Time is Money: Addressing the Inefficiencies in Investment Banking to Boost the Bottom Line

Investment Banking

By Antione Vettes

In investment banking, every detail counts. Documents produced need to be high-quality, accurate and impactful in order to secure the transaction and deliver maximum value to the client. But this pursuit of excellence takes time and makes it difficult to achieve optimum efficiency levels.

What’s more, the industry is entering a new era in which the phrase ‘banker burnout’ continues to rear its head. Stories of bankers leaving the sector in search of a better work/life balance and sense of purpose within their role, are a regular occurrence. The time and effort banks invest in managing turnover and replacing employees introduces an additional layer of inefficiency. The need to support and retain staff is, therefore, more important than ever.

So, in this challenging climate, how can banks achieve optimum efficiency, deliver maximum value to clients and avoid adding pressure onto their workforce?

Saving time on lower-value work

With a fluctuating economy and rapidly changing conditions, bankers need to be able to adapt quickly to make decisions and deliver the best value to their clients. 

One major hindrance for them is the number of hours they spend on repetitive tasks whilst preparing key documents, such as pitchbooks and IMs.

Tasks such as updating documents repeatedly based on minor changes to financial models are, of course, necessary. However, doing these manually takes a great deal of time, often resulting in late nights at the office, and a major hit to productivity thanks to fatigue and stress.

What if these long hours spent on manual tasks could be limited, or better still, spent on more impactful work such as improving the quality of analysis, conducting more research or perfecting the messaging? 

By automating some of the manual processes, time could be freed up for bankers to develop their skills and add more value to clients, ultimately providing a welcome boost to the bank’s bottom line. 

What’s more, automation also reduces the chances of human error, meaning less time spent by managers on identifying and correcting errors, as well as a higher quality document for the client.

Improving acquisition and retention

Salaries in investment banking are well known for being some of the highest around, and the battle to attract the best talent in the market is also costly.

The cost of replacing and retraining these highly sought after professionals is therefore huge; it’s estimated this can be up to nine months of an employee’s annual salary, taking into account recruitment, retraining, and general productivity loss. Given that the average base salary of an analyst ranges from $100k – $125k, with total compensation as high as $250k, that equates to around to $187k to per junior banker. The need to retain these employees for as long as possible is vital to maintain the bottom line. 

In a post-covid world, however, the workforce is becoming more demanding than ever, prioritising careers and firms which enable good work/life balance, with flexible and remote working becoming more desirable than ever. But on a deeper level, they are also looking for a greater sense of purpose in their day-to-day work. We often hear stories of junior bankers leaving their roles without a new one lined-up, or leaving for lower paid, but more fulfilling roles.

Technology has a key role to play in this, too. Freeing bankers from mundane, repetitive work would enable them to focus on more rewarding tasks such as developing new skills, more creative thinking and broadening their deal experience. Not only would this help staff feel happier and more fulfilled in their roles – thus helping to boost retention – it also means the business gets a higher return on workforce expenditure.

Transforming traditions – it’s time for change 

Investment banking is an industry steeped in tradition; it’s undoubtedly a key component of its success and desirability. However, this could also be hampering its ability to evolve at the necessary pace.

For some, these manual, repetitive tasks and late nights at the office are a rite of passage for an investment banker, or a necessary test to ensure sufficient commitment to the cause. The idea of automating work and saving bankers from these mundane tasks can seem like a shortcut that more senior employees weren’t afforded; it’s not always fully embraced.

But one of the biggest challenges is that traditionally, banks have been so busy with their day-to-day work that taking time out to investigate ways to improve processes and drive greater long-term efficiency has not been a priority. Instead, in many cases, firms continue to use the tried and trusted systems which have been in place for years, no matter how frustrating and inefficient they may be. The mentality is often, ‘if it isn’t broken, don’t fix it’.

Understandably, when it comes to technology, the development teams responsible for installing and managing the existing systems look to make incremental improvements rather than bolder, more widespread changes due to the time and cost involved. It can be difficult to get the buy-in to overhaul how the firm operates at a fundamental level. 

When it comes to significant process changes, value must be seen by the board, those responsible for installation and management, as well as the users themselves. Demonstrating the genuine value of updating processes to CFOs and decision-makers is the key to ensuring buy-in.

The introduction of new roles, such as Chief Digital Officers – responsible for ensuring staff have the resources required to complete their tasks, is certainly a step in the right direction. But more can be done. 

The time to act is now

Over the last ten years, demand for tools and technologies which can help unlock efficiency in finance firms has grown. And that pressure isn’t just coming from coming from senior leaders, it’s coming from junior employees in equal measure. Top candidates are prioritising firms which can offer them the most rewarding career, and who are willing to invest in technology and tools which support staff to do this. 

Legacy tools, which were often built in-house by major banks, can’t keep up with third-party applications, which are continuously evolving, have a better UX and require much less maintenance for internal teams – particularly IT.

And all this is happening against a backdrop of increasing volumes of data which need to be analysed by bankers. The most forward-thinking firms are now looking to take advantage of platforms such as Power BI to leverage data more effectively and efficiently.

Those firms who have invested time and funds into tackling these inefficiencies head on, will not only reap the rewards sooner, they will be in a much better position to take advantages of further opportunities to leverage new innovations and technologies in the coming years. Those who haven’t could find themselves at a considerable, long-term disadvantage. It’s no longer a question of what will be done, it’s more a case of when.

About the Author

Antoine VettesAntione Vettes is the Co-founder at UpSlide 

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.