Banks that have been methodically moving back office staffers to cheaper locales are planning to step up their efforts. In a decade, just a sliver of Wall Street’s support staff will remain in high-cost cities like New York and London, according to a new report.
Compensation expert Alan Johnson said that just 25% of the investment banking world’s back-office and operations workers will remain in hub cities by 2024. Moreover, not all will be funneled to secondary U.S. markets. Rather, much of the work will be done in developing cities, which will house a whopping 50% of back office workers in the next 10 years, according to Johnson. Bangalore, India, home to the burgeoning satellite office of Goldman Sachs, is sure to be one locale where much of growth will occur.
“As you look at the cost differentials, and with technology making it easier to do things from remote locations, firms plan to have fewer people here,” he told Reuters.
In the U.S., banks have so far relied more on cheaper local markets than the developing world. Goldman has 1,800 staffers in Salt Lake City, plus several hundred more in Dallas. Deutsche Bank operates a Jacksonville, Florida facility, and just last month, J.P. Morgan announced it would move workers across the East River and into Brooklyn.
Cost savings from these initiatives are substantial, but still nothing that you would see if you moved jobs overseas. Goldman reportedly pays its Salt Lake staff roughly 30% less than what they would make in New York, plus all the savings from the monumental difference in real estate and operating costs.
Unfortunately, as banks begin to shift their focus more toward the developing world, the U.S. will be losing jobs rather than just moving them.
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Quote of the Day: “Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” - Warren Buffett