The Crash of 2008 was the end to what I call, “the old capital markets”.

A new era is beginning, but form and detail are hidden in the mists of change. It may be a decade or so before new structures and directions are visible.

But before getting into the unpleasant chore of actually looking for a job, you should consider whether or not you even want to work in the new capital markets.

Warning: This is not a short article, but then, finding a new job is not always easy.

A different work environment

Historic events are unfolding in capital markets.

Hundreds of thousands will attempt to seek employment in a changing market. Some have been laid off as a consequence of institutional de-leveraging, bankruptcy, and the elimination of product lines.

Others, still employed, will be thrown onto the market soon enough, as the recession grinds on.

Students of finance and business, still in college, will soon be forced to consider whether to continue their current plans, marching forward to face stiff competition in smaller, perhaps less profitable financial fields, or whether it would be wise to re-direct their careers along a different path.

As the size of the market shrinks, due to de-leveraging and simplification of product lines, not everyone will find a job in “Post 2008 Wall Street”.

Hundreds of thousands unemployed in the financial sector

According to the Bureau of Economic Analysis, the number of people employed in the US finance and insurance industries peaked at 6.1 million in December 2006 and had fallen by 345,000 by January 2009.

However, many that are or will be unemployed by the contraction in the financial sector have no particular commitment to capital markets as a career path. There are many that work in human resources, building maintenance, clerical or secretarial positions, and similar “non-financial” jobs that can move to other sectors without discarding job skills or hard-earned professional credentials.

This article, however, is about those who have their educational background and job skills closely tied to financial markets and who would abandon professional qualifications by moving to a different sector of the economy.

It’s hard to say how many fall into this category, other than that it is far less than the number who will need to find new jobs as a result of contraction of the financial industry.

Financial markets may be shifting, but will not go away

Whatever the form the new capital market takes, people will continue to be gainfully employed in the field. Worldwide, the size of financial markets may even increase.

However, in certain cities, employment may be permanently reduced. College degrees that have currency in these markets will be accordingly devalued.

New York City, the traditional “Wall Street”, is an area that seems likely to be blighted for a long time. The net present value of Ivy League diplomas will suffer accordingly.

I, myself, have an Ivy League diploma that was useful decades ago in getting a first job on Wall Street. However, over the years, working in foreign markets, I found the credential to carry far less weight.

Investor confidence trumps executive bonuses

Financial centers depend upon the ability of the players to retain the trust of investors in the wider world. Success will depend upon a market’s reputation for honesty and concern for the long-term interests of investors.

Most importantly, recovery will depend on whether investors believe that their money will be safe under the guidance of financial experts of a particular financial center.

Bernard Madoff left an indelible mark on the international reputation of the US Securities and Exchange Commission. Impairment of confidence in Wall Street has been severe, worldwide, and, perhaps, permanent.

The bankruptcy of Lehman Brothers and bailouts of Bear Stearns, Citicorp, Bank of America, Merrill Lynch and other major institutions — resulting in losses in the trillions to investors in every major country — while Wall Street executives continued to pay themselves obscene bonuses — will not be easily forgotten or forgiven.

Adam Smith understood the importance of morality and good behavior to the success of capitalism. It really is not all about greed and “what’s in it for me”. That’s Hollywood, not the real world.

In the real world, the other face of immorality and greed is the permanent loss of confidence and trust of one’s clients.

It is too late now for the Harvard Business School to suddenly inaugurate courses in morality — the damage is done.

Wall Street becomes “one of many”

The Crash of 2008 will not remove New York City from the list of important financial centers.

However like many dire economic happenings that have brought down financial centers over the long course of history, the events of 2008 have removed Wall Street from the apex of the financial world, forcing the city into a lesser role as “one of many”.

London dominated world finance until World War I, when the extravagant costs of war resulted in leadership shifting to New York.

