Finance & economics | Financial careers

Go east, young moneyman

Ever more jobs in finance are migrating to growth markets, particularly in Asia

|HONG KONG AND NEW YORK

“A LOT of my friends are going to Asia and Latin America to do their internships,” says Ben Zhang, a student at the University of Chicago's Booth School of Business who will do his in Hong Kong with Morgan Stanley. “It may be outside their comfort zone, but they see getting some experience there as helpful, since that's where many of the jobs will be.”

The percentage of business-school graduates choosing finance as a career has dipped only slightly since the crisis, no doubt largely because pay in the industry has held up remarkably (some would say obscenely) well. But within the industry career priorities are changing, at least when it comes to location. Talent and transactions are migrating from London and New York to faster-growing markets, particularly in Asia. Though some headhunters predict indigestion in Hong Kong, Singapore and Shanghai this year after an overzealous bout of hiring, most are bullish on the region's long-term prospects.

This eastward march has grown more pronounced since the crisis. According to Sheffield Haworth, a recruiting firm, 31% of financial firms' external hires in Asia in 2010 transferred from Britain or America, compared with 8% the year before. The shift is also visible on eFinancialCareers, a leading recruitment website for the industry. Asian cities have climbed up the list of most popular destinations for applicants based in America and Britain (see table)—though that is partly the result of collapsing interest in the United Arab Emirates following the property bust in Dubai. Though not a top-three destination, Latin America is on the up, too. Fund managers in Brazil report a big increase in applications from American MBA graduates.

Many new recruits still want to spend their first few years in London or New York to “plug into [their firm's] global network”, says Constance Melrose of eFinancialCareers. But several business-school career advisers and bank campus-recruiters interviewed by The Economist say that a growing number seem willing to bypass this phase and go straight to markets they see as being the future. This is especially true of graduates with cultural links to those countries and of Westerners with relevant language skills, says Julie Morton, head of career services at Booth.

Banks are encouraging this trend. Under its Growth Markets Opportunity Programme, Goldman Sachs hires Asians and Latin Americans with MBAs from Western schools, puts them in New York or London for just one year, and whisks them off to more permanent positions in China, Brazil and so on. The firm is also trying to strengthen its links to local business schools: Goldman's global head of campus recruiting for banking, Sandra Hurse, spent most of the past month in Asia.

The allure of emerging markets is not just based on superior growth rates. Graduates see mature markets as saturated and emerging ones as offering greater job stability (Hong Kong and Singapore saw relatively few lay-offs in the crisis). Michael Malone, a career adviser at Columbia Business School, says some students think they will have a better chance of standing out and getting promoted in Shanghai or Mumbai than in New York. Another issue is visas: with Britain and America having grown less welcoming, foreigners are tempted to look elsewhere—though Singapore, too, has tightened restrictions a bit.

Then there is tax. Someone earning a base salary of $400,000 gets to keep 85% of it in Hong Kong or Singapore, versus 55% in London. Pre-tax pay packages are still higher on average in the West but the gap has narrowed. Factor in the tax advantage in Asia and you can end up earning significantly more there in many positions, says Tim Sheffield, the head of Sheffield Haworth. (This is no help to Americans, however, who pay similar amounts of tax wherever they live under America's tax-equalisation rules.)

Regulation matters, too. This week's Vickers commission report calmed fears that British universal banks would be forcibly broken up. But the political pressures on pay and other forms of bank-bashing in Britain and, to a lesser extent, America are driving some financiers overseas. Almost two-thirds of London-based bankers polled by Sheffield Haworth said they were willing to move to a more tax- and regulation-friendly environment. Asian countries, which have kept regulation fairly stable, are only too happy to exploit this competitive advantage. Their efforts may help to accelerate a nascent trend: international banks moving global divisional heads, and in HSBC's case its chief executive, eastward.

London and New York are hardly spent forces. Each remains the other's favourite destination for job applicants. Even in horrible years, they can be sure of seeing lots of business. The stigma attached to banking is fading: in 2010, 17% of finance students polled felt awkward telling friends they wanted to work in the City, compared with 35% the year before. When it comes to quality of life, London and New York still have huge appeal for the young, the single and the binge-drinking.

But for bankers with families, Asia has the big advantage of cheap domestic help. “For the same as a day's taxi fares in London you can employ a nanny or cook for a month,” says one recruiter—though this is truer of Mumbai than Hong Kong. Singapore has good schools, infrastructure and weather, and lovely golf courses to boot. London-based investment bankers polled by Astbury Marsden, another recruitment firm, said they would rather work in Singapore than any other financial centre. London came second, Hong Kong third and New York a poor fourth.

For all the increased interest in working in Asia, demand for qualified labour exceeds supply. In February HSBC revealed that its top bankers in the region received 40% higher bonuses last year than their counterparts in London because, as its boss said, Asia “is where the pressure is” on pay. UBS's regional head has given warning that its profit margins there could be depressed for “a year or two” amid fierce competition for talent.

Demand is up not only from global banks but also from new entrants and regional players, such as Jeffries and Samsung Securities. Chinese banks are starting to poach. Some of these firms are dangling guaranteed cash bonuses in front of prospective hires, say headhunters in Asia. According to Ying Tao, a Chinese-born Harvard MBA student who has a job lined up at a hedge fund in London: “When I started looking for a job, a common reply was ‘We don't have anything in London but how about Hong Kong?' They seemed desperate for qualified people out there.”

Some wonder if the region's job market is ripe for a correction. One headhunter sees signs of a “herd mentality” encouraging “overbidding” and predicts that some firms' planned hiring expansions for the year won't be completed, especially since business was disappointing in the first quarter. Competition could recede as upstarts retreat. A few dare to suggest that Asia could become a lot less attractive if China's economy sputters (see Economics focus). But it will take quite some bust in the east to shake the general belief that that's where the industry's future lies. The London bankers in the Astbury Marsden survey were asked which financial centre they expected to be the world's biggest in ten years' time. Nearly four-fifths picked one in Asia.

This article appeared in the Finance & economics section of the print edition under the headline "Go east, young moneyman"

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