Sunday, April 14, 2024

The finance sector is changing how it hires graduates to help survive post-Brexit

In the wake of the Brexit vote, the future of the finance sector was uncertain. Some major banks and institutions feared they would have to relocate over the channel to maintain easy access to the single market, which experts predicted would mean a loss of 71,000 finance jobs in the City of London.

However, recently recruiters have indicated that these fears were unfounded. The banking sector embarked on what the Financial Times hailed as a graduate “hiring spree” in November 2016, with Deutsche Bank, Barclays and Citi among some of the most enthusiastic employers of recent graduates.

Although this hiring spree was viewed as risky, four months down the line, it appears to have been one investment worth making.


Understanding the risks: Why some banks won’t hire graduates 

To outsiders, hiring graduates may sound like a no brainer — after a minimum of three years studying, they leave university fresh-faced and eager to prove themselves in the “real world” of banking.

Recruiters Instant Impact say that hiring graduates works well for companies because graduates are more focused on the long term than the short term, looking for careers as opposed to jobs. But this has been a mixed blessing for investment banks.

The world of finance has built up a reputation as the perfect place for money-driven individuals to become high earners, consequently finance graduates are increasingly taking jobs at major banks, gaining valuable experience, and then swiftly moving on to work at higher-paying hedge funds. In other words, they are looking at the bigger picture, but working at a bank is only a small corner of the canvas.

FT reports that this trend could be seen as a response to the unpopularity of the banking industry after the 2008 financial crisis. Now, business school students are increasingly seeing graduate roles as pathways into jobs at hedge funds and private equity firms.

These firms appeal to ambitious graduates who seek huge payouts for their work, the likes of which they may struggle to find in the more heavily regulated post-crash investment banking sector. Hedge funds and private equity firms, though, are not known for hiring graduates straight out of the university gate, and so working in investment banking became an important step in the path to riches for the young financially inclined.

Though this state of affairs may be hugely beneficial to other companies, it is troubling for banks, who have struggled to keep graduates in employment past the requisite experience time for work in private equity. In light of the Brexit vote, with the banking sector known to be in danger, graduates may be even more likely to leave their jobs when they have enough experience to do so, perhaps even to move to a more stable financial area such as Wall Street.


Widening the pool: How banks are adapting to keep graduates in house 

To stop their job roles turning into mere training grounds for future hedge fund managers, banks have taken to an unconventional way of finding new hires: attracting applicants who have never studied finance.

This unorthodox approach may sound counterintuitive, but by all accounts it is working out very well for the employers and graduates alike. Barclays’ popular graduate intern scheme now consists of 40% studying non-financial degrees such as subjects from the arts, sciences or humanities, that’s up from a previous average of 10%. Barclays hopes that these new hires will stay with the company, more interested in building careers there, rather than moving into hedge funds and equity.

This move towards hiring non-finance graduates is not just a rational, sound business move, but a part of a broader move at many of the country’s major banks to diversify their employees, which began long before Brexit.

Back in February 2016, Barclays proudly reported that 40% of their new intern hires were female, and 38% came from ethnic minority backgrounds. Again, this is a huge increase on the norm at the firm.

The final part of this new push for diversity from banking recruiters comes in the increased implementation of so-called “contextualised screening”. This practice was introduced after research into the finance sector found that banks were focusing too much on hiring graduates from only a select few to universities, and that small social factors such as the “wrong” colour of shoes could make or break an applicant’s career chances.

“Contextualised screening” judges an applicant on their achievement relative to the circumstances they were born into. In theory, this means that a hardworking graduate from a working class background will win out against a lazy privately-educated graduate with recommendations from family connections in high places. The logic here is that these diverse new hires are far more likely to remain loyal to their new employers, rather than to jump ship to a hedge fund as soon as they can.

For investment banks worried about the future of their industry in this current climate, these new hiring practices could be just what they need to shake up the sector.


Elliot Preece
Elliot Preece
Elliot is the Editor at ABCMoney. He manages a team that writes and contributes to many leading publications across a number of industries.

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