London, as a financial center, reached its nadir in the socialist governments following World War II, but has recovered since Prime Minister Thatcher and now is about on a par with New York, which is on the decline.

The prestige of Edinburgh as a financial center was severely damaged by the collapse of the Darien Company in 1700, but Edinburgh is still one of the leading European banking cities.

Rio de Janeiro, dominated the Brazilian capital market until the 1970s, when, by failing to modernize its exchange and exercise aggressive leadership, it ceded its position to Sao Paulo.

Today we have vibrant markets in Singapore, Hong Kong, and Shanghai, which were hardly considered financial centers fifty years ago.

What this means is that, once the current crisis has passed, the size of world capital markets will continue to grow to serve an expanding world economy, but that the relative importance of markets will change.

High salaries and big bonuses, mainly a Wall Street phenomenon, may give way to more modest levels of professional remuneration.

Staying employed in the post-Crash era

I   would suggest that a financial professional looking for a job in capital markets today should first seriously examine his or her commitment to this field of endeavor.

Capital markets that function as they should do great service to mankind.

• First, wise investments help people preserve their financial resources over long periods, providing them with funds in hard times and old age.
• Second, by allocating funds to the most productive use, capital markets can help to ensure high levels of employment, technological progress, and general economic well-being for entire countries.

In other words, it’s not — or shouldn’t be — all about money.

It’s about doing something worthwhile that will truly help others.

More reasonable career expectations

Bankers and stock-brokers who hung onto their jobs throughout the Great Depression, emerged chastened and more willing to toil for the common good than their successors on Wall Street today.

Although some will continue to get very rich working in financial markets, the combination of the collapse of Wall Street culture and the shift of markets elsewhere should result in lower levels of average remuneration for financial professionals.

Furthermore, companies that strive to perpetuate the pre-Crash culture working for big bonuses rather than the interests of clients are less likely to do well in post-2008 markets.

However, if you are in the profession because you want to help people and do something worthwhile for your country, and because you find the business interesting and challenging, then you are more likely to be happy in the new market.

Good works and worthwhile careers

While some on the “Old Wall Street” amassed fortunes and garnered headlines and praise, running over-leveraged hedge funds, selling toxic derivatives, and marketing sub-prime loans, others were doing truly worthy things that earned more modest rewards and less public attention.

While investment bankers and corporate executives were using the Great Stock Buyback Scam to transfer corporate funds into their own pockets, to the detriment of modest, long-term investors, there were others, working off stage, doing some remarkable things to make capital markets better.

Here are some of the worthy achievements of the “Old Wall Street”:

• Cleaning up the “back office” mess: In the 1960s and 70s, Wall Street was drowning in its own paper. Trading was still based on certificates and computerization was not resolving the problems. Thousands of operational specialists addressed the issue and today, the “back office” mess is no more.
• Implementing book-entry settlement: The cost of a stock trade today is a fraction of what it was a quarter of a century ago, thanks to the introduction of “scripless trading” and book entry settlement. Many worked behind the scenes to bring about this processing revolution, but their names are largely forgotten and few became rich for their efforts.
• Introduction of computerized trading: The trading floor of the New York Stock Exchange is largely an anachronism. Most transactions take place in cyberspace between people on keyboards often far from New York City. Exchanges overseas, from Singapore to London, to Kuala Lumpur are now floorless. Again, legions worked long and hard to bring this about, but few of their names are mentioned in Fortune magazine or Forbes.

In other words, not everyone in the “Old Wall Street” has followed in the footsteps of Gordon Gecko. Many truly love the business, find the field intellectually stimulating, and can feel good about something beyond the year-end bonus.

If this is you, I would encourage you to stay in the field — the world needs you, your skills, and your commitment to making things better, although it may seem, at times, that those doing the hiring do not realize this.

The mechanics of job hunting

I‘ve made a living in capital markets for four decades and, inevitably, from time to time, I have found myself on the job market. Being unemployed is never fun.

