The Biggest Opportunity Of 2021

The Biggest Opportunity

We live in unprecedented times.

The great resignation is now a full-blown avalanche of departures, leaving companies scrambling to secure their talent base.  In today’s knowledge-driven economy, their very survival depends on it.

Let me give you a couple of examples, all hot off the press.

A friend of mine left his asset management job in September, having negotiated a 30% pay rise with a direct competitor.  Two weeks later, his former boss also resigned to join yet another competitor.

As a result, my friend is now in talks to go back and take his old manager’s job.  In addition to a major promotion (say hello to the ExCo!), there will be another 20-30% pay rise involved – on top of the raise he had already secured.

Another friend runs a reasonably large (think 600+ people) division at a large commercial bank.  They currently have 100 vacancies and are struggling to find more than a couple of candidates.  Resignations continue outpacing hiring and everyone is working overtime to make up for the staff shortfall.

Investment banking is no different.  With deal activity at historic highs, the mass resignations could not have come at a worse time.

Every single team is looking for junior (read: analyst to VP level) bankers.  Every other team is looking to add directors and possibly even MDs.  A headhunter’s wet dream, playing out in real life.

Candidates who wouldn’t even get a second look a couple of years ago are now getting multiple competing offers from top shops.  Even the HR teams are bending over backwards to accelerate the hiring process.

Whether it’s professional services, blue-chip corporates, or even front office hospitality staff, the labour shortage is real – and really painful.  Here in the UK, it’s been further exacerbated by Brexit.

Which is precisely why you should act – and quickly.

A Case Of Self Interest

Long-time readers of this blog know that I’ve got a very cynical pragmatic view on the relationship between capital (i.e. your employer) and labour (i.e. you).

No, loyalty doesn’t pay.

No, working harder isn’t the way to make more money at work.

And nothing pisses me off upsets me more than hearing people like Indra Nooyi (former CEO of PepsiCo) tell people they should never ask for a raise.

If you believe her, then make sure to ping me an email – I’ve got some swampland in Florida to sell you.  People who (allegedly) don’t ask for raises don’t end up making $30m a year.  Trust me on this one.

In fact, people who don’t ask for raises don’t even get paid anywhere close to the market rate.

Instead, your employer will wax lyrical about the virtues of loyalty and the bright future ahead before finally coughing up a 3% annual raise.

Except that in today’s environment, a 3% raise is actually a pay cut. US inflation now stands at 5.4%.  The UK isn’t far off.  And experienced inflation is far, far higher.

From housing to used cars, prices are rising at double-digit rates.  Good luck keeping up.

It’s not just the cost of living either.  There’s yet another, much more prosaic reason to be aggressive in salary negotiations.

At some point, the labour market environment will normalize.  Those who have negotiated higher salaries and promotions will be starting off a much higher base.  Everyone else will be answering awkward questions.

Did you really fail to get a raise or a promotion in the hottest environment in history?  What is wrong with you?

Moving The Needle

In personal finance, we like to talk about the importance of low fees, savings rates, and the importance of compounding.

No doubt, all three are important levers that will help you reach financial independence.  But the most important lever by far is the absolute amount of money you make.

Going from $50k to $100k doubles your savings even if you keep your savings rate unchanged.  And there’s something really magical about increasing your income – all while keeping your spending the same.

That’s how people accelerate their journey to FI by years and decades – but it all starts with getting that damn raise.

The blindingly obvious way to go about it is to find a new job.  Vacancies abound, and once you do have an offer in hand, your current employer will most likely counter.

It’s amazing how generous companies get once you actually have an alternative option.  Budgets appear, approvals are secured within days, and promotions no longer take years to get.

In an environment like today, your boss has the choice of either paying up or doing your job until he can find a replacement (and it won’t be soon).  Guess which one he will prefer?

And if you don’t get a counter, the worst that will happen is you’ll just take the new job you’ve been offered.  I moved companies four times in the course of a relatively short career.  Not every move was straightforward – but every single move has paid off in spades.

The other opportunity at stake here is to make a functional switch.  You can move from corporate development to consulting, from consulting to investment banking, or from investment banking to PE / VC.  All lead to step changes in compensation.

There are ways to play this game even if you want to stay with your current employer.

You could ask for more holiday, better working conditions, paid professional education, a sabbatical, a two-year break to get your MBA, and anything else that you think would improve your lot.

