Whether you’re climbing the promotion ladder or keeping an eye on the job market, the ugly truth about the investment banking industry – or any other industry – is that the org chart is also an age pyramid. When the overall banking sector is growing rapidly, it’s possible to forget this as new jobs are created, but in more static times, the number of senior vacancies is to a large extent driven by the number of senior people who retire or move on to other fields.
So it’s worth keeping an eye on the retirement prospects of the generation above you. It’s never the most edifying experience to be in the company of a crowd of mid-level directors surrounding an aging MD, particularly one with poor health, but this is where the opportunities arise. And if you're looking to replace an MD, your options right now are not great.
Senior bankers tend to come in two varieties. The first kind are the driven type-A masters of the universe. These ones aren’t really worth watching because they do it for the love of the game and they almost never retire voluntarily. The second kind are the ones who are in the job because they’re good at it, not because they love it, and who dream of a comfortable life of leisure once they’ve made their pile.
The retirement schedule of the second type of MD has historically been determined by school fees. However good conditions are in the market, if you have to write a five figure termly cheque out of post-tax income, you’re not going to be building up the kind of retirement wealth you need. For this reason, the key to understanding when someone is going to retire is to know the age of his or her youngest child. Once the last school uniform has been taken to the charity shop, the mental countdown will have started, and it’s unlikely to last much longer than the three years of an undergraduate degree.
Unfortunately, though, this useful rule of thumb might not work going forward. Costs are rising in the form of university fees and the need to help offspring onto the housing ladder. And retirement plans are dependent on wealth, which for senior investment bankers in London is very closely tied to the property market. Downsizing or moving to the country is often a big part of the plan, and the sale proceeds or rental income from a prestige property tend to be the factor that makes the overall economics work. This is even more likely to be the case for the current generation of bankers in their mid to late fifties, who will be aware that if they were to hang on to statutory retirement age, they will benefit in full from their membership of the extremely generous defined benefit schemes that banks used to run in the 1980s and 90s but which are now for the most part closed.
This all means that things might start to get delayed. The London property market, particularly at the high end, is not in the best of shape; asking prices are falling and expensive houses are spending a lot longer on the market. Nor is the high end of the rental market looking particularly healthy. With Brexit on the way, foreign executives are less likely to relocate to the UK and significantly less likely to be interested in signing multi-year contracts when they do. It’s not going to be quite as easy to finance an early retirement and the prospect of serving out the last few years, or waiting for a generous offer in a round of voluntary redundancies is going to look much more attractive. The ambitious middle tier might have to keep an eye on the corner office for a while more.
Dan Davies is a retired former investment banker, currently interested in any offers on a five-bed in North London.
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