Graduates should expect to work 12-hour days and 6 days a week to really master their jobs, says JPMorgan exec

Mary Callahan Erdoes of JPMorgan
Mary Callahan Erdoes of JPMorgan.

  • Graduates should expect to work 72-hour weeks, says JPMorgan wealth management CEO Mary Erdoes.
  • This will speed up their mastery of the craft, versus taking 5 years by working 8-hour days.
  • By doing 12-hour days, graduates can cut the process down to under 3 years.
  • See more stories on Insider’s business page.

Graduate wealth management analysts should expect to work 72 hour weeks – and they’ll be better trained for it – according to a senior JPMorgan executive.

Mary Callahan Erdoes, the CEO of JP Morgan Chase’s Asset and Wealth Management division, was speaking during an episode of Bloomberg’s Wealth with David Rubenstein.

Erdoes said that working longer hours will help graduate analysts learn their craft more quickly.

Based on the idea that it takes roughly 10,000 hours to gain “base-level mastery” of something, it’s going to take around five years if someone works eight-hour days, five days a week, said Erdoes.

“On Wall Street, it’s more like 12 hours a day, six days a week. That cuts you down to about two-and-a-half years before you become mastered in something.”

Once a graduate has that experience under their belt – across different areas of the wealth management division – they be sorted into a specialized team, based on what they’re best at, said Erdoes.

The concept of the ‘10,000-hour rule’, which was made popular by the sociologist Malcolm Gladwell, is disputed by some.

Erdoes joined the bank from Meredith, Martin & Kaye in 1996, and took over the asset management arm in 2009.

Alongside accounts of her earlier career and first forays into wealth management – as a six year old, accounting her grandma’s checkbook – Erdoes gave insight into the “intense training” that graduate analysts can expect during their three year training.

Erdoes describes each day as a “constant education” and revealed that each day starts with an 8am meeting.

“I call it a mini university. It’s not just about what you’ve read in the newspapers as to what happened overnight, it’s about understanding how all of those components fit together within a client’s portfolio,” said Erdoes.

“You’re synthesizing all that information every morning and then you’re going out and figuring how to apply it to each situation.”

Wealth managers provide advisory and other financial services to clients – typically about how to handle and which assets to invest in. 2,200 summer interns have already joined JPMorgan this year, and Erdoes said that 3,600 analysts will have started by September.

Wall Street has been under fire for its work culture

Financial services is among the industries under fire for its culture of long hours.

In March, junior bankers at fellow Wall Street bank Goldman Sachs issued executives with an internal pitch deck describing the “inhumane conditions” they felt subjected to. The bank subsequently reviewed its formal working hours in response.

In 2013, an intern at Bank of America Merrill Lynch’s London office died of a seizure. While it wasn’t conclusive, an inquest concluded that overwork could have contributed to 21-year-old Moritz Erhardt’s death.

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Goldman Sachs is transforming under CEO David Solomon

Goldman Sachs CEO David Solomon
Goldman Sachs CEO David Solomon.

Goldman Sachs is transforming under CEO David Solomon.

The Wall Street bank has taken steps involving transparency and inclusion to change up its culture. After its first-ever investor day in early 2020, the firm is executing on targets including multi-year cost-cutting plans. And it’s making big pushes into wealth management and consumer banking.

On Tuesday, the firm’s second-quarter 2021 earnings results topped expectations, with the bank reporting its second-highest net revenues on record. Its investment bank raked in more than $3.6 billion in revenue.

But the bank’s top ranks have also seen turnover this year, shedding execs within its management committee and partnership.

At the junior level, some young bankers are frustrated about not yet receiving base salary raises even as some bank competitors have raised pay.

Here’s a rundown of the must-know news at Goldman, including the latest hires and exits, as well as deep dives on its Marcus consumer bank and wealth-management push.


Who are the top leaders at Goldman?

Goldman Sachs org chart 2x1

Goldman in September shuffled its setup, creating a new standalone consumer division that includes its Marcus lending unit as well as its wealth-management and private-banking businesses.

Strategy chief Stephanie Cohen and Tucker York, the head of the private-wealth business, were tapped to colead the new consumer and wealth management division and the changes went into effect on Jan. 1.

The new setup matches the way Goldman reports financial results, a change the firm made in 2019 to better align with how Solomon wanted investors to think about the firm. Goldman now has four divisions: consumer and wealth management, asset management, investment banking, and global markets.

Read more:


Junior bankers in focus

wall street trader sad
Junior bankers have vented their frustrations to Goldman Sachs executives in recent months.

Goldman Sachs juniors vented this spring about 100-hour work-weeks.