Looking for a new job hardly tops the agenda for most people.  It’s uncomfortable, it requires putting yourself out there, and there’s always the risk of being rejected.

But in today’s market environment, it’s the most powerful money move you could make.

As always, thank you for reading – and good luck!

About Banker On Fire

Enjoyed this post?

Then you may want to sign up for our exclusive updates, delivered straight to your inbox.

You can also follow me on Twitter or Facebook, or share the post using the buttons above.

Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.

Find out more about me and this blog here.

If you are new to investing, here is a good place to start.

For advertising opportunities, please send an email to bankeronfire at gmail dot com

28 thoughts on “The Biggest Opportunity Of 2021”

  1. Agree that moving jobs pays. Chump change to the likes of yourself but I work in utilities currently earning £62k pa with a 15-20% bonus, mileage, 10% matched salary sacrifice pension contribution and share save scheme. All of which I make use of with a 72% of earnings total savings rate.

    Pay rises have been incremental over time but have always come with job moves. I have found negotiating upwards when you are already an employee has never worked, but always secured decent raises when moving companies.

    The utility industry is in a different place currently with wholesale prices causing businesses to close and flooding the market with skilled applicants seeking work. I count myself lucky to work for a company that generates its own power. The amount of people I’ve seen in my career waiting for a promised promotion that’s will never come was upsetting. Some people have a loyalty problem, believing it’s better to stay put and be secure. But I’ve seen enough examples of “restructuring” to know that it doesn’t go both ways. I always say to people look out for yourself first but have learnt to recognise some people will not move until pushed and then it’s often into a worse situation rather than a career development move.

    1. Hi Tom,

      It helps to see a comment from someone working in the same sector as me and what’s more surprising is that you have a 99% similarity to my pay and benefits package. to benchmark how well I’m FIREing year-on-year, I target a savings rate of 50% of my net monthly paycheck (i.e. excl. pension contributions) with a hypothetical 10% annual interest rate uplift.

      I also work for a company that produces it’s own power, but in contrast to yourself, I have managed to get all my pay increases through internal moves. I avoided 3 “restructurings” in 9 years, but I think it was due to a combination of my skill set and the fact that I am ~10y younger than my peers (hence more growth potential?!) in a sector with a relatively high median working age and low churn rate (thanks in part to the generous DB schemes which incentivise “staying in the game long enough” behaviours).

      I did look for external opportunities, but I usually found roles which were either too junior or required very specialised senior positions. Hence, it is my impression that that it is a lot easier to move companies more often in a service based industry (finance, consulting, etc.) than it is to do it in a manufacturing/industrial based one. I am very curios to find out more about your experience of moving companies. Nevertheless, I implemented the general “move every 2-3 years” strategy in a different way, through internal secondments which led to permanent positions in other teams and the ability to move to the next pay scale.

      I agree with the point you make about it being an influx of skilled applicants seeking work at the moment. I think this is mainly due to the closure of large power stations and limited ability of the RES sector to absorb this influx (operations and maintenance requirements are different for these technologies).

      1. Alex, it’s a good industry to be in, quite recession proof, everybody needs power.
        My savings rate includes my employer pension contributions.
        Did interesting point on low churn in management. There are a lot of people coasting out their final decade due to the db pensions they are on, which makes climbing to a certain level difficult as people don’t leave the roles. In the next 5-10 years there will be a mass exodus of the old guard and I’m hoping opportunity will start to present itself. I’m taking the opportunity to diversify my income streams. I have a couple of personal training clients and am currently undertaking a diploma in regulated financial planning. Figure use my hobby to advise others and get paid.
        I’m 38 next month. And only really started on this path at the start of my 30’s. Across all my investments I’m sat on approx £200,000, I’m heavily invested in and contributing to my pension currently (salary sacrifice makes it the best place to save) I’m not quite at the annual limit but 33,000 a year is invested there, £4000 into my LISA £150 a month into my ISA, £50 a month into SMT investment trust, and each month left overs go into the ISA. As I get into my mid forties I’ll switch to load up accessible cash to bridge a gap between pension access and wanting to retire/go part time.

    2. I think that’s a great package actually, 2x+ the median salary in the UK and you sound like you know what to do with the money. I’ve seen bankers clearing £300k+ who have nothing to show for it when they are 45, other than an interest-only mortgage and some cool Instagram pics.

