How JPMorgan’s PE recruitment crackdown could affect junior bankers

Now, JPMorgan is imposing new rules on those employees who choose to participate.

“We understand that the practice of interviewing and accepting a role at another firm has accelerated and is happening even earlier in your career with us,” JPMorgan wrote to new bankers in a communication shared by Litquidity’s Instagram account and others on social media. week. (A person familiar with the message confirmed its authenticity to BI.)

“This puts undue pressure on you and also puts us in a difficult position,” the bank continued, adding: “We cannot take on client business where there may be a conflict of interest. If you accept an offer of future employment, you are required to disclose this acceptance to your manager immediately. This could affect the projects for which you are employed so that the firm can properly manage any potential conflicts.

Finally, the firm added: Accepting a job with a PE firm while retaining banking jobs “may result in us reconsidering your employment status.”

JPMorgan’s message has become the talk of Wall Street as everyone from recruiters to junior bankers try to figure out what it could mean for them. According to one of the top buy-side recruiters, the bank’s ominous assertion about the potential sacking of bankers who took futures contracts risks plunging the private equity recruiting machine into chaos. It could also increase the hiring appeal of boutique banks, one former junior banker suggested.

Here are 4 ways JPMorgan’s missive could impact Wall Street, from recruiting private equity to junior bankers fearing job losses and more.

Bankers with jobs in PE are in a difficult situation

The bank’s message about mitigating and preventing conflicts of interest seems sensible enough. It is simply asking workers with future job offers to do the ethical thing and disclose them to avoid actual or potential conflicts of interest. But JPMorgan’s warning that the pitch could be fired leaves junior bankers in a damned-if-damned scenario.

“It puts you in a very bad position if you’re a junior banker who has accepted a buyout offer,” said Anthony Keizner, co-founder of Wall Street search firm Odyssey Search Partners, adding: “If you’re a young banker who just oncycle, are you trying not to tell the bank?”

Bankers who are fired also risk losing private equity job offers. These offers are usually offered with the expectation that you have two years of training and transaction experience at an investment bank.

“There’s a reason why PE jobs are backdated, because of firm capacity, planning and pipeline needs — but also because they want you to be trained and have business experience before you come in,” Keizner said.

The suggestion that junior bankers could be fired for disclosing their future private equity jobs could encourage the opposite of transparency, he said.

“We’re more likely to bury those issues or make someone less responsive,” Keizner said. “I think this seems to be causing more confusion and concern than clarifying or allaying any fears.”

This could be the “nail in the coffin” for cycle recruitment

The first wave of private equity recruitment is known as the “oncycle” and has become increasingly chaotic and stressful for junior bankers as firms start the process earlier each year. The oncycle recruitment process started so early (took place in June of this year) that buyout firms often hire candidates with zero deal experience. In some cases, it drives away the novice bankersas previously reported by BI.

“There has been pressure on oncycle and I think this will further weaken its importance because of the effect it will have on anxious bankers who have enough to do in their days without having to worry about potential legal implications and job cuts by their banks. Keizner said.

“I think probably the biggest impact will be on current bankers and potential bankers,” he said. “It uncovers issues that relate to this oncycle process, and frankly, this email is potentially another nail in the oncycle coffin.”

“I think it will make candidates even more reluctant to interview for roles in such a lengthy manner and make them more likely to say, ‘I don’t know where this is going, but this sounds like a legal and employment mess, so I’m going to keep my head down, do my first year and then I’ll look for opportunities for an early start or an immediate start.”

Other banks are likely to follow JPMorgan’s lead if they haven’t already

As exemplified by collective practice mandates to return to the office In the wake of the COVID-19 pandemic, Wall Street tends to move in packs when it comes to employee policies. So the impact of JPMorgan’s missive will also depend on whether others follow suit.

“We haven’t seen any other banks come up with anything this clear,” Keizner said. “It will be interesting to see if other banks follow suit or if this is really just a JPMorgan thing.”

A spokesman for Goldman Sachs told BI that the firm has had a policy similar to JPMorgan’s for more than a decade, requiring analysts to disclose future job offers. A Citigroup spokesman said the bank does not have a policy similar to JPMorgan’s. Spokesmen for other banks, including Morgan Stanley, Bank of America, Deutsche Bank and Barclays, either did not respond or declined requests for comment on their respective policies.

Boutique banks could become even more attractive

Boutique banks have become more and more attractive place for junior talent — and JPMorgan’s potential new policy could give them another leg up.

A former junior investment banker who started working in private equity this year said smaller boutique banks tend to be more accepting of their young talent participating in buy-side recruiting.

“Brackets bulges I’m so backwards with this stuff,” this person said. “I can get the compliance and conflict aspect, but it’s not that big of a deal.”

They added that at the boutique they worked at in New York, senior staff actively supported them when analysts went for private equity interviews and land deals.

“They actively want their analysts to go client-side, because analysts are basically the clients of tomorrow,” they said.

They added: “I would put this in the bucket with the back thinking that the seniors at these firms have. It’s all power and ego.”

Do you work on Wall Street? Contact these reporters. Emmalyse Brownstein can be reached by email at [email protected] or the encrypted application Signal at 305-857-5516. Reed Alexander can be reached by email at [email protected] or the encrypted SMS/App Signal at 561-247-5758.