So far, they’ve yet to benefit from it in the way of raises or bonuses, though Solomon hinted on the firm’s second-quarter earnings call that an update to their compensation policy might come in August.

The bank has been looking to hire reinforcements and fast-track tech initiatives to streamline work.

Read more:

The lastest news on Goldman’s Marcus

Marcus Goldman Sachs
Marcus offers savings and credit products online and through its app.

Goldman Sachs has built its consumer-banking arm into a $1 billion business over the past five years.

But it’s seen a wave of departures including the exits of top Marcus bosses Omer Ismail and David Stark. And JPMorgan has poached the head of product at Marcus to join the bank’s digital and product leadership team for consumer and community banking. Goldman has also brought in new hires, including Peeyush Nahar, an executive at Uber, to head the bank’s consumer business.

Insiders explained how Goldman Sachs’ hard-charging culture had contributed to exhaustion and high turnover within Marcus, and a Goldman spokesperson told us that the firm is eyeing beefing up the ranks by hiring some 200 to 300 new engineers.

Read more:


Goldman’s wealth-management push

Meena Flynn and John Mallory of Goldman Sachs
Meena Flynn and John Mallory co-head the private wealth business at Goldman Sachs.

Goldman, a firm synonymous with enormous wealth, has in recent years tried to reshape itself as a bank that can count someone with just $1,000 to invest as a client just as it has long done business with large companies and the very wealthy.

It launched Marcus Invest, a robo-advisor with a $1,000 minimum, earlier this year. And it has reorganized how its wealth businesses are situated entirely, creating a new internal consumer and wealth management division that went into effect at the start of this year. Goldman has some 800 advisors within private wealth globally.


Goldman’s dealmakers

When Goldman announced its latest class of partners, one group was particularly well-represented on the list. Seven of the 19 investment bankers elevated to partner status came from the bank’s powerhouse technology, media, and telecommunications group.

The group has also seen some shakeups in recent months. Goldman Sachs veteran Gregg Lemkau, co-head of the firm’s investment banking division since 2017 and a member of Goldman’s management committee, left at the end of 2020. Instacart has tapped Nick Giovanni, Goldman Sachs’ head of the global technology, media and telecom group, to be its CFO. And in September, Goldman Sachs named new leadership in its M&A group.

Goldman has also been riding the SPAC boom, which went into overdrive in the first quarter. It ranked No. 2 among banks in terms of SPAC IPOs year-to-date by mid-March.

Read more:

Read the original article on Business Insider

The Fed is reportedly weighing fines for Deutsche Bank over the bank’s insufficient anti-money-laundering controls

Deutsche Bank CEO Christian Sewing
Deutsche Bank CEO Christian Sewing

  • In recent weeks, the Fed has pressed Deutsche Bank to enhance its anti-money-laundering controls.
  • The Fed may resort to fines, the Wall Street Journal reported, citing sources familiar with the matter.
  • The bank has been under regulatory scrutiny for years, and its CEO has acknowledged that more work is needed.
  • See more stories on Insider’s business page.

Tensions between Deutsche Bank and the Federal Reserve are rising.

In recent weeks, the Fed has told Deutsche Bank to address flaws in its anti-money-laundering controls, according to a report by the Wall Street Journal.

The Fed could end up fining the bank, the Journal reported, citing sources familiar with the matter.

While Deutsche Bank has said it’s allocating significant resources to revamp its controls, the Fed says that the bank is actually backsliding.

In 2017, Deutsche Bank paid a $41 million fine to the Fed over its anti-money-laundering practices.

Potential fines are the latest development in a years-long dialogue between the bank and the regulator. In 2018, the Fed classified Deutsche Bank’s US operations as being in “troubled condition,” one of the lowest classifications. In May 2020, it sent a letter to the bank saying that it had failed to improve past its “troubled” status.

Deutsche Bank passed the Fed’s stress test for the first time in 2019, but its CEO Christian Sewing has recognized the bank’s continued shortcomings.

“Are we there yet regarding our controls? The answer is no,” Sewing said in prepared remarks at the bank’s annual general meeting in 2020.

New York’s Department of Financial Services fined Deutsche Bank $150 million last July in part due to its dealings with convicted sex offender and financier Jeffery Epstein. The DFS said that Deutsche Bank processed payments that should have been flagged through its compliance systems, including payments to people who were publicly alleged to have been connected to Epstein.

Even so, Deutsche Bank reported its most profitable quarter since 2014 in the first quarter this year, largely driven by its investment banking unit, an area where it’s aggressively hiring.

