Tuesday, September 23, 2008
Staff Cuts: Lehman Brothers, Asia Relatively Dicey
Finance Asia: Whitney Group is a global executive search firm focused exclusively on financial services, with offices in North America, Europe and Asia-Pacific. Russell Kopp, a Hong Kong-based director who heads the firm’s wealth management practice in Asia, shares his thoughts on the impact on Asia’s job market of the latest turmoil on Wall Street.
What do the Lehman layoffs and the consolidation of Merrill Lynch and Bank of America mean to the job market in Asia?
Kopp: Lehman's demise is a serious hit to the markets in Asia. Barclays appears to be quite savvy in its approach, as in the US and Europe it's getting the pieces of the Lehman business it wants, without a black hole, and possibly with few liabilities at all. This should mean there is a fair amount of money set aside to lock in the Lehman employees that it ultimately hires. However, it’s a different picture in Asia, as there are a multitude of legal entities and geographic operations which adds some major complexity to any potential deal. As much as every competitor is looking at the talent there, every person in the industry is 'feeling' for the Lehman guys, as it was a good solid shop in Asia and it apparently had a decent 2008 P&L. All of us just potentially lost a career option (as an employer) for some stage of our careers. In contrast, the Merrill Lynch and Bank of America combination is nothing but a trifle.
Does the turmoil present good opportunities for other banks and asset management companies to scoop up Lehman and Merrill talent?
As yet, we haven't seen large pools of talent come out of Merrill Lynch, but they and virtually everyone else will be trimming people before year-end. Yes, it helps to some degree, but the investment banking/capital markets/wealth management industry is always evolving. Sure, any large influx of talent helps those who are growing, but more importantly, the industry continues to evolve. We saw all the British brokers – Barings, Jardine Fleming, Smith NewCourt, etcetera – disappear in the 1990s into global players, we saw the rise of the hedge funds over the past five years, and now we are starting to see other players grow. The Chinese and Korean brokers, the inter-broker dealers, a handful of boutiques, etcetera are all growing. On a longer-term basis, disintermediation will continue, Asian growth will propel the region's GDP, FX rates will loosen, interest rate policies will become more market driven and the financial markets will continue to broaden and deepen around the region. On a relative basis, much of the US and Europe is mature, so, there are still real opportunities for growth in Asia.
Will this mean compensation packages will be reduced?
Broadly, and on average, yes. However, there will always be pockets of the market with shortages of talent. In addition, niche product areas, and first movers will earn supernormal profits and senior players in these areas will not only be highly sought out, but highly paid - and likely, seriously guaranteed.
Which types of employees at Lehman will be able to find jobs more quickly here in Asia?
Clearly the Lehman people who will move quickly will be the ones who produce revenue, as no one's looking to add to their cost bases. Key investment bankers, traders, derivatives staff, etcetera are likely to be the most well bid. We'd also expect risk, compliance, COOs (chief operating officers), CAOs (chief accounting officers) and some IT people to be well bid. Although, Lehman staff in general are probably well above average, so hopefully, many will find new jobs.
Do you expect more of the people who have been laid off in the US to come knocking in Asia? Is there room for them here?
We continue to see a regular flow of candidates from both the US and Europe looking to come to Asia. Given the maturity of markets and the financial services industry fallout in both, it’s no surprise that we're seeing so many people turn up on 'spec' out here – both Asians wanting to return and Westerners looking for a better employment environment. There will be room for some of them, but certainly not all.
p/s photo: Andrea Fonseka