams working on order routing and listed derivatives systems.
Finally, we’re seeing Wealth Management IT groups very aggressively hiring, as the management of client assets generates recurring, non-risky revenue.
Too many Quant-Devs/Dev-Quants
Many universities now offer the MFE degree, and the market is saturated with individuals looking for quant-dev roles. This is a valuable combination of skills, but I see a saturated market for these individuals. I continue to have very strong demand for top developers, but only a handful of positions require quant skills.
Below is my mid-year update providing more context on the current market.
2014 Mid-Year Market Update
The market for developers and quants remains robust, but heavily skewed towards the best talent. By that I mean that there remains strong demand for superior talent, but the market for B+ and even A- players is relatively weak. Most big banks have had layoffs in recent months with Barclays leading the way in numbers and breadth. These layoffs have hit a wide cross section of employees including groups whose function has moved offshore, groups whose business has been divested, and a good number of highly paid employees that budgets no longer support.
The overall industry is faring better, with bank stock prices well off their lows after the Credit Crisis and the European Sovereign Debt Crisis.
However, the appetite for risk is low and capital costs are relatively high, so there’s less demand in the front office as banks place less emphasis on trading. At the large banks, hiring is focused on Risk and Regulatory work streams as well as strategic technology initiatives that promise cost savings in the long run.
Strong talent is still seeing 15-20% increases for lateral moves. Raises for the next tier are significantly lower, and many individuals find the best option is contract work instead of fulltime. Contract remains a good option for folks who are well into their careers, as salaries for experienced technologists and middle management have stagnated. While the industry is healthier, I don’t yet see any sign of a rising tide that will raise all boats. As one hiring manager said to me recently before making an offer to a candidate, “I don’t want to be bidding against myself.”
Consulting firms like E&Y and Deloitte are growing rapidly, as they offer to take regulatory headaches off the hands of upper management at the big banks. These firms can provide a soft landing for experienced professionals who have been laid off or are squeezed in the current compensation environment at the banks.
Top talent is rotating to the Buy side in significant numbers. While the demand is strong at hedge funds, the competition is fierce for these roles. The motivations are
- Perceived better pay and more upside
- Flatter orgs with higher visibility
- Less bureaucracy/red tape (regulatory)
- Little risk
My sense is the above are mostly true, but bear in mind that compensation is comparable unless you distinguish yourself. Regarding risk, the reality is that hedge funds go out of business at a significant rate. However, if you are talented enough to get hired by a top fund, you’ll likely have no problem finding a job should your employer blow up.
Bear in mind that if you are a developer, you’re better off starting your career at a large company to learn best practices. Hedge funds are often too small to have well established systems for standard practices, and hiring managers expect these skills to be second nature.
Hands on skills continue to be critical. Layers of middle and senior management have been eliminated in many companies, so everyone needs to be “productive.” The demand remains for technical skills, financial expertise particularly in the areas of risk and regulation, and quantitative skills that help firms make money. Regarding the latter, data and data analysis skills have become paramount. All trading desks, HFT/flow/structured, are now looking to understand the data better than their competitors and leverage that information to make money.