Toxic to tolerant: are investment banks appealing to Gen Z?

“When I started in the early 1990s, the managing director was a mythological figure — we analysts had no access to him, communication flowed unidirectionally, no one dared to say ‘no’,” recalls an MD working for a European investment bank. Three decades later, his junior staff have a very different attitude to hierarchy and, more broadly, to work.

Despite their inexperience, analysts or associates would refuse to develop hypothetical product structures if they thought they would fail to get client approval, says the MD, to his frustration. They also expect to be included in client meetings and have no hesitation in complaining to their manager’s boss if “instead of 7pm, they leave at 9pm — we’re not talking about all-nighters, like we used to do in my days”. Their requests, he adds, often feel “annoying”. 

A peer at a US bank is more outspoken. He describes young recruits as “lazy and needy”.

But on the other end of the work relationship, many bright young minds from Generation Z, the latest to enter the workforce, are in no rush to get into investment banking. And they are pushing back against these negative characterisations.  

Those branding Gen Z lazy have never seen this generation working in start-ups or Big Tech, argues Michael Lawrence, an economics graduate who, after a few years in finance, co-founded a company with a friend. “I see loads of [young] people working crazy hours ... They just don’t seem to [want to] do it in investment banking,” he says.

Banking is struggling not only with an often-perceived toxic culture, but an inability to provide the purpose younger generations crave. And other types of financial companies like hedge funds and fintechs may be a better match for younger people seeking high pay, as well as often promising a more intellectually seductive and flexible job.

“[Banks] acknowledge [Gen Z’s different approach] but don’t necessarily accommodate it,” says a non-executive director with experience in banking and other financial services. “I’m not even sure they know how to deal with it yet.”

Is this the final chapter of a once sought-after, high-status profession? 

‘Why would you do that?’

Gen Z comprises those born between 1995 and the early 2010s, and who, as social psychologist Jonathan Haidt describes, grew up spending less time having free play and, for the first time in history, had access to smartphones. 

In an overview ahead of the release of his book The Anxious Generation, Haidt warns that “the rise of continual adult supervision deprived children of what they needed most to overcome the normal fears and anxieties of childhood: the chance to explore, test and expand their limits, build close friendships through shared adventure, and learn how to judge risks for themselves”. 

For younger Gen Zers, who are not yet of working age, regular use of smartphones has played a role in the “rewiring of childhood”, as adults “lacked the knowledge to protect them from tech companies that had designed their products to be addictive”.

The “wiring” and expectations of Gen X, now in their 50s and holding those MD positions, is rather different. The cohabitation of Gen Z and Gen X seems to be a widespread challenge, as multiple studies report that managers find younger recruits difficult to work with. Whether the label is warranted or not, such tension is not helping either side.

Intergenerational conflict is nothing new, as the European banker points out. He adds that even if “there are some considerations that didn’t really exist” when he started working, he finds many junior staff to be “well prepared, keen to learn and make a name for themselves”.

One of these considerations is the search for purpose, and the changed view on what line of work is considered acceptable due to its impact on the environment and society.

Lawrence, who launched regtech marketing company Parker & Lawrence Growth Advisory with Nathan Parker earlier this year, sees investment banking as being “one place removed” from the oil industry.

“If someone talks about going to [work for] an oil company … universally the response is negative: ‘What are you thinking? Why would you do that?’ There is a presupposition that we shouldn’t be engaging in those activities now,” says Lawrence.

During his university days, a few years before the beginning of the Covid-19 pandemic, investment banking was the most coveted destination for top students, but things have changed since then, he says. Others agree.

Nishma Gosrani, a partner at consultancy Bain & Company, recently visited the University of Oxford for a panel discussion on financial services careers. To her surprise, students asked about climate change and the likelihood of a scandal similar to that involving the UK Post Office — where almost a thousand staff were wrongly prosecuted for false accounting and theft — transpiring in the industry. There were far fewer questions about pay and career progression. 

