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How today’s millennials will shape tomorrow’s investment banks

As the workforce ages, do millennials hold the key to competitive advantage in investment banking? Read the highlights.

Recent technological advancements and regulatory changes have largely eroded return on equity (ROE) in the investment banking industry. Re-establishing a competitive edge will require banks to not only digitalize their value chains, but also build a tech-savvy workforce that is capable of delivering those services to an increasingly demanding public. Of course, there are challenges.

  • The workforce is aging. Today, 40 percent of employees are between the ages of 60 and 65. Within three to five years, millennials are expected to account for roughly two-thirds of the workforce. Transferring knowledge from experienced employees to their younger counterparts will be essential.

  • Millennial interest is waning. Between 2008 and 2014, the share of MBA graduates from the University of Pennsylvania and Columbia University—two top US business schools with a strong finance focus—who chose investment banking as a career fell by nearly 50 percent. After salary and benefits, millennials most value interesting and challenging work, flexible hours and opportunities for advancement.

  • Roles are evolving. As self-service grows in popularity and trading becomes increasingly automated, the need for specialized traders is expected to decline and the demand for broadly skilled traders who can oversee trading activity and manage client relationships effectively will continue to expand.

  • The skills gap is widening. Together, the aging workforce, waning millennial interest and evolving roles mean that investment banks are facing a widening gap between the skills they need and the talent that’s available. To help keep costs under control, as many as 82 percent of all organizations are turning to the extended workforce—that is, part-time workers, freelancers, contract employees and consultants.

Building the workforce of tomorrow
The investment banking industry has two main options for addressing these challenges: engage the millennial workforce and/or leverage an extended workforce.

When it comes to attracting and retaining top millennial talent, investment banks must pay close attention to four key factors:

  • Recruiting: Finding the right talent with realistic expectations

  • Capability development: Helping recruits build skills during their first few years in the workplace

  • Corporate culture: Creating a workplace environment that aligns with new preferences regarding work-life integration, philanthropy, and opportunities for career development and and advancement

  • Job satisfaction: Providing transparent, interesting and challenging job opportunities

Similarly, working with contractors, consultants and other members of an extended workforce requires investment banks to answer tough questions:

  • Which functions are best served by internal versus external workforces?

  • How much should we invest in the career development of our external workforce?

  • What skills and tools are required to manage external resources?

  • How can we facilitate collaboration between internal and external resources?

The bottom line
To become the customer-focused, digitally capable organizations that consumers want, investment banks must become the talent-focused, innovative workplaces that the next generation of talent demands.