Morning Coffee: 25-year-old bankers forced to confront unrealistic lifestyle aspirations. David Solomon's current focus at Goldman Sachs
If you're a young adult today, what are your hopes and dreams for the way you will live when your adulthood is fully underway? And are you sure they're entirely viable?
Curbed magazine has been asking young people these questions in New York and discovering that the lifestyles that many young people consider imminent and attainable are actually wildly expensive and out of reach.
Those young people include juniors in financial services.
Audrey, a 25-year-old working in an unnamed investment firm in Manhattan, for example, listed her expectations of: an Upper East Side apartment on Madison, Park or Fifth Avenue; a husband and three kids; a second home on Long Island; regular meals out in West Village at Cafe Cluny or Rosemary’s; regular facials; membership of a high-end gym like Equinox; a season ticket to the Jets; having her nails done; a nanny while she and her husband work; children attending prestigious schools like Hunter or Bronx Science; vacations in the Caribbean; and a "lot of cabs."
Curbed totted up the cost of all this and reckoned on $522k of net income a year, plus a one-off payment of $2,019,582 as down payment on the Manhattan apartment and holiday home.
Audrey may be a special case. Aged 25, her aspirations read like a wish list of the archetypal upper middle class Manhattan housewife, and Audrey confesses that this was how she grew up and is simply replicating what she knows. But Curbed is still onto something: life is expensive, and becoming more so, and pay for juniors in financial services is declining from its recent peaks.
This is creating some difficult choices for the Audreys of the world. Without family money, it's not easy to live like it's 2006. In fact, many young people in banking seem to have apprehended this: last year's Goldman Sachs survey of its interns found that only 25% of them expected to have children, down from 57% a year earlier. It's not clear whether this was motivated by saving money, wanting freedom, or worrying about climate change, but given that a nanny alone costs $60k to $100k in NYC, remaining child-free can be one way to cut costs. Alternatively, there's ditching the Caribbean holiday or second home out of town.
Separately, David Solomon, CEO of Goldman Sachs has both a grown up family and a house in the Bahamas, but can presumably afford it.
Solomon, who is not modelling a modest lifestyle, but has healthy habits like biking and kite surfing, spoke to Barrons about his current endeavours at Goldman Sachs. "We're extremely focused on the growth of our asset and wealth management platform," said Solomon. "There's no question that management fees—and more reliable management fees—get a higher multiple...I wouldn't call this a top-quartile environment for a capital markets–focused banking institution."
What if you're a Goldman partner in a capital markets business and aren't keen on this? Solomon said he listens to feedback, but is making changes, and "not everybody likes change." Most of the partners are "aligned on the strategy," though, and are helping to "drive it forward."
First Citizens Bank is suing HSBC for hiring 42 SVB bankers on Easter Sunday and allegedly stealing SVB's trade secrets. David Sabow, a former SVB healthcare and technology bankers who's now at HSBC is accused of being the architect of this scheme. (Bloomberg)
Sabow allegedly called the scheme "Project Colony" and allegedly used SVB data to project that a new unit staffed by the bankers from SVB could generate profits of $66mn in its first year, rising to almost $1.3bn in year five. (FT)
JPMorganChase is planning to spend $15bn on new initiatives this year. Asked how many more years he wanted to stay on for, CEO Jamie Dimon quipped “three and a half” and then added: “I can’t do this forever. I know that. But my intensity is the same. I think when I don’t have that kind of intensity, I should leave.” (Financial Times)
Ex-Barclays head of electronic equities trading, Nej D’jelal, has left UBS for the London Stock Exchange Group. (The Trade)
Credit Suisse has been sending letters arguing that its AT1 bonds should never have been written down. “[Credit Suisse Group] further argues that no contractual ‘viability event’ occurred because the state support did not have a capitalising effect.” (Financial Times)
Credit Suisse employees whose bonuses were linked to the AT1 bonds are also mounting a case that they should be paid. It doesn't help that their stock bonuses have also fallen 93 per since the beginning of 2021. (Financial Times)
A derivatives committee ruled on Monday that a bankruptcy credit event had not occurred in relation to Credit Suisse, meaning that credit insurance linked to Credit Suisse will not pay out. (Reuters)
The British Labour Party is prepared to force pensions to invest in a proposed £50bn “future growth fund." (Financial Times)
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