As a result of the financial crisis, Wall Street has taken a beating on reputation, on pay and on layoffs. At the same time, with a series of hot initial public offerings culminating in Facebook’s planned issue, Silicon Valley has developed a new allure.
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Silicon Valley, California
But that doesn’t mean people are leaving the Street in droves to go work in the Valley — or any of the other tech corridors around the country.
Bureau of Labor Statistics data show that, in the last decade, employment at securities firms has risen 2.2 percent, while employment at non-manufacturing tech companies is still off by 1.4 percent.
That’s not to say that Wall Street layoffs have had no impact on employment. Securities firms’ payrolls are 6.6 percent smaller than they were at their 2008 peak. But compared to Silicon Valley employers, Wall Street firms are still hanging in there.
Still, the BLS numbers don’t tell the whole story. There is certainly a coolness factor that could draw graduates to Silicon Valley over Wall Street.
“The difference is, if I was at Silicon Valley at one of the top tech firms — an Apple , Facebook, a LinkedIn , being CEO there that's probably really cool,” says Rob Sloan head of executive recruiting firm Egon Zehnder’s financial institutions practice. “But if I'm at JPMorgan or Citi or CIT or Bank of America . I don't think that's cool today.”
There’s also a pay disparity that’s opened up. A managing director on Wall Street who’s been out of school for 10 or 12 years probably takes home $500,000 in cash and another $500,000 in bonus. That compares to a VP level engineer at a tech company, who gets $500,000 in cash and another $1.5 to $10 million in stock.
"If you are an engineering graduate in the top one percent, you would be insane to go to Wall Street, and that was probably not the case five years ago," says Martha Josephson, head of Egon Zehnder’s Internet and Media practices.
Tech and financial services require different skill sets, say recruiters. But increasingly Wall Street is taking a page from Silicon Valley’s playbook when it comes to leadership within the firm. The new emphasis on pay for long term performance, with a much higher deferred stock component has led securities firms to focus on businesses that can create value — read higher profits. They are hiring people who can get the most out of their teams.
“They'll have to drive for efficiency, drive for effectiveness, drive for profitability,” says Sloan. “It's no longer just about making the trade, taking your fee and going home.”
Among business school grads, Wall Street is no longer the place you go because you want to make money, say business school career placement directors. The initial pay you get may be slightly higher at a Wall Street firm, but the upside at tech firms can be much higher. These days securities industry recruits are more focused on what they love about finance — the intrigue of the markets and the intellectual and analytical thrill of creating financial instruments.
Even though tech companies are stepping up their recruiting on campus, grabbing MBAs for their business development and marketing functions, Wall Street still accounts for 25 to 30 percent of placements at most of the top business schools.