JPMorgan Chase is shining a spotlight on an unusual recruiting practice that seeks to lure its newest talent to jobs that won’t start for two years — forcing it and other investment banks to act as a training ground for rival employers.
In communications with prospective investment banking analysts, America’s largest bank by assets addressed the infamous buy-side recruiting ritual. In a practice unique to Wall Street, private equity firms and other investment firms approach first-year investment banking analysts to woo them with offers for gainful employment starting at a future dateusually in two years. While it has become a hallmark of junior bankers’ experience, it can also be a nuisance for banks and their younger hires – interrupting their work and even their on-the-job training.
Now, JPMorgan is imposing new rules on those employees who choose to participate.
“We understand that the practice of interviewing and accepting a role at another firm has accelerated and is happening even earlier in your career with us,” JPMorgan wrote to new bankers in a communication shared by the Litquidity Instagram account and others on social media this. week. (A person familiar with the message confirmed its authenticity to BI.)
“This puts undue pressure on you and puts us in a difficult position as well,” the bank continued, adding: “We cannot take on client business where there may be a conflict of interest. If you accept an offer of employment dated future, you have the obligation to immediately show your manager this acceptance, this may affect the projects in which you are personnel, so that the firm can properly manage any possible conflict.”
Finally, the firm added: Accepting a job with a PE firm while retaining their banking jobs “may result in us reconsidering your employment status.”
JPMorgan’s message has become the talk of Wall Street, as everyone from recruiters to junior bankers try to figure out what it might mean for them. The bank’s ominous line about potentially firing bankers who have taken future gigs risks throwing the private equity recruiting apparatus into chaos, according to a top buyout recruiter. It could also increase the hiring appeal of boutique banks, one former junior banker suggested.
Here are 4 ways JPMorgan’s message could affect Wall Street, from recruiting private equity to junior bankers fearing to lose their jobs and more.
Bankers with quiet PE jobs are in a tough spot
The bank’s message about mitigating and preventing conflicts of interest seems quite reasonable. It is simply required that employees with future job offers do the ethical thing and disclose them to avoid actual or potential conflicts of interest. But JPMorgan’s warning that it may lay off one man leaves junior bankers in a damned-if-you-will-be-damned-if-you-don’t scenario.
“It puts you in a really bad position if you’re a young banker who has accepted a buy-side offer,” said Anthony Keizner, co-founder of Wall Street research firm Odyssey Search Partners, adding: “If you’re a young banker. who just finished cycling, try and not tell the bank?”
Bankers who are laid off also lose their private equity job offers. These offers are usually given with the expectation of having two years of training and work experience in an investment bank.
“There’s a reason that PE jobs are outdated, because of the capacity of the firms and the scheduling and pipeline needs — but it’s also because they want you to be trained and experienced in deals before you come in,” Keizner said.
The suggestion that junior bankers could be fired for disclosing their future private equity jobs could encourage the opposite of transparency, he said.
“It’s more likely to bury these issues or make someone less relatable,” Keizner said. “I think this seems to cause more confusion and concern than clarifying or allaying any fears.”
This could be the ‘nail in the coffin’ for the recruiting cycle
The first wave of private equity recruitment is known as the “oncycle” and has become increasingly chaotic and stressful for junior bankers as firms start the process earlier each year. The cycling recruitment process has started so early (took place in June of this year) that buyout firms often hire candidates with zero deal experience. In some cases, it’s turning off young bankersas previously reported by BI.
“There has been pressure on the cycle and I think that will further weaken its importance because of the effect it will have on anxious bankers who have enough to do in their days without having to worry about the potential implications legal and reducing employment by their banks,” said Keizner.
“I think probably the biggest impact will be on current bankers and potential bankers,” he said. “It’s raising issues related to this oncycle process, and frankly, this email is potentially another nail in the oncycle coffin.”
“I think it will make candidates even more reluctant to interview for roles in such an old-fashioned way and make them more likely to say, ‘I don’t know where this is going, but this sounds like a legal and employment mess so I’m going to keep my head down, do the first year and then look for opportunities for a faster start or an immediate start.”
Other banks are likely to follow JPMorgan’s lead if they haven’t already
As illustrated by the collective practice mandates of return to office In the wake of the COVID-19 pandemic, Wall Street tends to move in packs when it comes to employee policies. So the impact of JPMorgan’s message will also depend on whether others follow suit.
“I haven’t seen other banks come up with something that’s this clear,” Keizner said. “It will be interesting to see if other banks follow suit or if this is really just a JPMorgan thing.”
A spokesperson for Goldman Sachs told BI that the firm has had a policy similar to JPMorgan’s for more than a decade, requiring analysts to disclose future job offers. A Citigroup spokesman said the bank does not have a policy similar to JPMorgan’s. Spokesmen for other banks, including Morgan Stanley, Bank of America, Deutsche Bank and Barclays, either did not respond to or declined requests for comment on their respective policies.
Boutique banks can become even more attractive
Boutique banks have become more and more attractive place for young talent — and JPMorgan’s potential new policy could give them another leg up.
A former junior investment banker who started working in private equity this year said smaller boutique banks tend to be more accepting of their young talent participating in buyout recruitment.
“Inflator brackets are so backwards with this stuff,” this person said. “I can understand the compatibility aspect and the conflicts of it, but it’s just not that big of a deal.”
They added that at the boutique where they worked in New York, senior staff were actively supportive when analysts went for private equity interviews and land deals.
“They actively want their analysts to go client-side because analysts are essentially tomorrow’s clients,” they said.
They added: “I would put this in the back bucket thinking the seniors in these firms have it. It’s all power and ego.”
Do you work on Wall Street? Contact these journalists. Emmalyse Brownstein can be reached by email at ebrownstein@businessinsider.com or encrypted Signal app in 305-857-5516. Reed Alexander can be reached by email at ralexander@businessinsider.com or encrypted SMS/app Signal to 561-247-5758.