Read the original article on Business Insider

JPMorgan CEO Jamie Dimon warns investors not to buy crypto – and calls for clearer rules around trading it

jamie dimon
Jamie Dimon.

  • Jamie Dimon cautioned investors against owning cryptocurrencies.
  • The JPMorgan boss sees little value in them relative to gold and fiat currencies.
  • Dimon urged lawmakers to regulate crypto more closely.
  • See more stories on Insider’s business page.

Jamie Dimon blasted cryptocurrencies as inferior to traditional assets, warned people against buying them, and urged regulators to scrutinize them more closely at a congressional hearing this week.

“Something that’s not supported by anything, I do not believe has much value,” the JPMorgan CEO said. Blockchain and stablecoins aren’t in that camp, and his opinion doesn’t dictate whether his company embraces crypto, he added.

“My own personal advice to people is stay away from it,” Dimon said. “That does not mean the clients don’t want it – this goes back to how you have to run a business. I don’t smoke marijuana, but if you make it nationally legal, I’m not gonna stop our people from banking it.”

JPMorgan is exploring ways to allow clients to buy and sell crypto and have it appear on their statements, the bank’s chief said. However, he reiterated his view that crypto pales in comparison to conventional assets, and carries a lot more risk.

“It’s nothing like a fiat currency, it’s nothing like gold,” Dimon said. “Buyer beware.”

The executive also bemoaned the lack of rules in the crypto space, which he described as a “serious emerging issue” in his latest shareholder letter.

“The regulators who are a day late and a dollar short should be paying a lot more attention,” he said, highlighting crypto, payment for order flow, and high-frequency trading as areas of concern.

Bitcoin surged in price from under $10,000 a year ago to north of $60,000 in April, and continues to trade at north of $30,000. Dimon said he wasn’t a fan of the coin earlier this month, and has dismissed it as fraudulent and dangerous in the past.

“It’s worse than tulip bulbs,” he said in 2017. “It won’t end well. Someone is going to get killed.”

Read the original article on Business Insider

Sen. Elizabeth Warren grilled Jamie Dimon over Chase charging nearly $1.5 billion in overdraft fees during the pandemic

Jamie Dimon
  • The four major Wall Street banks collected a combined $4 billion in overdraft fees during the pandemic.
  • Sen. Warren said Chase was “the star of the overdraft show,” charging customers nearly $1.5 billion.
  • Warren asked the four banks’ CEOs if they would refund the fees. All said no.
  • See more stories on Insider’s business page.

Senator Elizabeth Warren singled out JPMorgan CEO Jamie Dimon during a banking committee hearing, grilling him over Chase’s decision to continue collecting nearly $1.5 billion in overdraft charges from customers during the pandemic.

Joining Dimon were the CEOs of Citibank, Bank of America, and Wells Fargo, which took in a combined $4 billion in fees from checking customers who had no money in their accounts during the pandemic, against the recommendations of bank regulators.

At the start of the pandemic, Warren explained, the bank regulators told financial institutions that they would not be charged a fee if their accounts at the Federal Reserve were overdrawn. The regulators also recommended the banks extend the same automatic protection to their customers.

Senator Elizabeth Warren asked the CEOs to raise their hands if they had followed that guidance.

“I’m not seeing anyone raise a hand, and that’s because none of you gave the same help to your customers that the bank regulators extended to you – help that the regulators recommended that you give,” Warren said.

Instead, the four leading Wall Street banks, which handle tens of millions of retail checking accounts, charged customers a combined $4 billion in fees during the pandemic when their balances hit zero.

According to the Pew Charitable Trusts, those customers were more likely to be African American or Hispanic, or be earning less than $50,000 per year. Figures from the Consumer Financial Protection Bureau show that just 8% of account holders are responsible for three-quarters of overdraft fees.

Singling out Jamie Dimon of JPMorgan, whom she called “the star of the overdraft show,” Warren asked if waiving the nearly $1.5 billion it collected in overdraft fees would have put the bank into financial trouble.

“We waived the fees every time a customer asked because of Covid,” Dimon replied.

“Your profits would have been $27.6 billion,” Warren said. “I did the math for you.”

“Mr. Dimon, will you commit right now to refund the $1.5 billion you took from consumers during the pandemic?” she continued.

“No,” he said.

The other three executives also declined Warren’s request.

“Last year, when customers said they were struggling, we waived fees on over 1 million deposit accounts, including overdraft fees – no questions asked,” Chase spokesperson Amy Bonitatibus said in a statement to Insider.

A previous study found Chase charges more than average for overdraft fees, generating more than $35 per account, compared with Citi, which charges less than $5 per account, according to Aaron Klein, a senior fellow at the Brookings Institution.

