Relocation, relocation, relocation
As traditional markets stagnate, Ben Wright looks at the overseas postings well worth banking on
Banks have never been shy of firing staff at the merest whiff of a downturn. First the fat, then the muscle and finally the bone. In the past, cuts have been so deep that firms have found it hard to benefit when the markets rebounded, paying over the odds to restaff at speed. Such wild oscillations in staffing numbers are known as “doing a Merrill”.
There have been staff cuts during this crisis. Citigroup cut 11,000 employees worldwide in the first half of 2008 but, equally, banks have been a little bit more savvy about managing their resources, moving their pieces around the board rather than sweeping whole phalanxes of staff off the table. Asia and the Middle East have risen up the agenda of most investment banks’ priorities as business has slowed to a trickle in the industry’s traditional heartlands of London and New York.
JP Morgan recruited close to 1,700 staff in the Asia-Pacific region last year, while Barclays Capital plans to strengthen its workforce by 40% in the region, equivalent to about 1,500 people in the next couple of years.
High-profile appointments have highlighted the changing global investment banking landscape. Early last year, Vikram Gandhi, head of Credit Suisse’s financial institutions group, relocated to Hong Kong from New York. It was the first time the Swiss bank had based a global business head outside the US or Europe. Also in 2008, David Law, formerly head of financial sponsors at Morgan Stanley, relocated to Dubai to run the bank’s Middle East business.
The redeployment strategy is often summed up as “Shanghai, Mumbai, Dubai or goodbye”. But, although the phrase is pithy, the truth is more nuanced.
Most investment banks still only have small offices in Shanghai, and most staff are locals who know the language and culture and have the necessary contacts in the country. Most western banks still cover the region from Hong Kong. Nevertheless, headhunters in Shanghai report that financial services firms are scrambling to recruit top-quality bankers who may have been laid off by troubled Wall Street firms.
The recently opened Shanghai World Financial Center, a 101-storey skyscraper, proudly proclaims the city’s ambitions to recapture the glory of the 1930s, when western banks were nestled along the famous Bund area next to the Huangpu River.
Dubai, also no stranger to Freudian town planning, is increasingly looking like a busted flush, at least for the time being, but it is far from being the only show in the region. The city has almost become synonymous with the Gulf region in the minds of many other bankers, but it is not even a country in its own right. Rather, it is one of seven emirates that make up the United Arab Emirates, of which Abu Dhabi is the capital and beginning to emerge from long shadows cast by the skyscrapers located in its more brash neighbour down the road.
According to the cognoscenti, Bahrain, Qatar and, for those who can cope, Saudi Arabia, arguably offer more interesting options for those working in some sectors.
Matthew Taylor, international director of recruitment consultancy Macdonald & Company, said: “People are coming to the conclusion that Dubai is a bit of a house of cards and that the real regional power resides in Abu Dhabi and, to an even greater extent, Saudi Arabia. The latter is clearly not an easy posting. A year ago you couldn’t pay people enough to move there; now, out of desperation, they are prepared to move there and take a drop in salary.”
Mumbai is still a growing market, but one bankers have, on the whole, been reluctant to relocate to. That may well be about to change. Moscow and São Paulo have also seen their fair share of bankers turning up with suitcases.
Deciding whether to relocate is always a delicate equation of weighing up the various pros and cons. But with capital markets activity grinding to a halt in most of the largest financial markets, the decision has been made a lot easier. This has been counterbalanced by a reduction in perks bankers can expect to enjoy if they move abroad, according to headhunters.
In the past, a foreign posting was a means to bolster a CV and to gain wider experience, but expatriate packages also helped pad out bankers’ remuneration packages, according to one recruitment consultant.
Many banks paid for the accommodation of the staff they posted abroad and some even stumped up for school fees. This allowed bankers to rent out their primary residence and effectively pay off their mortgage for free. However, expat packages, where they are being offered at all, are now far less generous. The main considerations for most bankers are holding on to their jobs and going where there are deals to be done.
Taylor said: “A year ago we were certainly struggling with candidates that had unrealistic expectations and were expecting, for example, to be able to double their salary if they moved to Dubai, even on top of the fact that they wouldn’t have to pay tax. Now the market has gone from being candidate-driven to being company-driven, and candidates aren’t taking a view on salary; they are moving out of necessity.”
Western bankers who are reluctant to twiddle their thumbs indefinitely will want to be where there is at least some action. One investment banker at a Middle Eastern brokerage firm said: “The speed with which people have gone from demanding $5m (€3.7m) to work in an emerging market for a local firm to being prepared to work for food would be funny if it weren’t so sad.”
However, those considering, or being asked to consider, a move still need to weigh up the full implications of relocating to a foreign country. Taylor said: “The key thing that we stress to companies who are recruiting from abroad and to individuals who are looking to relocate is that both sides need to do whatever they can to mitigate any surprises.
“There are people who will agree to move on the basis of a couple of telephone interviews. I think that is absolutely crazy for such a life-changing decision.”
The decision to relocate is, of course, more complicated for bankers who are married and have children. While the opportunity to broaden children’s horizons and expose them to different cultures is a positive motivating factor, schooling and safety are also serious considerations.
Moving to Hong Kong, a former British colony with a very well-established expatriate infrastructure, is clearly a different proposition to establishing a home in Moscow or Mumbai. Most international cities are a bit of a melting pot nowadays, but people who move to them still need to be open-minded. The things that tend to grate with residents most would not even occur to them before they moved. For example, the number one complaint of expats based in Shanghai, Dubai and Mumbai is the volume of traffic and the poor standard of driving in their adopted homes.
Schooling and the cost of living tend to be the primary concerns of bankers moving to new cities. UK bankers relocating to mainland Europe or to a country whose currency is pegged to the dollar (this includes the Indian rupee and most Gulf currencies) have the added disadvantage of sterling’s weakness to consider. Also, many people incorrectly assume that moving to an emerging market will mean low costs of living. Half an hour in a Moscow or Dubai bar should disabuse them of that notion.
One banker in the region said: “Very few people who move out to Dubai understand how expensive it is. The cost of living is also extremely high: £40,000 (€44,817) to £50,000 a year in rent for a three-bedroom villa. Now that a lot of air has come out of the property bubble, rental rates might come down a bit, but not a lot.”
Recruitment professionals advise bankers to be pragmatic, realistic and adaptable. Relocation may increasingly be driven by necessity rather than lifestyle choices or career progression, but that does not mean it cannot be a thoroughly enjoyable and beneficial experience.
One British banker who has been working for a local firm in Dubai for the past year said: “It is sunny every day and you don’t have to pay any tax. With those two things on the pros side of the ledger, you can put up with quite a lot on the cons side.”
This article appears in Brummell, Financial News’ lifestyle magazine, out today. To view a digital edition, visit www.brummellmagazine.com
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