It’s becoming accepted wisdom that things will never be the same again on Wall Street.

A drop in salaries reflects a new supply-and-demand quandary in which both the financial industry and profits are contracting.

Recruiters in the US are reporting declining offers for entry-level employees in the financial services area. Some are speculating that even when the economy improves, the industry won’t be able to support as many jobs as before.
Challenger, Gray & Christmas, a leading outplacement firm in the US, has released figures showing that from January to the end of September 2008, the number of announced financial services industry job cuts totalled 129,150 in the US.

After US market turmoil in October, things look set to continue and even overtake the job cut figures from the whole of 2007, which reached 153,105 for the whole year. In 2006 and 2005, by sharp comparison, job cuts sat around the 50,500 mark for each year.

In the UK, new research published by Powerchex, a pre-employment screening firm for financial institutions, confirmed in January this year a dramatic decline in the number of employment offers made by financial services firms across all sectors.

The research suggests that, in the UK at least, instead of cutting staff to enable hiring of the best talent in the market, recruitment is wholly at a standstill.

“Many [financial services] companies have implemented hiring freezes and are waiting to see what happens with the economy over the next year before taking on any more staff,” according to Alexandra Kelly, managing director of Powerchex.

But how far do examples of US and UK miseries sum up Australia’s own financial services industry?

Optimists claim we’re better protected, and that Australia won’t see the job losses and recruitment freezes of the US. But is it true that we have no reason to believe this has been the “tip of the iceberg”, as one major recruiter told Money Management?

In the face of a spiralling economy and uncertain times for the financial services professional’s job prospects, what does the future hold for job hunters and is the worst yet to come? If the US was the boiler room for the credit crisis, where does Australia sit?

Shrinking job market

Estimates cite 15,500 Australian financial services industry job losses already in the past year, a figure both Hays Recruitment and MLC believe is about right.

In December last year, as Australia’s finance industry shrank for the first time in 13 years, according to the Finance Sector Union  (FSU) of Australia, Macquarie Bank planned to add 600 redundancies to the 200 it had already made.

The union also claimed ANZ Bank had shed 1,000 jobs, while Westpac Banking Corporation and its BT Investments unit fired 450.

However, Richard Gilbert, chief executive officer of the Investment and Financial Services Association (IFSA), told Bloomberg News the “union estimate is extremely conservative on job cuts” and “we think it’s quite a bit higher”.

Commonwealth Bank of Australia (CBA) confirmed in November it would make modest job cuts in its institutional banking division, affected by reduced business activity as a result of the financial markets downturn.

A week earlier, KPMG said 10,000 jobs, or 6.5 per cent of the bank’s workforce, could be cut as the bank attempted to shore up its balance sheets over the next 12 months.

The New South Wales Minister for State Development, Ian Macdonald, told NSW Parliament in November that despite efforts by governments in Europe and North America to help rescue the financial sector, “we are led to believe the worst is yet to come”. Referring specifically to job losses in the sector, he says “most corporations in the financial services sector are on survival mode”.

While accepting that recruitment in the financial services industry is “quieter than usual”, Hays Recruitment senior regional director, WA, Jane McNeill said January and February are a quiet time of year, particularly in wealth management and financial planning.

The recruitment expert says banks and other financial institutions that have not been forced to make hiring freezes are still recruiting key positions.

“Even in a downturn, people want good quality advice. So there is a still a demand for financial advisers. Good, skilled financial planners are still being placed,” McNeill said.

“Senior positions, specialised positions such as business development managers in banking, risk and compliance, and things focused on the distressed debt side of things” are still being recruited, she noted.

While there is not much work out there in mortgage lending, according to McNeill, there have been some recent key hires in commercial lending, and of people with strong business development skills.

McNeill denied “mass redundancies” for Hays’ financial services clients at least, and said that while “there have been job cuts in certain areas, we’re not seeing any indication from our clients that there are going to be further cuts. I think the sentiment is to watch and see what happens over the next few months”.

McNeill said there is no indication that the worst is yet to come.

“We’ve got no reason to believe this has been the tip of the iceberg … We’re seeing organisations proceed with caution and be sensible in this current market.”

Olivia Engel

However, according to a newly released poll by CFA (Chartered Financial Analyst) Society of Sydney, the Sydney arm of the global association for the investment profession, which has more than 100,000 members in 133 countries, “employment issues are real”, the society’s president Olivia Engel said.

As those banks that would only speak off the record to Money Management downplayed the impact of the financial crisis on their own recruitment, the CFA was more bullish in portraying the impact of the crisis on our major financial institutions.

“Even in the Asia-Pacific region, the results are very similar to what is happening globally. There is no doubt that this is real,” Engel said.

“This is a tough period for the entire world ... Career opportunities cannot be compared with those in the past.”

Rewriting the rules

In the US, some on Wall Street are making a truism of the phrase “one man’s trash is another man’s treasure”.