“Overdraft is an expensive fee they charge only on those people who run out of money that goes straight to short-term profits,” Klein told the New York Times in April.

Read the original article on Business Insider

Warren Buffett dumped Goldman Sachs, JPMorgan, and other bank stocks last year. They’ve now surged to record highs, meaning the investor left billions on the table.

warren buffett
Warren Buffett

  • Warren Buffett might regret dumping bank stocks given their positive outlook.
  • Buffett’s Berkshire Hathaway sold Goldman Sachs, JPMorgan, and most of Wells Fargo.
  • Bank stocks have hit new highs and stand to gain as the economy reopens.
  • See more stories on Insider’s business page.

Warren Buffett might be kicking himself for selling the banks, as their prices have rebounded to pre-pandemic levels and several are flirting with fresh highs.

The famed investor’s company, Berkshire Hathaway, sold its stakes in Goldman Sachs, JPMorgan, M&T Bank, PNC Financial, and Synchrony Financial during the past five quarters. It virtually eliminated its historic Wells Fargo position as well, and trimmed its bets on US Bancorp and BNY Mellon. It only added to a single bank holding in the period, Bank of America.

Buffett dumped the banks because he feared Berkshire was overexposed to the sector and could suffer if the pandemic worsened, he said at Berkshire’s recent shareholder meeting. “We overall didn’t want as much in banks as we had,” he said.

Read more: Warren Buffett has a $80 billion headache when stocks and businesses are this expensive. Here’s a look at the investor’s big dilemma – and the unhappy compromise he’s made.

The investor also pointed out that the banks have the Federal Reserve as a safety net if the financial system freezes up, but Berkshire doesn’t. “It’s up to us take care of ourselves,” he said.

Buffett may be sleeping more soundly, but he missed out on significant gains. For example, Berkshire’s Goldman stake was worth $2.8 billion at the end of 2019; it would have fetched $4.3 billion today. JPMorgan, PNC, and Synchrony are also trading at record levels, while Wells Fargo and M&T have rallied to 15-month highs.

Moreover, Buffett didn’t sell the banks and buy something better instead. He has struggled to find compelling uses for Berkshire’s cash reserves, which exceeded $140 billion at the last count. His company sold about $13 billion of stock on a net basis over the past five quarters, and only spent about $4 billion on acquisitions. In fact, Berkshire’s biggest splurge in 2020 was spending $25 billion repurchasing its own stock.

Read more: Warren Buffett slammed Robinhood, touted tech stocks, and questioned his own holdings at Berkshire Hathaway’s annual meeting. 6 experts explain why.

Buffett risks missing out on further gains too. Bank stocks stand to benefit from the US economy reopening, higher interest rates, a booming stock market, and regulators approving bigger dividends and buybacks in the coming months.

In short, Buffett sold his bank stocks well below their current prices, won’t benefit from any further gains they make in the coming months, and has been earning a meager return on the sale proceeds. His saving grace is Bank of America – Berkshire’s 1 billion shares in the lender have surged in value by 18% since the start of last year to $42 billion today.

Read the original article on Business Insider

Goldman Sachs is going through a massive transformation under CEO David Solomon

Goldman Sachs CEO David Solomon
Goldman Sachs CEO David Solomon.

  • Goldman Sachs CEO David Solomon is taking big steps to transform the bank.
  • Goldman has been pushing into consumer banking and wealth management.
  • But a slew of partners have jumped ship, and Marcus has seen a big talent exodus.
  • Visit the Business section of Insider for more stories.

Goldman Sachs is going through some big changes under CEO David Solomon.

The Wall Street bank has taken steps involving transparency and inclusion to change up its culture. After its first-ever investor day in early 2020, the firm is executing on targets including multi-year cost-cutting plans. And it’s making big pushes into wealth management and consumer banking.

Goldman smashed expectations and set a revenue record in the first quarter, and its stock price has soared. Investors and Wall Street analysts are singing Solomon’s praises.

But the firm’s top ranks have seen almost unprecedented turnover, with six members of the management committee departing over the past year.

And junior bankers have been so overworked that they put together two presentations to express their unhappiness to management. Engineers in a consumer division that Goldman spent billions to build have quit in droves.

Here’s a rundown of the must-know news at Goldman, including the latest hires and exits, as well as deep dives on its Marcus consumer bank and wealth-management push.


Who are the top leaders at Goldman?

Goldman Sachs org chart 2x1

Goldman in September shuffled its setup, creating a new standalone consumer division that includes its Marcus lending unit as well as its wealth-management and private-banking businesses.

