Morning Coffee: Goldman Sachs partner tells you the worst thing about making MD. The hero of UBS bankers gets another massive payday

“When you’re junior, you’ve got senior people watching everything you do”, points out Rob Kaplan, the vice-chair of Goldman Sachs. But once you get up to managing director level, your fellow MDs have better things to do than check up on how you’re doing your job.  Which means that, although you presumably had a few things you were good at in order to get promoted in the first place, your weaknesses are now completely unmonitored. If you’re unlucky enough to have a few slightly destructive personality traits or business habits, then the highest ranks of management are where they can finally gain career-destroying scale.

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What’s the solution? Regulation by subordinates. Once you're an MD, Kaplan says you must take advantage of the fact that the people who are watching your every move are junior to you.  When you're in a leadership role, you should “learn to cultivate your subordinates as your coaches,” he says.  MDs should ideally be conducting three or four “skip-level” meetings a week, gaining insights on their personal deficiencies from vice presidents, associates and analysts.

Don't expect the criticism to be harsh. Kaplan doesn't seem to be suggesting that direct reports will tell you where you’re going wrong. Instead, he thinks that people further down the tree have less finely tuned boss-pleasing instincts, and might not see their careers as quite so intimately entwined with yours.  Rather than looking weak, he says that “an atmosphere of debate and disagreement” is one of the best ways to avoid the trap of excessive reliance on past success. As he puts it, ““The mistake many leaders make is, ‘I was very successful at this … and so whatever got me here is what I’m going to keep doing’”, but this tends to be the biggest reason for former high-fliers to suddenly hit a performance wall.

Of course, if your personal blind spots are in the general area of “bad at listening to other people” or “thin-skinned and massive ego” (two personality traits which are not entirely unknown at the highest ranks of investment banking), this might be a bit difficult.  Kaplan warns that it’s no good to “ask for feedback, then rebut it, and shut it down as soon as it arrives”.  It’s tough at the top.

Elsewhere, up until this week, Matthew Grounds was most famous for putting together the legendary “kangaroo deal”, an arrangement whereby the Australian arm of UBS’s investment bank would not be subject to firmwide bonus restrictions.  Now, he’s probably more famous for having left UBS to set up regional boutique Barrenjoey Capital along with Guy Fowler in 2020, and selling it to Magellan Capital for the equivalent of US$1.1bn.

Given his past performance in looking after his people, few employees will begrudge Grounds his generational wealth.  In fact, many of the beneficiaries of the kangaroo deal will have double reason to thank him.  Most of the original staff of Barrenjoey were poached from UBS Australia in the first place, and they will also be cashing out on their shares.  (So will Barclays, which took a stake).

As well as a feelgood story, though, this is a sign of where the industry cycle is at.  Buying an M&A boutique is something of a leap of faith – it’s one situation where you can be absolutely sure that the other side’s bankers are smarter and more motivated than yours are.  So people only tend to do it when they are very confident indeed about the revenue outlook.

Which, at present, they are. Troy Rohrbaugh of JP Morgan has said he thinks that 2026 could be a “top decile” year for M&A activity, while David Solomon of GS is getting ready for the long-delayed return of financial sponsors clients.  Although the Barrenjoey kangaroos might want to spend a little while counting their blessings (and money), they might end up being too busy.

Meanwhile …

Although the diseconomies of small scale are still there, and you need a few hundred million dollars of AuM to make it viable, it has never been easier to launch a small hedge fund, from a logistical point of view.  With allocators increasingly asking for separately managed accounts rather than funds, and with “as a service” offerings in everything from risk management to compliance, it’s now possible to be literally a one person shop. If you’ve got the investors, and the ideas, that is. (Business Insider)

Sergio Ermotti of UBS has apparently been quietly told that he’s not helping by making such outspoken criticisms of the regulators.  Lots of Swiss lawmakers actually agree with him that UBS is being treated unfairly by the too-big-to-fail rules, but they can’t be seen to say so publicly. Nevertheless, the board is open to the possibility of him staying on for another term as CEO. (FT)

Industry awards ceremonies are a bit of a bore for senior bankers, but they’re a great opportunity for less jaded juniors to feel like they’re part of something, and to make industry contacts. Despite this, firms which can’t say enough about the importance of apprenticeship and mentoring when it comes to the remote working policy seem to have got all stingy about a few nice dinners. (Global Capital)

Marshall Wace, Brevan Howard and TCI have all told their UAE employees to work from home during the conflict...  (Financial News)

… however, a local law firm has told its employees that “Dubai is safe” and that anyone who doesn’t come into the office will have their annual leave docked. (Financial News)

The increasingly fancy (and often free) onsite cafeteria options from the big Wall Street banks mean that Delmonico’s doesn’t get the same lunchtime trade as it used to. (Business Insider)

If you are looking for a side-hustle capable of generating decent Vice-President level money, there is a crossing guard in Vermont who makes $14,000 a month by sending subscribers a magazine about her days.  There is probably room for exactly one finance equivalent. (WSJ)

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