by Brian DeChesare Comments (8)

2019 Financial Job Outlook: What to Expect Based on My “Time Portfolio”

2019 Financial Job Outlook

We get a lot of questions about the “outlook” for various jobs in the finance industry.

Will Job X be around in 10 years?

What about Job Y? Will it continue to pay high salaries and bonuses in 30 years?

But no one knows what will happen that far into the future, and if someone claims to have a clue, that person is lying.

However, you can get a sense of what people think in the near term by reviewing the actions of market participants: how do companies that serve customers in the industry spend their time and their money?

In this case, I am a “market participant” because I create and sell courses and guides geared toward finance jobs.

If I’ve been spending a lot of time and money in a certain area, you might conclude that I’m optimistic about its future.

And if I haven’t, you might conclude that I’m less optimistic, or that the area in question is less popular to begin with.

Here goes:

My “Time Portfolio”

I do not spend that much money directly on content creation. Most of my business spending is in areas like support, web design and development, advertising, and web services.

However, I do spend at least 1,000 to 1,500 hours of my time each year – and often more than that – on course creation.

Here’s where I allocated this time over the past three years (2016 – 2018):

Time Portfolio = Market View (“Financial Job Outlook”) + Personal Circumstances

If your financial portfolio reflects your view of the financial markets and your personal circumstances, then your “time portfolio” reflects something similar – but in a different market.

The time allocations above roughly reflect my views of the finance job market, but they’re not a 1:1 match.

For example, I didn’t spend time revamping the Bank Modeling course because I think that FIG is a great, high-growth market; I did it because the old version needed updates, and I felt it was worth updating rather than discontinuing.

Also, I did not create completely new courses in the past few years (Restructuring, Infrastructure, Venture Capital, etc.) not because I think those industries are “bad,” but because:

  1. We already have a ton of content to support and maintain, and I’m skeptical of my ability to handle even more, especially in areas I would have to learn from scratch.
  2. Based on the data, I don’t think these additions would boost net sales by more than ~10%. That translates into ~3-4% in additional after-tax profits, which is not enough to motivate me more than 12 years into this business.

Now, to my market view. My thinking around the future of finance jobs is:

“The more complex and customized the deals, and the more relationship-oriented the field, the less likely it is to be automated or displaced, and, therefore, the better its prospects.”

Let’s go through the main industries covered on this site and look at both near-term and possible long-term changes.

With each one, I’ll consider market size/growth, past performance and returns, and vulnerability to automation and technological disruption.

And for fun, I’ll throw in technology jobs at the end as well:

Investment Banking

Companies have been raising capital for centuries and will continue to raise capital going forward, so I don’t think investment banking is going anywhere.

I don’t see a ton of upside to the field, but there’s also relatively little downside. Something fundamental about the economy and financial markets would have to change for IB to go away.

That’s possible, but it’s more likely on a 100-year time frame rather than a 20-year one.

Elements of the deal process will be automated, but the industry is still based on human relationships – so I doubt AI will take over unless robots kill and replace all humans (which I don’t think will ever happen).

At the same time, I’m not super-optimistic about IB because hiring is cyclical and companies tend do fewer deals when there’s a recession or market crash – both of which are likely in the next few years. So:

  • Near-Term Outlook: Neutral to slightly negative (anticipated market downturn).
  • Long-Term Outlook: Neutral to slightly positive.

Private Equity

Private equity and investment banking tend to move together, so my views are similar here: the typical PE deal does not lend itself to “automation,” so I don’t a whole lot changing.

Instead, the main problem is that Limited Partners such as pension funds and endowments will keep funding PE firms only if they beat, or at least keep pace with, the public equity markets.

It’s difficult to answer whether or not they’ve been doing this because it depends on the time frame and how you calculate “returns.”

IRR isn’t straightforward at the fund level because of unrealized gains and losses and the timing of contributions.

Based on Preqin data and a WSJ examination last year, the answer is “yes, sort of, with caveats” – and returns have declined over time, especially if you compare pre-2008 and post-2008 funds.