Depressing, stressful, even challenging … yes … but never fun!

I’ve tried just about every method of finding a job … contacts … sending out resumes … hiring an outplacement expert.

The only way that ever worked for me was getting a job through contacts … often through people who I didn’t even think of at the time as “contacts”.

My first advice to you in finding a job is to read a good, up-to-date book on the subject. This might not find you a job, but at least you’ll feel that you’ve left no stone unturned.

My second piece of advice is to never, ever, hire an outplacement expert that demands an up-front fee. These people are slick frauds and should be in jail with Bernie Madoff.

My third piece of advice is to not give up hope. Watch your finances, be practical, take a temporary assignment if need be, keep busy, and don’t give up on your final goal. Sooner or later good times will return.

I know it’s tough. After sending out several thousand carefully-drafted resumes without receiving a single reply, it’s hard to keep your chin up.

How to get immediate employment

When you finally get that all-important job interview and the interviewer asks you, “What are you doing now?”, you want to be able to say something like this:

I’m working as an editor of a financial encyclopedia. I’m writing an article on my area of expertise, [insert expertise here]. I’m also helping the encyclopedia recruit experts from universities. Here’s my card.

This is better than being “unemployed”. If you’ve just been fired, stripped of your “corporate identity”, you may feel naked and embarrassed when people ask the inevitable question, “What do you do?”

Now, it doesn’t matter that this is volunteer work. The important thing is that it’s better than saying,

We’ll I’m not really doing much of anything. I spend a lot of time in front of TV eating popcorn. I’m available as a consultant but am currently between assignments.

The other advantage of becoming an editor of Capital Market Wiki is that it offers a chance to meet other capital market professionals, perhaps from a distant market, providing that one, surprising, unexpected “contact” that makes all the difference.

As a founding editor, you’ll stand out and can make a difference.

Proving your worth

Everyone knows that resumes lie. That’s why contacts are the best way to change jobs.

But if your contacts fail you — they may be unemployed as well — you need some way to prove your worth.

To say that you were Vice President of XYZ investment bank that just went belly up isn’t much of a credential, for it begs the question of whether you were responsible for the failure, or were just an innocent bystander. You’ll have to try to prove a negative!

You need some way to demonstrate your expertise, beyond question.

I would suggest that you write a carefully researched article for Capital Market Wiki, a collaborative world encyclopedia of capital markets that publishes on the Internet, worldwide. Contributions may be in your own name, or anonymous. Your material may be licensed under creative commons or copyrighted.

You can write articles about particular securities (like, Soybean Oil Futures), institutions (like, the Dalian Commodity Exchange), an accounting rule (like, FASB Statement No. 157), a legal provision (like, SEC Rule 10b-18), an operational procedure (like, book-entry settlement in Indonesia), or a thousand other capital market related topics.

To make it easier for you, the encyclopedia offers a structured Capital Market Taxonomy and recommended formats for hundreds of types of articles.

You can also post your resume on the wiki and take advantage of a job opportunity network that is tied into the wiki’s sophisticated semantic database. You can also post in any language.

As a founding editor, you can play an important part in shaping this new encyclopedia.

Finance students can improve opportunities on graduation

Capital Market Wiki has a special program for teaching open source financial research to college students.

This program has a placement component that can help students find employment upon graduation and also earn income while still in college.

If you are a student of finance, email this article to your professor.

If you are an unemployed professional, read about the entrepreneurial opportunities in crowd-sourcing financial research offered by this program.

If you need guidance in joining Capital Market Wiki as an editor, academic patron, or entrepreneur, I’ll be glad to help. Just leave a comment below.

By becoming a founding editor of Capital Market Wiki, you may help yourself find a new job. In the process, you may even find yourself in a new business opportunity.

This entry was posted on Friday, April 17th, 2009 at 4:21 pm and is filed under Leadership, Bankers, Brokers, Fund Managers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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