Increasing disgruntlement over the excessive red tape and inflexibility of big name financial services companies such as Goldman Sachs and JP Morgan Chase are persuading a growing number of high-level executives and partners to open their own boutique investment companies.
The trend has been taking place across the globe and is particularly prominent in Hong Kong, where established industry heavyweights have been seen leaving the safety and security of big name financial institutions to set up their own smaller, more flexible boutique firms — taking their loyal clientele with them along the way. The selling points? More personal relationships, higher flexibility, customized services and fewer regulations to deal with.
The latter is particularly poignant, as the industry has been seeing an exponential rise in banking regulations targeting big banks — part of the effort to prevent a repeat of the 2008 financial crisis. This is driving high performers out of the big banks and into more local firms such as China Renaissance, a boutique investment bank on the mainland which has announced plans to triple its headcount within the next few years.
Joining or opening a boutique firm is seen as a means to sidestep bureaucracy and be able to make quicker, direct changes — offering the flexibility and instant response rate for clients that is often lacking from big banks. Customers are also turning to small firms to seek out higher capital ratios and specialized financial advisors, the latter of which are more efficient in helping them safeguard their assets than big name companies.
Most of these so-called “breakaway firms” are focusing in the merger and acquisitions (M&A) sector, while others cover everything from wealth management to debt funding. At the ground floor of these boutique companies is a wave of young grads and up-and-coming stars in the industry who see the smaller companies as a speedier path to either a higher title or more responsibility and hands-on work without the pressure and threat of bureaucracy looming over them. In most cases, boutique firms offer more of an incentive to award those who perform well, versus a stagnant pay check from “bulge bracket” banks despite an increase in work hours.
Another major concern in the big banks of late has been major cost-cutting across the organizations, from companies such as Standard Chartered, Barclays and Deutsche Bank. With sizeable layoffs in recent years, particularly within the Asia markets, new recruits are looking to smaller firms for a safer commitment to the local market.