This competitive advantage forces boutiques to compromise on quality. They must compromise either compromise on a graduate’s academic results, their people skills, or their communication/ English skills. Or in the most desperate cases, a combination of all three. The second time the boutiques get king hit by the big firms starts about a year after the analysts join. And this hit is even more painful financially.

Those analysts who have proved to be good are now targeted by the big firms for poaching. The graduates now have valuable on-the-job experience and are still relatively low-cost. The lure of the big brands is hard for them to resist – most originally applied when they were students, but were beaten by the graduates with better results. The big fellas also have deeper pockets and so can pay more. Hard for a young graduate to ignore the dollars with big HECS bills to pay. And finally, big companies have a greater variety of roles to offer.

Now they have work experience, the graduates have had a good look around the financial services industry. They know about alternative careers and what their options are. They now often want a particular role – and the larger firms are more likely to have what they want. What is the cost of losing a young analyst after 12 or 18 months? It’s high, though perhaps not as high as consultants who make a living out of ‘The Employee Retention Business’ would have us believe. They throw around some really scary numbers to encourage employers to buy their services. But it is certainly at least 50 per cent of their salary – so the hit to the small firm’s bottom line is well over $20,000.

Is there a way around the problem for these thousands of boutiques?

I believe the management of these smaller firms should shift their attention to talented undergraduate students, those with about two years to go on their degrees. At Abacus, we call those undergraduates ‘Smarts’, and seek to employ them at companies on a part time basis (16 to 20 hours a week), paying them around $17 per hour. The ‘Smarts’ program tries to identify the top 2 per cent of students, based on a combination of academic results, work experience and emotional intelligence.

The program was originally developed in conjunction with Macquarie Bank, which now has a lot of these talented young people working for it. The program only becomes valuable for employers if the students stick in these jobs – something 19 or 20 year olds are not known for! It’s important the part-time job gives them challenges and the opportunity to grow – if you’ve seen the research on what Generation Y want in a job, both of these factors are critical to them remaining with an employer.