The financial crisis has had a number of damaging effects throughout the global marketplace, but perhaps nowhere so dramatically as at the epicenter of Wall Street itself, where firms’ top talent is leaving for greener pastures, reports the New York Times. The hurt suffered at many top financial firms, coupled with more stringent regulations and compensation requirements as dictated by the government, has sparked a “brain drain” of Wall Street’s top thinkers and analysts.
Bankers and their brethren are increasingly leaving behind the former megastars of the financial landscape in favor of smaller, nimbler companies that don’t have to contend with the bureaucracies—either internal or external—that now malign many Wall Street firms. These include boutique firms, start-ups, and foreign companies that don’t have to deal with strict U.S. regulations.
Wall Street recruiters are of course apprehensive about this shift, arguing that the loss of qualified managers could make it difficult to rebound from the recession. Head counts at the world’s largest 12 investment banks were cut by about a fifth in 2008, according to consulting firm Oliver Wyman.
Others argue that the exodus may in fact be a disguised blessing, as it will allow for a healthy renewal of investment bank personnel. As managers and analysts move to smaller firms, it will have the effect of diluting the risk potential, says Matthew Richardson, finance professor at NYU’s Stern School of Business.
“If the risk-taking spreads out to these smaller institutions, it is no longer a systemic threat,” says Richardson. “And innovation is spreading out, too. This is a good thing.”