Be a Solo Investment Banker!

According to Edmond Sassine, co-founder with Pierrick Morier (ex-Credit Suisse Investment Bank) of Analyst Pool, a virtual investment bank staffed by freelancers, banks have started to outsource many front office functions, creating an opportunity for Solo Investment Banker.

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Having successfully outsourced back-office functions as IT or accounting, investment banks have lately started to send some of their financial analysis and research overseas by either establishing subsidiaries in India or by contracting with Indian firms where a group of analysts is dedicated solely to their needs and purposes. Two main factors are driving this trend, first, it’s cheaper and second, banks want senior analysts to focus on more front-office, added-value and money generating tasks by taking some of the more basic and repetitive analysis away from them.

According to Financial News, large banks and asset managers have as many as 5,000 financial analysts being used in emerging economies, led by India. These staff are paid between $10,000 to $25,000 a year, against the $250,000 it cost to hire a junior analysts in London or New York. While in the past the financial outsourcing firms used to keep their analysts in the dark on the identity of the clients for whom they are working (be it a Credit Suisse or a Morgan Stanley), given the scale they’ve achieved, they are now trying to market themselves more aggressively and requesting co-branding of work. For example, Copal Partners (1,200 employees) with offices, among others, in Delhi, Beijing and Buenos Aires has recently signed an agreement with Société Générale Private Bank where they will do research with reports co-branded with the Bank’s name and Copal’s.

Copal Partners (1,200 employees) with offices, among others, in Delhi, Beijing and Buenos Aires has recently signed an agreement with Société Générale Private Bank where they will do research with reports co-branded with the Bank’s name and Copal’s.
Edmond Sassine and Pierrick Morier

Furthermore, some asset managers and in particular the ones specializing in emerging markets, outsource many front office functions such as intermediation to local counterparties. Connections and an in-depth understanding of local politics lead to the need for such functions to stay at the place of business and not in London or NY, where the funds are being ultimately managed. What’s most interesting is that these functions, in their vast majority are outsourced at no retainers, no fixed costs whatsoever; the model is a pure success fee one.

The recent turmoil on Wall Street has led to major cost cutting initiatives in London and New York, shedding thousands of talent from their investment banking units. The latest cuts announced by top banks this year are almost 60,000. Crisis or not, companies still need the work to be done, but at a much lower cost, which has been reinforcing the trend for work being shipped to offshore centers.

More and more freelancers or solopreneurs are lately targeting; taking mandates that would once be handled by professional firms in a traditional fixed cost employment model and turning these mandates into a purely variably priced one.. Such assignments can range from marketing to business plan writing and both individuals and boutiques supply their qualifications and bid for this work.
Edmond Sassine and Pierrick Morier

Nevertheless, cheaper and more efficient as these centers may be, in the very turbulent and volatile current environment we live in, they still do not address the callings for such functions to be of zero fixed cost to employers. This essentially is what more and more freelancers or solopreneurs are lately targeting; taking mandates that would once be handled by professional firms in a traditional fixed cost employment model and turning these mandates into a purely variably priced one.. Such assignments can range from marketing to business plan writing and both individuals and boutiques supply their qualifications and bid for this work. Specific online ventures have thus emerged to address the need to connect mandates and analyst, in which the latter get to see one another’s pricing in a transparent auction, which makes bids more competitive and lower the total project cost for the client. Interest in such services is being driven mainly by small companies or ex-IB bankers keen to take advantage of their ‘free time’ and their comparatively low cost expertise. While lower costs might imply lower quality, the work performed is generally of high standard (as the name and reputation of the author/provider is now on the frontline), the only thing missing being the official “big bank” stamp, which often makes 90% of the price paid by clients.

Lastly, in an economy where grueling hours are the norm, bonuses are fading away and job insecurity is becoming standard, the cost of opportunity has touched such low levels that many bankers from bulge brackets firms are finally feeling the motivation to work for themselves, to achieve a better work-life balance and definitely a more interesting risk-reward profile.

Edmond Sassine , Pierrick Morier , November 2011

Article also available in : English EN | français FR

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