That is pretty much the call from Meredith Whitney who sees Wall Street firms reducing head count by 15%. Should we listen to her? For now she is one for two on big calls; right on banks and wrong (or early??) on muni bonds.
Earlier this week after news of the JP Morgan (NYSE:JPM) criminal probe I tweeted something like "it never ends with the big banks." While I don't want to sound too much like Paul Farrell, there really is a lot of bad stuff that goes on at the big banks and it seems like when they leave one bad behavior behind (or say they are leaving it behind) another bad behavior emerges. It really doesn't end.
I don't know about 15% headcount reduction versus any other number but as I think it about I think the entire financial services industry is going to be for a major overhaul in the next ten years.
There is a line of thought about it having become much harder to be President of the United States than it was in decades past because we now have access to way more information than we used to. I don't know whether the administration is covering up Benghazi (for purposes of this post it is irrelevant) but if it isn't covering that up there are plenty of things that it is covering up. How do I know this? Because all Presidential administrations cover stuff up. It's just that since about the time of Clinton or maybe the first Bush it has become much harder to actually keep stuff covered.
So it is with all the bad stuff banks do. I suspect they have always been very bad actors (read some history books and you will know that they have always been bad actors) but it has become harder to hide this activity--manipulations of various sorts, ripping their clients' faces off and so on.
Well, hiding stuff from their clients isn't going to get easier and I doubt they will start to get religion about doing the right thing so at some point they will lose clients. They can still exist as huge pools of capital but, taking it to an extreme, giant hedge funds don't need 100,000 employees.
There is also a high likelihood for changes in other parts of the financial services industry that are less certain to me. It would be logical to think the buy side (RIAs) would benefit but I don't know. Individual investors have more tools to do it themselves than they used but it will still boil down to time they are willing and able to devote to the task. So the question is will the combination of big changes in industry that they read in the headlines plus more tools at their disposal adversely affect the buy side? I really don't know but it is an important question.