Zoe McLoughlin, associate director for employer engagement, degree education, at London Business School, says banks are facing tougher scrutiny from young job applicants.

“Things like purpose and accountability are really important to [students],” she says. “They’re asking banks, ‘are you greenwashing?’ [and] asking questions around diversity and inclusion. They’re asking questions around the gender pay gap.”

The 100-hour week

Gosrani senses a wider discomfort with the industry. “When I started my career in financial services 20 years ago, you would sit on the edge of your seat in theatres to listen to Goldman Sachs speak. Not anymore,” she says.

The legendary quotation from former Goldman Sachs CEO Lloyd Blankfein in 2009 that banks do “God’s work” does not sit well with many young people today. Instead, the insistence of Goldman Sachs’s current boss, David Solomon, on a full post-pandemic return to the office felt to many, including older generations, anachronistic. 

Young Goldman Sachs bankers’ plea for a cap on their nearly 100-hour week in 2021 caused outrage as the group of 13 first-year bankers shared details of “inhumane” practices that led them to sleep five hours a night and hurt their physical and mental health, as well as their personal relationships. They also said they were subjected to abuse by superiors.

At the time, Goldman Sachs responded by recognising “that our people are very busy, because business is strong and volumes are at historic levels. A year into Covid, people are understandably quite stretched, and that’s why we are listening to their concerns and taking multiple steps to address them.” 

But earlier this year, a former Goldman recruitment manager sued the bank for more than £1mn in a London court for “physical and psychiatric injuries” developed after “working unreasonable and excessive hours”, as reported by Bloomberg — a claim Goldman denies. The bank declined to comment for this article.

These may be extreme cases, but they are emblematic of investment banking’s reputation when it comes to work hours and pressures.

A student at the University of Oxford who interned in the leveraged finance division of a UK bank says that it was clear from the outset that the work–life balance was “quite tough”. “I was working from 9:30 to 22:00 [or even] midnight. I learned that the [leveraged finance team] is one of the teams that works the most; other teams might have a better work–life balance.” 

The student thinks that, for most younger people, tough working hours are likely a big disadvantage. “It depends on how much you’re willing to tolerate. The main issue is the fact that you don’t have time to do other things,” he says. 

There are other considerations. Gen Zers appear to “seek change more often” than their parents’ generation, the student notes. It is not just about seeking more of a challenge, but also a different challenge, he says. 

The European MD has seen a similar change in attitudes too. “Now, there’s no fire in getting into Goldman Sachs or another big investment bank,” he says. “Candidates prepare for the interview rounds, but the thinking is ‘if I don’t get into Goldman, I might go to a [smaller] bank, or do a Masters, and then work for a fintech’.”

He adds: “In a sense, this is positive. There was a hype around investment banking that was completely unjustified. It produces value but it’s not open-heart surgery … [The financial crisis and] Lehman’s collapse didn’t help, the subprime mortgage securitisation [problems] didn’t help.”

Covid also played a role. Parker says the focus on work–life balance was “turbocharged” by the pandemic. “My preference now is to be self-employed to give me that freedom, geographically — not just within the UK [where we are based] but abroad as well,” he says.

Gen Zers do not have an aversion to hard work, Parker adds, but prefer the autonomy and choice around when to work. 

The US bank MD agrees that “with Covid, we had a work–life balance revolution” for the older generation, and an acceleration of an underlying trend for the younger ones. But he insists that the new recruits’ requests often go beyond flexible work practices, and are unjustified by practical concerns.

Many senior managers, he says, agree with him, but do not act on these shared frustrations because of “a political, legal and societal terror” — they’re scared of very public repercussions of potential employment grievances.

‘Pandering’ and whistleblowing

Overall, Gosrani says there has been a “real shift” in what employees want, and that this has been so strong that bank executives are “having to pander” to these new expectations from younger workers. 

Société Générale’s UK head of HR, Ben Higgins, says the bank has seen a need for more pastoral support and coaching since the pandemic, combined with an increased intake of Gen Z staff. 

