A "Grunt Gap" at Banks

Private equity has investment banking against the ropes in terms of fees, and it shouldn't come as a surprise that the long-suffering analysts are sustaining the blows.

As the Financial Times has noted, banking bigwigs shedding crocodile tears for their junior staff, who are being "pushed beyond their limits" by a record number of deals, coupled with serious shortage of staff.

So why not just staff up?

Because when it comes down to it, Managing Directors don't want to share any more of their smaller and smaller pie. Deals are abundant but profit margins for banks are sinking.

One source inside UBS explains that not only is the industry is trending towards retaining multiple advisers on a single deal, but clients are exerting pressure on fees as more and more deal expertise can be found in-house, particularly at private equity firms.

At the same time, private equity shops are squeezing banks on the talent front. Private equity and hedge fund jobs have supplanted investment banking posts as the big prize in both salary and prestige for candidates fresh out of undergrad and M.B.A. programs.

As high-level staff has become expensive to pose a serious threat to the boss's third house, maxing out junior staff and letting analysts play associate and is a mildly better solution.

The moral of the story for those exhausted underlings beginning to consider their options -- it's better to be making the deals than running them.

by Liz Gunnison