Boom & Bust

Wall Street Investment Bankers are accustomed to boom and bust cycles when the bulge bracket banks slash jobs in bad times and race to rehire when the tide turns, creating a feeding frenzy for talent. The problem in the current environment is that all of the rules are being broken. With the Dow heading to pre-2008 levels and strong economic indicators, it is an environment when we would have historically expected happy days on Wall Street. Alas, as the Wall Street Journal wrote in yesterday’s edition, the current landscape has too many bankers and not enough deals. The conundrum is that M&A activity is weak, and with fewer deals there are lower profits. On top of the current anemic deal environment, Washington is introducing new regulation that is negatively impacting growth among the banks. The stage is now set for the banks to slash jobs and reduce pay by about 30% across all levels, from young associates to senior bankers, and real estate has not escaped the most recent carnage. We can expect the cutbacks to persist throughout 2012, of course – unless deal flow suddenly ramps up, and then the banks will be back to the races and recruiter phones will be ringing off their hooks to find talent once again.

Tony LoPinto is the Global Sector Leader of Korn/Ferry International's Real Estate Practice and founder of SelectLeaders. The views expressed in this article are the author’s own.