The European MD adds that, unfortunately, he has witnessed his bank’s internal whistleblowing channel being abused with complaints that he feels were out of proportion, with three in four of such grievances regarding working schedules that could have been resolved by talking directly to the manager. 

Sadly, he adds, the internal whistleblowing channels are not properly being used for serious misconduct involving women and ethnic minorities, where incidents are still “swept under the carpet”.

This mirrors the findings of the UK Treasury committee’s Sexism in the City report, released in early March, which says there continues to be a “fear factor” around reporting sexual harassment — something that is more prevalent in financial services than in other industries. 

The inquiry also found “an overwhelmingly negative view of the effectiveness of financial services firms’ internal whistleblowing procedures in dealing with allegations of harassment”. 

Though formal complaint channels may be misused, a lower tolerance for unhealthy behaviour can only be positive. The European banker recalls when, both as an analyst and then an associate, he was forced to stay in the office until the MD had left or face being reprimanded, and was regularly given an unreasonable and disproportionate amount of work compared to his peers because he was deemed high-performing. 

This kind of behaviour has changed over the past decade, he says, adding that now “there is a focus on not abusing people’s time; work is distributed in a more equitable way”.

Yet investment banks’ demands of staff are increasingly feeling out of sync with Gen Z’s aspirations.

The University of Oxford’s latest annual survey about what students seek from a job found that a good work–life balance was deemed more important than a high salary. Working for a cause that promotes positive social action also increased in relevance over both 2022 and 2023. 

Aside from attitudes, the mix of high-paying careers open to Gen Z has changed to increasingly include fintech and financial boutique firms. 

The European banker, who held a junior role at the now defunct Lehman Brothers, says that before the global financial crisis, even an analyst would close the year with a bonus the size of their basic salary. This is now closer to 20–30 per cent.

A first-year analyst at a European investment bank would now take home a salary of around €40,000–€60,000 a year, with the figure rising to £80,000 a year in the UK, he adds, while hedge fund Citadel offered a monthly pay of $14,000 to its interns in 2022 — equivalent to an annual $168,000 — according to data by Wall Street Oasis and levels.fyi, reported by Bloomberg.

A spokesperson for Citadel told Bloomberg that that figure would be even higher for some roles, like traders or quantitative researchers.

One recruiter who places fixed income and foreign exchange traders at hedge funds and investment banks tells The Banker that bonuses have generally decreased since 2008, but that experienced hedge fund traders can still get a multi-million-dollar compensation in a good year.  

A decade ago, the EU introduced a cap on bankers’ bonuses limiting the additional remuneration to 100 per cent of fixed salary. The UK recently removed the cap.

‘We train, they leave’

Compensation was flagged as an issue also in a recent Bain study, Five Themes That Will Fundamentally Change Wholesale Banking, for which the consultancy interviewed 30 CEOs and senior executives at large banks. 

It found that banking has fallen behind large technology firms in the race to attract top talent across compensation, culture and career progression. While the competition for talent has been ongoing for some time, the sharp rise in concern that bank executives have for it is new.

The authors of the report, including Gosrani and another partner, Carsten Baumgärtner, say they were surprised that some chief executives declared their main strategic priority was sorting out the HR department.

Baumgärtner says: “I did not have the HR function as one of the top five issues in the survey. But it was brought up by quite a few CEOs who said [it is] their biggest headache.”

A non-executive director at a London-based investment bank says that “from a board perspective, the issue is more in retaining [Gen Z] than recruiting it. There [seems to be] quite a large turnover on that age tranche, which makes it expensive — we train and they leave.”

The search for specialist skills that are in demand across other industries creates another challenge. Jen Tippin, group people and transformation officer at NatWest, says that financial services companies are often looking for specific knowledge in areas such as data, technology and financial crime. 

“This means we are now competing for talent across [multiple industries], all over the world, and not just with other banks,” she says.