Morgan Stanley’s CEO John Mack saved about $1 billion by firing 4,800 people by July last year, sending pink slips to about 10 per cent of its workforce in January and April 2008 in areas like investment banking, research and fixed income.

But, soon after, it began gingerly spending the savings on new hires, according to a report in the Financial Times.

The company was planning to spend $600 million on new recruits by the end of 2008. New people would move into areas such as derivatives, risk management and proprietary trading. Mack told associates that the massive layoffs represented an historic opportunity to seize new talent.

AXA Financial Planning national manager Paul Williams believes that stronger businesses see this as an opportunity to acquire skilled professionals who have been let go by floundering banks.

“In terms of hiring intentions, we’re seeing our stronger businesses prepare for future growth. They see this as an opportunity, when markets do pick up, to really grow their market share,” he said.

Those interviewed by Money Management were doubtful of the daring ‘cut the fat’ practices, but accepted that if things were to worsen here, there may be more of it.

“I can’t say I’ve heard [of such practices],” said Wayne Handley, general manger of adviser growth and succession at MLC, which recently announced that 120 roles would be cut or redeployed. “But it may be pertinent to potentially any profession or industry that may be going through a difficult time or a downturn.”

While few are perhaps quite so brazen about hiring and firing as the top dogs at Morgan Stanley, Hays Recruitment’s McNeill said some financial sector organisations are not taking on surplus overheads as they may have in the past.

“There has been a drop in the number of support staff and more focus on staff who can add value to the business as a whole,” she said.

Boon for some

For others, the sudden boon in talented candidates, those who have become the waste of the financial downturn, represent an excellent opportunity for smaller firms.

“If a firm can put itself in a position of having more service and advice available for their clients, they can actually grow in this climate. That is the attitude that some firms are taking. It’s a very bold move on their behalf,” MLC’s Handley said.

“You may suddenly have some very good advisers coming into the market because they were last on, first off.”

According to Handley, the seemingly interminable talent shortage will be replaced by a very different dynamic in terms of recruitment.

“Frankly, over the past five or so years, adviser firms have been finding it really hard to find advisers.”

“This is belt and buckle stuff. Things have changed and businesses are having to completely rethink the way they do things,” Handley said.

According to CFA’s poll, only 3 per cent of financial services professionals globally think their jobs have been unaffected by the credit crisis. In Australia, 32 per cent of respondents in the poll of 220 members said their firm had laid off or might lay off others.

At global financial institution ING, which is 49 per cent owned by ANZ Bank, the global economic climate has reinforced a need to carefully examine its human resources and hiring methodology. For example, “when roles come up you don’t automatically fill that role”, said Victoria Doherty, organisational development manager at ING.

“We look at whether it’s required, ask ‘What do we need to do’, and ‘Could this be addressed through job redesign?’ We ask if we have the right people internally to fill this role, have we got that pipeline ready? In some areas we go out to market, particularly for very specialist roles, and look for the right people,” she said.

This sort of careful hiring has not been seen before in some organisations, and many are shunning mass redundancies and formal hiring freezes by rolling two roles into one where possible. Hays Recruitment’s McNeill said this is increasingly common practice in banks and those financial organisations working to cut costs.

The CFA poll found that 48 per cent of Australian investment professionals thought their workload had or was likely to increase as a result of the economic downfall and resulting job cuts.

“People are having to do the work left over from job cuts or reductions in hiring,” CFA’s Engel said.

“As some companies slow down on recruitment, or put hiring freezes on, someone still has to do that work.”

As well as shouldering increased workloads, employees are finding themselves being moved around their organisation as the business struggles to avoid making new appointments.

In what ING is labelling “strong career mobility”, employees are being moved from less profitable areas of the business into its new business unit, retirement and investment solutions.

“We’re seeing greater movement throughout this process,” Doherty said.

For the job hunter in the financial industry, the spiralling economic times have heralded new opportunities as well as mass job losses.

MLC’s Handley said many of the 15,500 jobless came from the top banks and other prominent financial institutions, and will likely decide they want to go into financial planning themselves by starting their own business.

“Some of these people may be middle management-experienced, who can go acquiring existing advisers who may look at retiring or need help with their succession plans. They may be a manager who can help corporatise their business,” he said.

AXA, too, is seeing an increased interest in people who have lost their jobs looking into financial planning as a career. Even current employees of the banks are approaching organisations like AXA to scope a move to financial planning.

“We’re seeing a greater number of enquiries of advisers, particularly bank employees, wanting to start their own businesses,” he said.

Optimistic about the renewed opportunities that will become available to “entrepreneurial, ambitious professionals with well thought-out plans”, Handley said the financial services sector will offer “outstanding opportunities” for quality people.

Like his peers in the industry, he is hesitant, however, to place a time expectation on when such opportunities might become readily available.

But as some doors open for talented professionals, others are being slammed shut.

MLC’s Handley said that never before has Australia seen a situation like this. He said that for clients and financial institutions alike, the way businesses are run, the way people are hired, and the way people look for jobs, is unlikely to ever be the same again.