Strategy chief Stephanie Cohen and Tucker York, the head of the private-wealth business, were tapped to colead the new consumer and wealth management division and the changes went into effect on Jan. 1.

The new setup matches the way Goldman reports financial results, a change the firm made in 2019 to better align with how Solomon wanted investors to think about the firm. Goldman now has four divisions: consumer and wealth management, asset management, investment banking, and global markets.

Read more:


The lastest news on Goldman’s Marcus

Marcus Goldman Sachs
Marcus offers savings and credit products online and through its app.

Goldman Sachs has built its consumer-banking arm into a $1 billion business over the past five years.

But it’s seen a wave of recent departures including the exits of top Marcus bosses Omer Ismail and David Stark. And JPMorgan has poached the head of product at Marcus to join the bank’s digital and product leadership team for consumer and community banking, while CNBC first reported in May that Sherry Ann Mohan, chief financial officer for Goldman’s consumer business, is leaving to serve as CFO of JPMorgan’s business banking division beginning in August.

Insiders explained how Goldman Sachs’ hard-charging culture had contributed to exhaustion and high turnover within Marcus, and a Goldman spokesperson told us that the firm is eyeing beefing up the ranks by hiring some 200 to 300 new engineers.

Read more:


Goldman’s wealth-management push

Meena Flynn and John Mallory of Goldman Sachs
Meena Flynn and John Mallory co-head the private wealth business at Goldman Sachs.

Goldman, a firm synonymous with enormous wealth, has in recent years tried to reshape itself as a bank that can count someone with just $1,000 to invest as a client just as it has long done business with large companies and the very wealthy.

It launched Marcus Invest, a robo-advisor with a $1,000 minimum, earlier this year. And it has reorganized how its wealth businesses are situated entirely, creating a new internal consumer and wealth management division that went into effect at the start of this year. Goldman has some 800 advisors within private wealth globally.


Goldman’s dealmakers

When Goldman announced its latest class of partners, one group was particularly well-represented on the list. Seven of the 19 investment bankers elevated to partner status came from the bank’s powerhouse technology, media, and telecommunications group.

The group has also seen some shakeups in recent months. Goldman Sachs veteran Gregg Lemkau, co-head of the firm’s investment banking division since 2017 and a member of Goldman’s management committee, left at the end of 2020. Instacart has tapped Nick Giovanni, Goldman Sachs’ head of the global technology, media and telecom group, to be its CFO. And in September, Goldman Sachs named new leadership in its M&A group.

Goldman has also been riding the SPAC boom, which went into overdrive in the first quarter. It ranked No. 2 among banks in terms of SPAC IPOs year-to-date by mid-March.

Read more:

Read the original article on Business Insider

An executive behind the $120 million Ethereum bond says banks must adapt to DeFi to survive

2018 05 03T103340Z_659174462_RC1154C44E80_RTRMADP_3_CRYPTO CURRENCIES ITALY.JPG
DeFi uses blockchain technology, like cryptocurrencies.

  • Banks must adapt to decentralized finance to survive, a banker behind an Ethereum bond launch said.
  • Jean-Marc Stenger, head of SocGen’s blockchain unit, said banks risk losing out, like Kodak with the advent of digital imaging.
  • DeFi advocates argue it will revolutionize finance by removing middlemen and slashing fees.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Banks must adapt to the new world of decentralized finance in which contracts will be created through crypto technology or risk becoming irrelevant, according to the Société Générale banker who was a driving force behind a recent high-profile digital bond launch.

Jean-Marc Stenger, the head of SocGen’s blockchain technology unit Forge, told Insider that banks face a “Kodak moment” if they do not adapt to decentralized finance or DeFi, referring to the failure of the famous camera company to transition to the digital era.

DeFi is the use of blockchain technology – the same tech that underlies cryptocurrencies – to create financial products.

It replaces the usual middlemen like banks and brokerages and instead lets pieces of digital code called “smart contracts” automatically execute, or control, financial products, taking care of things like interest payments, for example.

The European Investment Bank generated excitement in the cryptocurrency community at the end of April when it used the Ethereum blockchain network to issue a €100 million ($121 million) two-year bond. Stenger’s Forge unit at SocGen was the platform manager and settlement agent.

Stenger told Insider that SocGen – Europe’s sixth-biggest bank – sees DeFi as a big opportunity for the sector that brings the ability to do things “quicker, cheaper, [and] with more security or transparency for the regulators.”

Although some are skeptical the technology can truly disrupt the giant industry, DeFi’s advocates argue that it will revolutionize finance. DeFi’s fans say it will eliminate the need for intermediaries and central overseers such as clearing houses, and the fees they charge. Instead, a decentralized computer network would keep the contracts and transactions secure.

