Working For Diversified Financial Firms

Citibank sign on building
Diversified financial firms offer career advantages. Justin Sullivan/Getty Images News

In choosing employers, consider the trend towards financial industry mergers, which has important implications for career management. Large, diversified firms offer both advantages and disadvantages compared to smaller, more focused companies. Moreover, the assessment varies based on who you are and where you intend to go with your career.

Gaining Experience in Diversified Firms:

Working in diversified firms can be an excellent way to gain firsthand exposure to a variety of functional areas and career paths, whether or not you actually change jobs and responsibilities.

Perhaps you are still searching for the type of job that represents the best fit. Alternatively, you may crave variety for its own sake, and be eager to try on a new role every few years. Moreover, you may have ambitions to enter senior management, in which case "getting your ticket punched" in a number of functional areas often is a prerequisite for advancement.

Of course, you also can broaden your experience by changing employers, but this is typically disruptive to your life in some manner. Besides, it usually is much easier to shift career direction while remaining within diversified firms, where you have a track record plus colleagues and supervisors who can vouch for your adaptability. On the other hand, outside hires normally are recruited to fill a position similar, if not identical, to one that they already have held.

Dominant Culture:

In diversified firms, there probably is a dominant culture, management model or line of business.

If one firm had acquired another, odds are that the divisions descended from the former would be dominant. In a firm created by a true merger of equals, it is much harder to venture a guess. In any case, do not be misled by the current name of the company. Sometimes the weaker firm has the stronger brand name, which is the one retained by the consolidated company.

Assessing dominance may not be a straightforward process, and the answer can vary based on the context and the methodology. For example, nearly 30 years passed from when Merrill Lynch acquired a capital markets division (i.e., investment banking and trading), to its first chairman and CEO whose career was rooted there, rather than in the firm's traditional retail securities brokerage business. Meanwhile, pay scales in the capital markets division generally were much better than in retail, for comparable job categories. Which division you judged to be dominant depended on your evaluation criteria.

That caveat aside, be aware there are potential career ramifications if you choose to work in a division that is not the dominant one. As noted above, for jobs that are otherwise similar, compensation plans may be more generous in the dominant division. Talent groomed in the dominant divisions may be favored for senior posts in the corporate offices of diversified firms.

Discretionary Bonuses:

There are further considerations if the compensation plan for your job includes a discretionary bonus that is linked, at some level, to the profits reported by your department, your division and/or the entire firm.

In diversified firms, the dominant divisions may have the internal profit measurement systems skewed in their favor, increasing their bonus takes, all else equal.

Even if the internal profit measurement system is unbiased, having part of your bonus driven by firm-wide profits (and thus, effectively by the results of divisions other than your own) can be either a plus or a minus. It is a plus when your division underperforms the others, and a minus when it outperforms. If total corporate profits are consistently dragged down by results outside your own division, your long-term compensation may be lower than if you were in a solid standalone firm in the same line of business.