That said, private equity is not at serious risk of displacement, and LPs are likely to keep investing as long as returns stay decent (i.e., they do not greatly underperform the public markets).

  • Near-Term Outlook: Slightly negative (downturn will make exits more difficult).
  • Long-Term Outlook: Neutral to slightly positive.

Hedge Funds & Asset Management

Now we move into more negative territory. The data on the number of startup hedge funds tells the story here quite well:

2019 Financial Job Outlook: What to Expect Based on My “Time Portfolio”

The number of new hedge funds has plummeted, management and incentive fees are down, and the average hedge fund has greatly under-performed the S&P since 2009.

Some of this is due to the rise of passive investing and quant funds (though quant fund returns also haven’t been great), and some of it is due to quantitative easing distorting the markets.

But there’s a simpler explanation as well: the financial markets have become more efficient over time, and some of the most famous PMs (Paulson, Ackman, Einhorn) earned their reputations on a few great years a long time ago.

Even Warren Buffett’s recent performance hasn’t been great.

This is one reason why many funds have been moving into private equity-style investing and away from pure public-markets investments.

But it’s not all bad news – strategies that are more “deal-oriented,” such as distressed and other credit variants, might still attract LP attention and perform decently.

Also, the anticipated end of QE and the potential deflation of the passive investing bubble might help certain funds.

And there will always be mispriced assets; it’s just that as a fund grows bigger, it gets harder to identify bigger mispriced assets.

  • Near-Term Outlook: Negative.
  • Long-Term Outlook: Slightly negative.

Sales & Trading

A decade or two ago, if you weren’t sure what you wanted to do in finance, you could have made a good case for either sales & trading or investment banking.

Now, though, it’s harder to be enthusiastic about S&T because so much of it has been automated and/or “merged” with programming and data science.

Desks such as rates trading and ones that deal with more complex products, like exotics and distressed debt, have held up, but areas like cash equities trading haven’t fared so well.

So… this one comes down to your goals.

If you’re interested in the programming/automation angle or more complex products, S&T could still be a good field. Otherwise, I wouldn’t recommend it.

  • Near-Term Outlook: Slightly negative (automation, but also higher market volatility).
  • Long-Term Outlook: Slightly negative.

Equity Research

MiFID II has completely changed the business model here by requiring buy-side firms to pay for their research directly, which makes it harder to maintain large ER teams and justify their compensation.

So far, MiFID II is Europe-only, but firms everywhere will be affected because they have to compete globally.

The results so far aren’t great for either the established firms or the independents.

The other issue is that the end customers of equity research – hedge funds and asset managers – are also not doing well (see above), so they’ll have even less to spend on research.

The top Research Analysts still provide value because of their relationships and access to management teams and investors, and I don’t see that going away.

However, I also don’t think that ER is a great long-term career choice anymore.

It’s fine to start out in research and stay there for a few years to develop your network and skill set, but I wouldn’t recommend going beyond that.

  • Near-Term Outlook: Negative (MiFID II).
  • Long-Term Outlook: Negative.

Venture Capital

Venture capital is different from everything else here because it’s much longer-term, which means you can’t judge the success or failure of a deal for 10-20 years in some cases.

It took Harmonix, the company behind Guitar Hero, 11 years to be acquired by MTV!

Of course, most VCs underperform the market and many of their reported “returns” are actually unrealized gains.

If you compare venture capital to private equity, VC is a far more hit-driven business, with the big winners and the top few firms generating a disproportionate share of the total returns.

VC is even less likely to be automated than PE because there is limited data to work with, so algorithms can’t “predict” whether or not a startup will succeed based on past trends.

So, all things considered, I’m more positive on this sector.

You could easily work at a VC fund, claim you’re doing something complicated, say that the returns are coming but require more time… and then repeat that each year and collect cash along the way.

  • Near-Term Outlook: Neutral to slightly negative (expected downturn in the private startup market).
  • Long-Term Outlook: Slightly positive.

