Princeling hirings the road to success for investment banks?
Recruiting too many rich children may be a drag on investment banks as most of them don't have true ambition or uncompromising work ethic
Complaining about investment banks hiring rich children in order to win deals from their rich families is like complaining why beautiful people are more likely to receive better service than ugly ones.
Where the truth lies is somewhere in JPMorgan Chase's email trail, which revealed a candidate who was hired even though he accidentally sent a sexually explicit email to a human resources manager and was bluntly described by a senior banker as "immature, irresponsible and unreliable". Everyone knows why they are hired. No one talks about what happens to them after they are hired.
Rich Hong Kong Chinese used to be hired for their pedigree, but today the sons and daughters of influential mainland officials or businessmen are the most sought-after to pursue the country's growing financial opportunities. Western investment bankers have long decided that the offspring of rich Hong Kong families are incapable of navigating mainland culture and closing deals in the country.
No one should discriminate against someone who belongs to a privileged family. After all, everyone needs to find meaning in their lives through gainful employment. However, very few of them have genuine ambition and uncompromising work ethic. A position in a prestigious bank is an escape from the dreary prospects of managing the family's factory on the mainland.
Worst of all, the skills to motivate and manage well-educated and smart people who are singularly devoted to making money fail to work on someone who already has enough money for several generations.
Most rich children leave before having to commit to senior management roles that require foreign postings and arduous lifestyles.
If money isn't truly central to your life mission, then you won't last long or go far in investment banking.
The current crop of rich children hires are used to drive initial public offerings of mainland companies because winning listings is a competitive and self-immolating business, much like a knife fight in a telephone booth.
This is the dirty secret: that listings have become so commoditised that almost anyone can do it. Here's why: legal counsel actually completes the stock exchange application process; investment research analysts produce the reports; and public relations firms manage the roadshow presentations.
The allocation and pricing of listings can actually be executed by high-school students with spreadsheet and internet training. Your most talented bankers are rarely found in the listing business, which also makes it the perfect place to channel and mine the connections of mainland princelings.
Another favourite refuge of rich children is private banking, where they were exploited to bring in money from their hapless families. Through the 1970s to the 1990s in Hong Kong, private banks felt they needed someone from a "good family" - a common expression and woefully misguided criterion that is still demanded today.
Back in those days, Hong Kong produced relatively few graduates who were qualified or sophisticated enough to know how to order fine wine.
However, more sophisticated demands from today's high-net-worth clients and stringent regulations have called for better skills from private bankers.
Hiring too many rich children can actually retard a financial organisation. Jardine Fleming was a leading asset manager and securities house before the 1997 handover. But it overpopulated itself with lazy local executives from wealthy mainland families and privileged British expatriates. Both were far too cosy to imagine or act on any ambitions.
Compare Jardine Fleming to CLSA, which was started by hard-driving and impoverished former financial journalists with the (this columnist was also a later shareholder and director).
Today, Jardine Fleming's business and brand have long been subsumed by its owner JPMorgan while CLSA has grown and prospered.
No one should be writhing in an apoplectic fit of moral outrage over what appears to be unfairness or even corruption. After all, banks may operate in a free market, but it's not a free world.