Stenger acknowledged the DeFi model might pose a threat to some of the ways banks traditionally make money. But he said: “When there is a shift like this in an industry, the financial industry as we speak, obviously it also means that you have to adapt and to change.

“Decentralized finance is certainly a threat to these financial institutions, which will not adapt and embrace this change, that’s for sure. There might be kind of a ‘Kodak effect’, if I may use that term, for some banks or financial institutions which again will not adapt quickly.”

He said banks would still generate returns from providing customers the services they want, which he argues will increasingly be DeFi contracts. “In today’s world, clients are paying for services where they see value-added.”

Read the original article on Business Insider

Meet the Barclays MD working to transform finance through distributed ledgers and quantum computing

Lee Braine_By Barclays
Dr. Lee Braine, director of research and engineering in Barclays’ Chief Technology Office

Dr. Lee Braine has spent the past seven years working across Barclays’ wealth management, markets, and corporate and investment banking divisions – but his job couldn’t be further from that of your typical City of London broker or trader.

A managing director in the bank’s chief technology office, London-based Braine is responsible for research and engineering across corporate, investment, and retail banking. He has a special focus on distributed ledger technology, like blockchain, as well as quantum computing.

Insider sat down for a virtual chat with Braine – who was named one of Business Insider’s 100 Transformers – to discuss what he’s working on and where the industry is going next.

Transcript has been edited for clarity and length:

Insider: You’re not an average banker. You’re a computer scientist by training. Can you tell me a bit more about your background?

Braine: I have a PhD from University College London in computer science-the particular topic was object-oriented functional programming. I used that research knowledge in banking, and that included, for example, working with financial market infrastructures when I was in my twenties to produce new architectures and new optimization algorithms. In this case, it was for securities settlement. After that, I spent quite a few years working in technology management.

Within Barclays, for these last 7 years, I’ve been working on technology innovation. The typical thing I’ve been working on is responsibility for advanced technologies that Barclays needs to be up to speed on. We work closely with a variety of stakeholders, not just [technology] vendors, but also very closely with official institutions, including central banks, regulators, and the government on the potential of these new technologies, and the risks and any issues that may lie with them.

Insider: Let’s talk about distributed ledgers-you lead Barclays’ efforts there. Why is Barclays interested in distributed ledgers like the blockchain?

Braine: Interest was initially sparked about 5-6 years ago when we were looking at bitcoin from a technology perspective. That means not as an investable asset, but at other interesting, novel technologies underlying bitcoin that could be repurposed in more traditional financial services. There are several features of bitcoin that inspire a different way of working: at the lowest level, there may be things such as consensus algorithms, hashing technique, the chain of blocks-all of those types of low-level technical things that everybody learned about in the last few years from blockchain. But higher up, there are new ways of working, almost new market models that get inspired by cryptocurrency.

For example, currently, financial market infrastructures are centralized financial institutions, and their technology is centralized-they’ve got centralized databases and centralized processing. The decentralized nature of something like bitcoin has inspired people. Could we have a different model of the market? Could we imagine decentralizing, not just the technology, but also some of the rights and obligations of participating in such a network? So to make that abstract idea a bit more concrete: imagine if you’ve got a clearing house, and currently we send all our trades to the clearing house, it performs the processing and sends us back the result. Imagine if, instead, each of the participants formed a network, they operated peer-to-peer, and that peer-to-peer model then gets translated down into the technical solution. So that’s a different way of working-you can call that a distributed financial market infrastructure.

It’s a big infrastructure change to the market-so why bother? What we see is quite a few potential benefits. These include radical simplification and rationalization. Another thread is you’re able to speed up settlement times.

Insider: Tell me about Utility Settlement Coin and the Fnality investment.

Braine: The consortium was originally called Utility Settlement Coin, and then, about 2 years ago, a group of financial institutions – so 14 banks and one exchange – strategically invested to create the new entity, which was Fnality International. They’re building a new payment system, and this is going to offer peer-to-peer settlements using an underlying blockchain platform. The money that moves on it will be one-to-one backed by funds that have been pre-deposited at a central bank, so it’s effectively a pre-funding model. It allows a number of benefits in terms of settlement.

For example, you could continue operating outside of the window when the real time gross settlement-RTGS-is closed at the central bank. You could, for example, connect to other tokenized assets to allow atomic swap between them. If you had Fnality representing the payment leg on a payment blockchain, you could imagine a security leg on a security blockchain and the two of them could do instant settlement with the appropriate interconnect between the two. A key point here is that the money being backed by funds at the central bank means that there’s lower risks associated with such payments.