A Santander spokesperson said the bank wants to hire talent to support its goal to be a digital bank. Meanwhile, Société Générale’s Higgins says juniors want to understand their learning and development opportunities and the bank’s sustainability goals. 

Despite banks’ efforts and digital aspirations, the European MD says that “there’s a total detachment from new technologies — banks still operate on Excel … AI, blockchain, all of that — we have some departments looking [into those technologies], but no real internal implementation.” 

Mentoring

Still, Luca Burini, a managing director at Bank of America, sees value in an investment banking career. His area of expertise is quantitative investment strategies for fixed income, currencies and credit products.

“I could have gone myself into fintech. For me what was great was being a part of a bigger organisation. I had a lot of mentoring,” he says, noting how the bank hired him as an intern and promoted him to his current position a relatively short 12 years later. The dedication and time to mentor may be less likely in smaller companies, Burini says.

However, Sohail Raja, who worked at Société Générale, Nomura and other banks for more than two decades, says that while “front office” roles at investment banks may still be appealing to many Gen Zers, those roles are limited and the fact that remuneration is out-of-sync with other financial companies is not helping. 

Last April, Raja started his own venture, Quetta Finance, to offer financial solutions to underserved Bangladeshi and Pakistani communities.

Leaving investment banking after only a few years, Romi Savova, the founder and CEO of PensionBee, says the industry was a great place to hone her skills, but ultimately she felt her efforts were not truly impactful. She briefly worked at Goldman Sachs and Morgan Stanley before launching her platform helping users combine pension plans in 2015.

“The industry was once hailed as the pinnacle of prestigious professions,” she says, but banking is losing its appeal to younger people, “especially those looking for meaningful and balanced career paths”. 

Not what it used to be

In addition to generational misalignments and compensation, there are other factors at play. Investment banking, as a line of work, has changed.

“The entrepreneurial spirit I found in investment banking when I started in 1992 was exhausted by the time of the global financial crisis,” says the European MD.

“Then, we were providing tailor-made services,” he says. “I saw merger and acquisition projects that were incredible, merging a company from an industry with another from a completely different one — and even if the deal wouldn’t happen, we used to engage the client in interesting conversations.”

He adds that even in M&A — an activity that remains too sophisticated and out of reach for emerging technologies that could easily fulfil markets activities such as pricing and research — most big corporates “have their own internal M&A divisions, so the bank only executes [what the company has already decided]”.

Smaller businesses, which lack those teams in-house, are unpalatable to a big investment bank chasing larger fees. Several investment banks contacted for this article, including JPMorgan, Morgan Stanley and Citi, did not respond to a request for comment.

The US bank MD has seen a deterioration in the pool of younger recruits, in terms of ability and drive. “We’re getting a weaker and weaker intake,” he says. 

But others, outside the world of finance, offer a slightly more hopeful view.

Though investment banks and other financial companies have been typically uninterested in widening their recruitment net because of their established — and now deteriorating — appeal to top graduates, things are beginning to change, according to Max Taylor, a director of strategy for National Student Pride, which runs the largest LGBT+ student career fairs in the UK, and a Gen Zer himself.

When attempting to reach candidates from a broader pool, investment banks also face the additional complication of debunking the myth that their world is akin to that of the 2013 film The Wolf of Wall Street, Taylor says. They remain behind tech and consultancy companies in adapting to younger people’s expectations, too, he believes.

But “we’ve had investment banks, [which] I’ve spoken to directly, for the first time this year at our careers fair,” Taylor adds. “That has not happened in my eight years at the organisation.

“The fact they are now looking towards a diversity and inclusion careers fair to hire not only a more diverse young workforce, but a workforce that really cares about them showing up to these things as well, is significant.”

The need to appeal to a broader group of potential recruits is both indicative of attempts to change for the better and a sign of an industry that, in other ways, has lost its gloss. In the long term, “investment banking will be a job similar to that of a utility”, says the European banker. “It will become a job like any other.”

This article has been amended since publication to remove the name of one of the interviewees and some details about their work