Nearly half of the graduates from Princeton University, prime recruiting ground for Wall Street, with full-time jobs worked in finance and insurance in 2006. For the class of 2015, that number had fallen to just 21%. Many graduates just don’t want to start their careers in a tarnished and declining industry, and the rise of technology firms has only exacerbated the issue. A lot of the banks’ natural talent pool switched to engineering and headed to Silicon Valley instead.
The high starting salaries are no longer high enough. According to the most recent data from the National Association of Colleges and Employees, finance graduates may get a starting salary of $57,300, but computer engineering graduates command $70,400. What’s more, even if the banks do succeed in luring smart young junior bankers, they aren’t staying. According to LinkedIn analysis this year, the average tenure of junior bankers is just 1.4 years – that’s about one year less than back in 2004.
So how do banks get bright minds to join and to stay? By convincing them that banks have a social value. The majority of the workforce are between 27 and 44, and, according to recent research from Cone Communications, two thirds of the 27 to 35 age group say they will only work for a company that has strong corporate social responsibility commitments.
For the banks that have been listening – and it’s by no means the majority – CSR has become the diversifier in hiring. Citi, for example, this year has begun giving new analysts a partially-paid gap year to work at non-profit organizations through its partnership with Service Corps.
But it goes far beyond volunteer opportunities, or non-profit work. As one head of a corporate bank says: “I’ve had to sit down with graduates who are on the fence about joining, and go through all of the diversity and inclusion initiatives we have to convince them to join.”
Competition around CSR is fierce. Pitches for the best global bank for CSR were more numerous than ever for Euromoney’s awards for excellence this year. Some chief executives clearly get it. James Gorman has been pushing impact investing at Morgan Stanley. Jamie Dimon has been personally beating the drum on using finance to help solve cities’ issues and youth unemployment. Bank of America’s Brian Moynihan has been leading the industry in diversity and inclusion. Mike Corbat is pushing Citi’s efforts in green infrastructure, while Sergio Ermotti’s UBS is putting social good at the core of its wealth management business.
It’s heralding a new age of banking, say executives. One head of asset management calls it a “golden era for banks” – that as the challenges facing global governments are just too big to surmount alone, it is banks that will facilitate putting private capital to work and smoothing the wealth gap.
It’s hard not to be cynical, but it certainly gives pause for thought. Seeing the success of UBS’s oncology fundraising of $471 million, or considering JPMorgan’s work with the UK government on the Dementia Discovery Fund, makes one realize how quickly private money can be put to work.
But if banks want to convince anyone of their value, it will take more than just picking sweet spots like impact investing or green bonds, or even running top-tier inclusion initiatives. They will need to craft CSR into the very fabric of the entire financial institution.
Whether it’s looking at the clients they deal with, the service providers they engage with, the products they develop and offer, or the way they interact with their employees, this idea of having a positive role in society will have to be a felt across every part of the business if banks want to tout their CSR efforts as evidence to society of their value.
If they succeed, banks could well end up being more attractive than technology firms – even if they are paying their employees less. Some 76% of older millennials say they would take a lower salary if they felt their company was contributing to the world’s issues in a positive way.
Eight years ago most would have scoffed at financial institutions being those companies but if they keep on focusing on CSR, even the doubters may have to put their cynicism aside.
As one banker says: “Imagine if we could get just 2% of our industry’s assets put to work to solve the some of the world’s challenges.” That kind of contribution would be hard to dismiss.