As the titans of Wall Street banks gathered to network, gossip and consider the future of their beleaguered industry in Davos, Switzerland, during the past week, one common worry emerged: who is going to take over when we leave?
Some of the most ambitious minds in finance are leaving the industry after years of losses, scandals, bad press – and perhaps most importantly, new regulations that have curbed some previously free-wheeling ways.
The issue, executives say, is not pay, but how much scope there is to innovate and build businesses, which is why more bankers and traders are leaving the big Wall Street firms for Silicon Valley, joining private investment partnerships like hedge funds and private equity funds, or going into energy and other industries.
David Boehmer, head of financial services in the Americas for the recruiting firm Heidrick & Struggles, said he hears this message from Wall Street employees looking to leave the industry.
"I get people saying, 'I'm bored and I need to do something about it – this isn't a challenge anymore,'" he said.
The problem is particularly acute for big banks such as Goldman Sachs Group Inc or JPMorgan Chase & Co, several senior bank chief executives, managers and consultants told Reuters in interviews at the World Economic Forum in Davos.
"There is a massive talent drain in our business," said a senior Wall Street executive, who declined to be identified.
For some of Wall Street's harshest critics this is likely to be perceived as good news. Former U.S. Federal Reserve chairman Paul Volcker and other experts have argued for years that innovation has little place in the financial sector, and having more conservative bankers and fewer heavy risk takers running Wall Street will reduce the chances of another blow-up like the financial crisis. It will also help to increase wealth generation in more important parts of the economy, such as manufacturing and software, they argue.
The financial implosion in 2008 was partly triggered by the best and the brightest on Wall Street engineering products that helped inflate a massive housing bubble, and then magnified the losses that resulted. The financial sector globally received trillions of dollars of government support during the worst of the crisis, and new regulations are designed to ensure that bailouts are not necessary in the future.
But many of the biggest global banks have gotten only bigger, making them potentially even more dangerous to the financial system. And having talented executives who understand complicated financial products and know how to control risks will become even more important, executives say.
"It will become more of a problem five or 10 years down the road, but ultimately someone is going to have to manage these beasts," the Wall Street executive said.
It isn't difficult to find examples of the exodus from big banks.
After nearly 15 years in finance - with stints at American International Group Inc, Barclays Capital and PineBridge Investments - Jacques-Philippe Piverger left Wall Street in 2011 to launch a company called Micro Power Design Inc, which makes solar-powered lamps. Piverger's ultimate goal is to get the devices into the hands of poor people in developing countries whose access to electricity is limited.
"Isn't it cool?" he asked as one of the lamps was placed on the bar of the posh Belvedere Hotel in Davos.
Piverger was well-paid in finance but said his career had left him wanting. His startup gives him the ability to "address business and societal and environmental imperatives from under one roof," he said.
Another example is the Twitter-linked tech startup Dataminr, which is staffed by ex-employees from Wall Street firms, including Mark Dimont, who left Morgan Stanley last year to head a business development team there.
Of course, there have been previous waves of departures to hedge funds as bankers and traders have sought to strike out on their own - or to make more money - but this time the departures appear to be broader in nature.
The departure of employees may force Wall Street to consider a wider range of people for positions. Heidrick & Struggles' Boehmer gave a presentation to a group of young professionals in Davos about his biggest challenge recruiting for big banks these days: getting executives to think creatively when filling positions.
In the presentation - called "Hiring an oddball" - Boehmer described how hard it is to get bank executives to hire creative and "quirky" leaders who do not "fit in" with the prototypical suited-up Wall Street mold, but who could help revolutionize the industry.
Instead, those quirky types are sought by Silicon Valley, and they may be happier there. Many prefer the laid back atmosphere, not to mention the challenges of building a business, and the promise of lucrative rewards at companies like Google, Facebook and smaller startups, Boehmner said.
"Banks are not getting top-level talent out of universities anymore, so in 10 to 15 years, there could be a big problem when it comes to leadership at the senior level of these firms," Boehmer said. "They're seeing big gaps in talent."
Boehmner said he performed a search for a technology position at a major investment bank, calling on candidates from Silicon Valley who might be lured to New York with mega-paychecks. He was denied by everyone he approached, he said.
On the flip side, Heidrick & Struggles also did a search for a mobile-payments company on the West Coast that was looking for someone with financial expertise but offered just one-quarter of the pay. In that case, "we got tons of applicants," said Boehmer.
Jack Dunn, president and CEO of FTI Consulting, recalled a recent conversation with a friend's son who is about 35 years old and works at a major Wall Street bank.
Despite having a lucrative pay package and senior title, all the son talked about was finding an exit strategy, Dunn said.
"When I was young and didn't know any better, I would have thought it was a dream job," said Dunn, a former investment banker. "It's a problem because we're going to need someone to pick up the pieces, and a lot of the best people are leaving these firms."
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