Southern California Job Market : Challenges / Opportunities : Odds Are Tough in High Finance : Securities, banking and insurance firms are cutting back due to the economic slowdown. But jobs exist for those who work hard and have specialized skills.
In the financial services industry, less is more these days: Investment bankers, commercial bankers and insurance companies are hiring fewer people and expecting much more of them.
That trend is unlikely to end soon. Wall Street still is desperately trying to pare employees to cope with the reality of a weak securities market and a much calmer takeover scene. Insurers, too, are consolidating and streamlining management. And many commercial bankers, particularly in California, are only now beginning to feel the effects of a moribund real estate market that threatens to slash bank earnings.
Even so, these are big industries, so there remain pockets of opportunity for aspiring deal makers, brokers and other would-be financiers. For the very smart, the very hard-working and those who have honed specialized skills, careers can still blossom.
An overview of the key sectors of the financial services business:
COMMERCIAL BANKING / S&Ls;
Job growth continues in this business, but at a slower pace, as the savings and loan crisis takes its toll and loan demand weakens with the economy. State estimates put bank and S&L; employment in the Los Angeles metropolitan area at 101,600 as of May, up just 2.4% from a year earlier. In Orange County, a broader measure of financial institution employment that is mostly banks and S&Ls; totaled 39,000 jobs in May, up 4% from a year ago.
Some bankers believe that the numbers will begin to drop soon as the lending business continues to slow.
“Overall, you’re going to see a reduction in the number of people” in the business, said Bob Bishop, senior vice president for human resources at Security Pacific Corp. His firm employs 40,400, down from 41,100 at year-end 1989 and about 43,000 in 1987.
Some banking firms, such as First Interstate, are being forced to shrink themselves to boost capital as a percentage of assets. First Interstate has sold numerous subsidiaries and exited some businesses, such as indirect auto financing. Many S&Ls;, of course, are well ahead of banks in shrinking assets and controlling costs.
INSURANCE
The insurance industry, in a tough pricing battle on the property/casualty insurance front, has been centralizing operations and loading more responsibility on current employees rather than making many new hires.
California’s Proposition 103 and other price rollback movements aren’t making life any easier for the companies. The workers’ compensation business has been a growth area, but, overall, many analysts continue to expect dramatic consolidation ahead in the insurance business, with strong companies swallowing the weak--and cutting overhead accordingly.
BROKERAGE / INVESTMENT BANKING
The Securities Industry Assn. said nationwide employment by New York Stock Exchange member firms has plunged to about 218,000 from a peak of 260,000 in 1987, a drop of 16%. Jeffrey Schaeffer, an SIA officer, said the cutbacks are unlikely to end “until the (financial) markets turn around.”
Not only has trading volume tumbled since the 1987 crash made stocks a tougher sell, but the industry’s most lucrative fields--corporate deal making and underwriting new securities--also are in deep slumps. Wall Street simply needs fewer financiers because there is much less work to do than there was when takeovers were booming.
In Southern California, the demise of Drexel Burnham Lambert put 400 people out of work, and many Drexel competitors have retrenched here as well. Shearson Lehman and First Boston, for example, have cut back their Los Angeles investment banking teams.
Yet other firms are expanding to fill those voids. Donaldson, Lufkin & Jenrette Securities, for example, has made a big commitment to the Southland even as competitors have cut jobs. DLJ hired 12 of Drexel’s investment bankers earlier this year, and now has a professional banking staff of 25 in its Century City office.
Likewise, Tom Weinberger, managing director of Oppenheimer & Co.’s office in Westwood, recently hired three senior investment bankers from other firms, bringing his banking staff to 15. Oppenheimer, like many of its competitors, believes that the Southland’s mid-sized companies have a great need for financing (via stock and bond issues, for example) and for strategic deal making, such as advice on friendly mergers of like-minded firms. Weinberger said he’s bringing new people on board to take care of business that the firm already can see in the pipeline.
“But are we looking for junior people? No,” he said. For one, because of the layoffs in the investment banking business nationally, many senior people are readily available when a slot opens.
Besides that, Weinberger said, “there are a lot of people who have been in the business for five to seven years who view themselves as senior people. But I don’t. They’ve never really been out there fighting the trench battles” for new business, he said. Instead, their function has been as “transaction processors.” And now that there are fewer transactions to process, “a lot of those people are going to have a very difficult time,” Weinberger said.
Indeed, Glen Payne, director of career services in the MBA program at USC’s School of Business, said he is “preparing to discourage students from getting into the investment banking world now” for the same reasons Weinberger cites. The business is “clogged up” with job-seekers, Payne said.
Brokerages have less need for investment bankers, and though commercial banks “still come out recruiting for merchant-banking and lending jobs, the numbers they’re looking for are getting lower,” Payne said.
Still, business-school graduates continue to find jobs in finance. UCLA’s Anderson Graduate School of Management, for example, saw 6.2% of the grads of the class of 1990 take jobs in investment banking or securities. Median annual salary: $52,500.
The biggest number of grads--17%--found jobs in commercial or merchant banking at a median salary of $55,000. Even troubled banks still need MBA graduates for the banks’ extensive development programs in such areas as lending to mid-sized companies--a key market that many banks don’t want to under-serve.
Outside the brokerages and banks, many Southland companies still need financial experts for their in-house staffs, in strategic planning, market analysis and other fields.
Meanwhile, for aspiring stock brokers, this is a time to get into the business only if you’re willing to spend very long hours building a client base.
“We’re losing younger account executives who find it more difficult to attract new accounts,” admits Bob Juneman, senior vice president of Dean Witter Reynolds in Los Angeles. He said Dean Witter has about 1,000 brokers in Southern California now, about 20 fewer people than at the start of the year.
What’s more, new applicants for broker training programs are down about 75% from a year ago, Juneman said. Yet he said the firm is eager to hire new brokers. For those who can cut it, the business is wide open, he said.
But Kathleen Haderlein, vice president of human resources for insurer Argonaut Group, may best sum up the attitude that many financial services firms will be forced to adopt over the next year, especially if the economy continues to slow. “I don’t see a lot of growth from adding staff,” she said. “I think it’s going to be more, ‘Let’s try and approach our jobs differently.’ ”