      The loyalty “penalty” is there, it’s real, and it’s quite punitive. A lot of it has to do with the fact that your manager doesn’t usually have the authority / ammunition to increase your pay as much as you would like.

      However, when you resign, you actually give him (or her) that ammunition. “If you don’t increase my group’s budget, this person will leave”. It’s amazing how many doors that other job offer can open.

  2. Another reminder that keeping a good network is vital to successful FIRE. Both internally, with your line management gatekeepers and heads of other departments, and also externally. The importance of knowing your worth and current (job) market rates can’t be overstated.

    1. 100% agree. It’s very intuitive in IB (as your pay is ultimately determined by your ability to grow and monetize your network). But also applicable in pretty much any career out there.

  3. Chris Carrington

    Sounds like good advice! Why do think, or what is the reason for the Labour shortages you mention above? I note you say brexit has exacerbated it (I don’t disagree) not necessarily caused it.

    1. A combination of factors.

      Massive stimulus causing the economy to reopen far faster than expected.
      Folks re-evaluating their priorities post-Covid
      Compensation not being nearly attractive enough given the experienced inflation and how hard people work these days

      Will take some time for market forces to work through and recalibrate the supply and price of labour IMO

  4. Alas, I have wondered what may be wrong with me! Two years ago, the newly appointed boss asked me to take a role on secondment in a different part of the business when somebody left. Since then, I have been trying to get this made permanent as my old role does not appear to exist anymore, although it has not been formally communicated as such. All I get is promises and difficult conversations when I bring it up. I have also applied for external roles, but I only managed one underwhelming offer this summer. I keep applying but competition is fierce in my field and all decent jobs are still in the City (I live 3 hours away). I thought that doing a fantastic job (rewarded with a good bonus but meagre pay rise) may at least give me some stability, but I see no choice but to try and secure a new role.

    1. Yes, a competing offer is kind of like pointing a loaded gun on someone – you better be willing to use it otherwise you lose all credibility

      Can see how the prospect of a 3-hour commute would make a new job unappealing. That being said, at least you are not incurring the London cost of living!

    1. Thanks BD and really sorry to hear that.

      A double insult given what we’ve just gone (and continue going) through…

  5. goodmoneygoodlifecom

    I’ve read somewhere that the lifetime value of one’s career is approximately doubled if they switched jobs every 2 years vs. if they were to stay at one company for their entire career.

    Having switched job once for a +40% raise in the 1st year, and ~+90% raise (when compared to the job I quit) the 2nd year based on equity, I definitely see the validity in switching jobs and moving around.

    If not the financials (which is really, really good), it’s a great way to explore the world, different working environments, and doing something new and somewhat interesting for a while.

    I am curious if in the UK they check whether or not your competing offer exists and check what your current salary is?

    I may or may not know someone who’s a friend, and definitely isn’t me, that have bluffed about competing offers when finding a new job to land an extra $40k/yr. In the US, it’s against the law to check your current salary / competing offers in some states.

    1. I don’t think anyone is “permitted” to check your competing offer. That being said, bluffing can be dangerous. If you threaten to resign, you better be prepared to resign – otherwise you may find yourself with no job.

      As far as the new company asking for your existing comp details, I’ve seen that happen in the UK. May be specific to investment banking though…

  6. Well, thank you for those eloquent words or advice. Those words resonated with me. I am stuck in a dead in job as my company has fired lots of management and using a strategy of employing team leaders who answer to the manager saving the company money on employment fees. It’s scary moving jobs it the “What if” factor.

    I have read the book twice “Be so good they can’t ignore you” by Cal Newport and feels like I am on the road to building career capital and going out there to be the wolf and not the dog.

    I have some debt to clear and they will be cleared by the end of the year. That had accumulated during the year to pay for a course and then afterwards there were two emergency which has set me back.

    I have been watching the Netflix “Squid game” and boy from watching the Netflix series have put me off getting into debt for good. It’s a must see Korean drama.

    I have been reading the suggest book “What real estate investor needs to know about cash flow” by Frank Gallineli(SP!) and this book has taught me about analysis and the importance of analysis and not to use a scrap piece of paper and pencil to make a decision but to create an external scaffolding of notes. Which can be distilled and expressed and used as a vehicle to negotiate.

    So I will be creative and show my worth and so good they can’t ignore me(pun intended :-))


    1. Cheers Cleophas.

      I am just about to finish season one of Squid Game. I wouldn’t normally watch something so gory, but the social satire is off the charts and makes up for the violence.