Insider: You also work with the International Swaps and Derivatives Association (ISDA), right?

Braine: Yes. One of the things we’ve been progressing for a few years relates to a new standard for data and processing, and it’s called the ISDA Common Domain Model. This model effectively provides a standard industry representation for events in the lifecycle of a trade. Currently, each institution builds their own solutions, so effectively, there’s variation in how you code it-some may code in Java and others may code in C++, so different programming languages. They may store the data in different types of databases, and they may enrich the data with extra fields. So you’ve got variation there. Then, over time, each institution must manage and maintain its data stores. So across the industry, the same high-level functionality is implemented slightly differently on slightly different data sets. And each time there’s a lifecycle event, they all need to sync up and reconcile to make sure that, yes, what’s been affected in terms of an event, the before and after, is consistent.

That’s incredibly inefficient as a solution. Imagine we had a browser for the internet, and each bank built their own browser, right? Of course we don’t do that. We have a common browser, Chrome or Internet Explorer, we download it, we use it. So that same philosophy is being applied here. A distributed ledger de facto defines the common data structure that you all must use. And smart contract technology is a common process that they must all follow.

You then start getting the opportunity to transform the industry, and all the participants. And those opportunities don’t come up very often. So I think we’re living in interesting times where this technology is just reaching the right degree of maturity, and there’s also appetite from the market participants to reduce costs.

Insider: Ok, tell me more about smart contracts, which I know you also research.

Braine: There are many, many business processes that could benefit from the rigor and standardization that smart contracts would bring. To give one example, interest rate swaps. So a few years ago, about 4 years ago, my team prototyped an interest rate swap from end to end. Complete end-to-end processing naturally fits with the idea of a smart contract, meaning the data that you construct at the beginning just flows through-you don’t transform it, you don’t switch it into completely different systems.

The way I like to view it is, smart means automatable, and contract means enforceable. Other good use-cases include trade finance, loans, bonds, and syndicated loans. It’s easy to identify 101 use cases for smart contracts; the challenge is identifying viable business cases where the industry can move together in concert, given that these are consortium plays, so you need your peers to be similarly motivated at the same time to grasp at the same propositions.

Insider: What sort of work are you doing in quantum computing?

Braine: Barclays started exploring quantum computing back in summer 2017. We did that by partnering with IBM. We set up a joint development project, and our goal initially was to learn more about quantum computing. It’s a phenomenally complex topic, where even those that have quantitative research backgrounds find it challenging to understand the details.

We decided for our first proof of concept that we would look at a settlement optimization problem. This is a particular challenge where a market infrastructure looks to optimize the settlement of a batch of securities transactions. A typical batch may have 50,000 transactions, you’ve got many potential combinations that you could settle, and you need to work out what is the best combination. It’s a problem that you typically can’t solve perfectly, so you often run an optimization algorithm for long enough in order to solve it well enough, and then you repeat the batch later.

We were inspired by [the question]: could a quantum algorithm on a quantum computer solve that problem perfectly, or perhaps better than the classical ones? We looked at candidate quantum algorithms, we worked with IBM to implement an algorithm, we constructed candidate scenarios to run through test data, and we got the results. The key takeaway is that, for the first time, an algorithm has been run for settling securities transactions on a quantum computer. Obviously, it’s only just test data and very small scale, so it’s more of a proof of concept, but we’ve demonstrated that the proof of concept works.

In terms of next steps, we’re currently exploring quantum machine learning. How many more buzzwords could you get into one conversation, right? We’ve run our first experiment comparing quantum and classical versions, and in the next couple of months, we’ll be looking to publicly release our initial findings.

Insider: In real terms, what benefits might quantum computing bring to Barclays? And when?

Braine: We need to extrapolate for when we think the hardware will be sufficiently mature to be able to run real-world use cases. For perspective, we think that will be in the range of 4-8 years from now.

In terms of the type of benefits, it’s almost like adding a special maths co-processor, and it’s able to perform a number of functions-it’s able to perform an optimization process faster than a traditional classical computer, or it’s able to perform the process and get a higher-quality result. So this could be optimizing which assets you put in a portfolio, or running a number of Monte Carlo optimizations as part of a risk model. These types of things often require huge compute resources.

And that’s why we’re exploring this for research-not because we think it could be perfectly used in the next year or two, but because we’re learning, building a foundation. I would almost call it quantum awareness, where we’re raising our awareness so that we could leverage it when the powerful machines come along in a few years’ time that we could use for real world use cases.

