New York — To the outside world, Wall Street banks looked like great places to be in 2020, as they printed profits during the pandemic slump. To those inside, they now look like great places to leave, too.
Technology startups and investment firms are offering some unusually attractive opportunities to seasoned Wall Street professionals, including shots at multiplying their pay cheques — an allure all the greater after banks showed restraint in doling out rewards for 2020. Exits are now proliferating as bonus season wraps up.
A pair of Goldman Sachs Group partners, including an architect of its consumer business, became the latest examples over the weekend by giving up their coveted spots for an unconventional alternative: Walmart’s nascent fintech venture. A day later, news broke that another top Goldman executive left to join Tiger Global Management.
While Walmart certainly isn’t Wall Street, recruiters and industry veterans say the allure of such an opportunity is obvious: a shot at building something from scratch with enough resources to challenge incumbent players. That’s not to mention the potential riches if the new business succeeds.
“These people are very motivated, they’re super-smart and they set goals for themselves,” said Noor Menai, CEO of CTBC Bank USA. They’re saying, “‘I built this, now I need to build something else.’”
Fintech is a hot space right now. Venture capital firms are pumping money into young companies. Businesses focused on cryptocurrencies, payments, financial advice and no-fee trading are taking off.
Companies moving into financial services need experienced people — not generic investment bankers or management consultants, but those who understand the intricate, unsexy details of consumer banking, such as consumer protection and lending risk, said Menai.
A division chief making $10m-$15m at a top bank can make two to three times that taking the helm of a company, with more upside over time, one senior executive estimated.
The Goldman consumer bankers — Omer Ismail and his deputy David Stark — had scored promotions in recent months to carry out the 152-year-old firm’s biggest strategy refresh in decades. So it wasn’t that Ismail was looking to leave Goldman but that an opportunity arose to make a big impact.
Walmart announced plans to build a fintech business with Ribbit Capital, a venture capital firm, in January. Though they have disclosed few details on their aspirations beyond saying they will serve Walmart shoppers and associates, the companies’ resources and credibility are enough to get Wall Street buzzing. JPMorgan Chase CEO Jamie Dimon pointed to Walmart during a Bloomberg Television interview on Monday when asked about the competitive environment.
Jumps to investment firms are an older phenomenon, but they could pick up in 2021 as senior money managers look to pass the torch or reinvest their profits from the bull market.
On Monday it emerged that Eric Lane, who became Goldman’s co-head of asset management less than six months ago, would join Chase Coleman’s Tiger Global as president and operating chief. The move evoked memories of investment-bank boss Gregg Lemkau’s recent exit for billionaire Michael Dell’s investment firm.
Despite their windfall in 2020, Wall Street banks are under pressure to improve shareholder returns by holding down costs — especially as some firms set aside cash to cover potential losses on loans. Keeping a tight hand on compensation helped big banks post results that sent some of their stock prices to record heights in recent weeks.
Initial recruiting packages may offer an immediate boost and have the potential to get dwarfed by greater payouts down the line if the venture proves successful. Closely held companies with external investors, such as Walmart’s tie-up with Ribbit, can offer profit-sharing plans or equity awards separate from the parent company’s publicly traded stock.
Money, however, isn’t the primary driver for many making the shift from finance to fintech, said Jon Pomeranz, a partner at executive search firm True Search in charge of those two areas.
“It’s the build,” he said. “The opportunity to be linked up with a brand that’s known by billions of consumers around the world — and the opportunity to get into an organisation where you can build a differentiated financial services company.”
Bloomberg
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