      It’s not just debt, either. Reminds me of many well-paid professionals who are sacrificing their health and families just to make an extra buck…

  7. The clarity of this post is just awesome, BOF. The situation is the polar opposite of the GFC when everyone was clinging onto their jobs like driftwood from the Titanic.

    Given the last 13 years, I can’t help but cheer for labour turning the tables on capital for a moment. My only issue is that I’m now reliant on capital and vulnerable to big hikes in the cost of living as a lean FIRE-ee. Ah well, First World Problems 🙂

    1. Thanks TA. For what it’s worth, I started in banking shortly after the GFC and have lived through the days when banks would routinely cut 10-15% of their workforce.

      Folks showing up on Monday morning with their badges not working. Others would notice their blackberries stopped working over the weekend, knowing full well the Monday commute in is their last. People typing up their leaving emails and hitting “Send” before they headed up to the proverbial meeting room floor (where HR would mete out the cuts).

      Anyone who’s been in the labour market since 2015 or so doesn’t remember any of this. They are also much more likely to move jobs more often, as opposed to the “older” generation who are scarred by that GFC experience.

      And yes, it is ironic that over time, labour transforms into capital and starts rooting for the shareholders, not the employees!

  8. Pingback: Weekend reading: Boom! Shake the room - Monevator

  9. I’ve come out of the last couple of years significantly worse off…my income is back to where it was 10 years ago in real terms. IR35 was a killer for me, 1000+ day rates all gone, and now back in “ok paid” employment. Also had to move far out of the South East, which became unaffordable with the slashing of income.

    However, it is eye opening being an employee again. I have 4 kids, so have 0 incentive to earn more than 50k post salary sacrifice. It’s a 75% marginal tax hit at 50-60k, which as a single income family, is something I can’t face. I prefer to take a time off work unpaid and spend with the family. The tax system is a productivity killer.

    Another plus about being an employee, the goal changes to doing enough to not be fired, rather than excelling. So I can pull in reasonable money effectively working part time. But my employer and client obviously doesn’t know this…expectations outside of FS are low…

    1. Sorry to hear that.

      I haven’t experienced IR35 myself but heard it’s done wonders reallocating contracts (and profits) from individual contractors to large outsourcing corporations. Not surprised at all, very much in line with all the BTL changes that favour institutional landlords!

      Good to hear re: lower expectations outside FS. In finance, somehow everyone chooses to work like their life depends on it (hint: it doesn’t…)

  10. Very interesting post, thanks. I think there a few exceptions per below (which I expect you’d agree with!)

    First, loyalty can pay when you benefit from senior patronage. These should ideally be symbiotic relationships where the senior benefits as much as the junior (i.e. you are not reliant on senior benevolence and only need them to act in their own interests).

    Second, people can underestimate how much of their performance is driven by the milieu in which they operate (or to invert, they overestimate how much of their performance is driven by their supposed exceptionalism). You may not perform the same as you do currently in a different organisation and generally lower performance means lower pay. A typical example in banking is people being less willing to take your calls when you are from [boutique abc], alongside reduced firm infrastructure / capabilities.

    Third, changes in industry (or functional switches as you call them) can often require pay cuts which may or may not pay off in the long run. But there is also value in doing a job you enjoy more in the present vs potentially being able to retire earlier and enjoy yourself more in the future.

    1. Yes, all good points.

      That being said, on your first point, if you have the right level of senior support (and they are REALLY dependent on you), you will get paid competitively. It might not be today or even this year, but it will happen. But if a few years go by and the promises never materialise, then you are just being strung along…

      But overall, I agree with you. Have seen some folks move platforms and lose their golden touch, which turns out wasn’t “their” to begin with!

  11. Pingback: The Sunday Ride #8 - You are likely to leave your job & Bank of America's Crypto Bible |

  12. I’m also in the same sector, with broadly similar benefits (no bonus, no share save, but the equivalent on top in base pay). Possibly I load in slightly higher, but that’s partly because my previous background is on the Oil & Gas side.

    I’m at the same age and stage as you Tom, and the approach seems right to me. Definitely I’ve found opportunity comes from investing heavily in yourself and looking strategically at the next steps for you. The book “Power” that BOF recommended is absolute gold if you are looking at opportunity. I’m currently working for one of the best for pay and conditions, so looking currently at internal, not external leverage.

Leave a Reply