Corporate Development

As with the other transaction-related fields above, corporate development has good prospects because:

  • It’s unlikely to be automated because deals here, especially for joint ventures, are even more complex to negotiate and structure than M&A deals.
  • Companies are increasingly building their own corporate development teams to do deals without bankers, especially in sectors like technology.
  • Even if the financial markets crash, credit dries up, or M&A becomes less viable, corporate development professionals can still work on JV deals, partnerships, or divestitures.

In the near term, prospects may not be so great because of the negative factors above.

In the long-term, though, everything else will help.

The main issue is simply that it’s a relatively small industry, with few openings at most companies and low turnover, so gaining access to the right roles will still be challenging.

  • Near-Term Outlook: Neutral to slightly positive.
  • Long-Term Outlook: Slightly positive.

Corporate Finance

I’m less bullish about corporate finance.

First off, corporate finance is a “support role” for most companies, so it’s easier to justify cuts in a recession.

If you look at the three major areas of the corporate finance career path – FP&A, Controllership, and Treasury – a good number of tasks could be automated across all of those.

For example, with the right technologies, companies could employ fewer accountants to review the books; judgment and human intuition are required, but less so than in corporate development when negotiating a complex deal (for example).

I don’t think Managers and CFOs will be replaced because people still need to make decisions, but I expect that companies will do less hiring.

Another negative factor is that some companies previously known for top corporate finance programs, such as General Electric, seem to be… troubled, to say the least.

I don’t think corporate finance will go away, but in the long term, there will likely be fewer junior-level roles.

  • Near-Term Outlook: Neutral.
  • Long-Term Outlook: Neutral to slightly negative.

Commercial Real Estate

Many people seem to think that real estate jobs will be displaced and automated, but I’m far more skeptical.

Yes, there are many crowdfunding platforms, data gathering sites, and other startups looking to disrupt the market, but in most cases, I think these companies will be additive/complementary to what real estate professionals already do.

Many engineers think that decision-making about properties boils down to math and logic, but they overlook the human/emotional element as well as issues such as asymmetric information that cannot be solved with an algorithm.

Also, real estate is one of the oldest asset classes, dating back thousands of years, which is usually a sign that it will continue to exist for a long time to come (vs., say, hedge funds, which are very new by comparison).

If central banks attempt to induce massive inflation to deal with the looming debt crisis, real estate also serves as a hedge.

As with some of the other industries, I would argue that certain sectors – such as real estate private equity firms that focus on complex or distressed deals – are in better shape than others, such as real estate brokerage.

On the whole, though, I’m fairly optimistic about the field, though it may not do so well in the near term due to the property price decline that has already begun in places like San Francisco.

  • Near-Term Outlook: Neutral to slightly negative.
  • Long-Term Outlook: Positive.

Private Wealth Management & Private Banking

I don’t have a strong view here because I don’t follow private wealth management and private banking closely.

On the one hand, these fields should do well because the rich keep getting richer, which leads to more assets under management by these firms.

On the other hand, similar to other markets-based roles, it’s difficult for human advisers to beat passive investing and quantitative strategies consistently and at a lower cost.

One trend here is the rise of family offices and other boutique firms; similar to the elite boutique vs. bulge bracket divide in investment banking, they are likely to take more and more market share away from the large banks (and they’re even making an impact in private equity!).

So… I would rate this one as “neutral,” with some positive trends and some negative ones, and “change” as a more likely scenario than growth or decline.

  • Near-Term Outlook: Neutral.
  • Long-Term Outlook: Neutral to slightly negative.

Big 4 Valuation & Transaction Advisory Services

I don’t have strong views here because I don’t track Big 4 firms closely. Also, it’s difficult to make a universal statement because Big 4 firms do everything from audit/accounting to tax planning to valuation and transaction advisory work (and more).

But if we limit this outlook to just the deal-related areas, I’m slightly negative.

The work in these transaction teams (except for the ones that execute deals from start to finish) is more about supporting deals rather than originating them, which means it’s less dependent on relationships – and, therefore, more vulnerable to disruption.

I don’t think Big 4 firms are in dire straits, but I also don’t think it’s a high-growth area going forward.

  • Near-Term Outlook: Neutral to slightly negative.
  • Long-Term Outlook: Neutral to slightly negative.