Insider: Where is financial technology going next? How does that fit with traditional banking?

Braine: There are a number of key themes, one being machine learning and artificial intelligence. So the application of that technology, we’ve seen it deployed with fantastic effect, whether that’s search or shopping or similar. There’s great opportunity for those technologies to also be applied within financial services, particularly to further improve the customer experience.

Other key technologies include cloud computing.

Insider: Are you worried about disruption from tech startups?

Disruption is at the heart of my day job. We’re often looking to see what technologies have potential for disruption, and to see how we could leverage or partner with third parties that have such potentially disruptive technologies-and also to understand the risks and potential issues that are associated with them-so that we’re able to have a sensible position in order to be able to advise the business.

Often if we’re going to pick certain technologies, it may well be the case that what’s viewed as a potential disruptor to Barclays could also be viewed as a potential partnership opportunity in terms of optimizing and improving some of our own internal processes.

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Goldman Sachs is going through a big transformation under CEO David Solomon

Goldman Sachs CEO David Solomon
Goldman Sachs CEO David Solomon.

Goldman Sachs is going through some massive changes under CEO David Solomon.

The Wall Street bank has taken big steps involving transparency and inclusion to change up its culture. After its first-ever investor day in early 2020, the firm is looking to execute on targets including multi-year cost-cutting plans. And it’s making big pushes into wealth management and consumer banking.

Solomon, who took the reins as CEO in 2018, has also looked to reduce the number of partners overall at the firm to make the status more elite and exclusive. In 2018, there were 484 partners. But as of the newest partner additions, Goldman’s total partners amounted to fewer than 440.

Goldman Sachs reported first-quarter earnings on Wednesday, April 14, and turned in blowout performance on trading and dealmaking. Stephen Scherr, Goldman Sachs’ chief financial officer, said on the earnings call that the firm is increasingly leaning into cloud technology.

“Our new builds are largely, perhaps not exclusively, but largely cloud-based,” he said.

“We’re riveted and focused on doing that so as to eliminate legacy technology,” Scherr added.

Here’s a rundown of the latest news at Goldman, including the latest hires and exits, deep dives on its Marcus consumer bank, and how Goldman investment banking analysts are reacting after a year of rapid-fire deal while WFH.


The lastest news on Goldman’s Marcus

Marcus Goldman Sachs
Marcus offers savings and credit products online and through its app.

Goldman Sachs has built its consumer-banking arm into a $1 billion business over the past five years.

But it’s seen a wave of recent departures including the exits of top Marcus bosses Omer Ismail and David Stark. And JPMorgan has poached the head of product at Marcus to join the bank’s digital and product leadership team for consumer and community banking.

Insiders explained how Goldman Sachs’ hard-charging culture had contributed to exhaustion and high turnover within Marcus, and a Goldman spokesperson told us that the firm is eyeing beefing up the ranks by hiring some 200 to 300 new engineers.

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Who are the top leaders at Goldman?

Goldman Sachs org chart 2x1

Goldman in September shuffled its setup, creating a new standalone consumer division that includes its Marcus lending unit as well as its wealth-management and private-banking businesses.

Strategy chief Stephanie Cohen and Tucker York, the head of the private-wealth business, were tapped to colead the new consumer and wealth management division and the changes went into effect on Jan. 1.

The new setup matches the way Goldman reports financial results, a change the firm made in 2019 to better align with how Solomon wanted investors to think about the firm. Goldman now has four divisions: consumer and wealth management, asset management, investment banking, and global markets.

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Goldman’s junior bankers are feeling the heat

wall street burnout young talent junior analyst 2x1

A grueling year of increased demands while working from home has some Goldman Sachs junior talent reaching a breaking point.

In March, a presentation created by 13 analysts within the firm’s investment bank grabbed headlines. Meanwhile, the bank is prepping its latest cohort of young bankers for a return to in-person work.

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Goldman’s dealmakers

When Goldman announced its latest class of partners, one group was particularly well-represented on the list. Seven of the 19 investment bankers elevated to partner status came from the bank’s powerhouse technology, media, and telecommunications group.

The group has also seen some shakeups in recent months. Goldman Sachs veteran Gregg Lemkau, co-head of the firm’s investment banking division since 2017 and a member of Goldman’s management committee, left at the end of 2020. Instacart has tapped Nick Giovanni, Goldman Sachs’ head of the global technology, media and telecom group, to be its CFO. And in September, Goldman Sachs named new leadership in its M&A group.

Goldman has also been riding the SPAC boom, which went into overdrive in the first quarter. It ranked No. 2 among banks in terms of SPAC IPOs year-to-date by mid-March.

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