Technology – Sales, Programming, Data Science, and Product Management

And now we arrive at the field that many bankers have been flocking to… at least, up until the past few years.

Overall, I’m fairly positive on most of these roles for the reasons that everyone else has already stated: all companies are becoming tech companies, software is eating the world, and coding will be the new literacy of the 21st century.

In terms of specific jobs, I am always bullish about sales because if you can sell effectively, you will do well no matter what industry you’re in.

You don’t need Ivy League credentials or a bunch of useless papers to get in, and most technical people do not understand the sales/marketing process at all.

I’m more negative on product management because it’s often difficult to point to specific results there, and many friends and acquaintances in PM roles have not done well in terms of advancement or stability.

I expect the tech startup market to take a hit over the next few years, so you may not necessarily want to go for these roles at tech companies.

But since all industries are becoming software-driven, you could find plenty of other opportunities even if startups and FAANG companies decline.

  • Near-Term Outlook: Neutral to slightly positive.
  • Long-Term Outlook: Positive.

My “Time Portfolio”: Plans for This Year and Beyond

So, based on all that, what does my “time portfolio” look like for this year and beyond?

First, I doubt that we’ll ever create a product specifically for equity research, hedge funds/asset management, or sales & trading.

The opportunity is too small, these markets are shrinking, and I prefer to create sample stock pitches and research reports and make them a part of existing courses, as I’ve been doing.

We might do something for private equity or venture capital in the future, especially since I already have a lot of the content, but I doubt it will happen this year.

And although I’m optimistic about real estate, I’ve already spent over a year re-doing the entire course and creating a new version, and that’s enough for now.

I’m positive about the technology sector, but I’m not in a position to release a course on data science or programming since I haven’t done serious programming in over a decade.

Also, there are many, many courses already out there on these topics, and it’s not clear how I would differentiate.

So, my plan is to continue simplifying, streamlining, and improving what we already have – in particular, the core Excel & Fundamentals modules, which are too complicated and time-consuming currently.

They have wide applicability to almost all the fields above, so I’m also “diversifying” and not betting on one specific sector by doing this.

Past that, I’ll turn my attention to the remaining courses that need updates/revisions, but given that they’re also the least popular ones, it’s not going to be a 2,000-hour effort.

Up Next

I’ll share the Bull Case and Bear Case for the economy and financial markets and, in a separate article, discuss expected changes in recruiting.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Avatar
    Jason Chen

    Hey, what about risk management and compliance?

    1. We consider those middle-office roles, so do not follow them or have a strong view on them. Maybe ask on the Bionic Turtle forums (https://www.bionicturtle.com/forum/forums/after-the-frm-careers-other-exams-eg-cfa.14/).

      My quick take would be that they should have reasonably good outlooks since banks are becoming more and more heavily regulated. Automation is a concern, though, especially since most “risk management” is quite basic. So… middle of the road, maybe.

  2. Hi Brian, do you have an opinion on Corporate Banking – be it commercial or large corporate?

    1. Good question, I forgot about that one. I think corporate banking will be similar to investment banking, at least for large corporates, for the same reason: it’s dependent on relationships, and it includes a wide variety of services, some of which require human judgment. Commercial banking will probably come under more pressure because at that scale, services are easier to automate.

  3. Hey, thanks for the article. Would your outlook on ECM/DCM be more similar to the IB or S&T outlook you have provided?

    1. More similar to IB. Large capital raises are dependent on relationships between the salesforce and institutional investors, and bankers and management, so while they’re easier to negotiate and execute than (some) M&A, they’re more difficult to automate than something like cash equities trading.

  4. Hey Brian, been following the site for a long time. I am a senior at a nontarget and was unable to secure a full-time offer but have decent internship experience (IB and two PE). I want to switch my focus to regional boutique investment banks but am unsure how to start. How should I go about recruiting for unstructured processes?

    1. I would read this article and follow the same set of steps and templates this reader used, maybe swapping in boutique banks for the PE firms he focused on:

      https://www.mergersandinquisitions.com/private-equity-internship-to-investment-banking-networking/

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