Investment News

McKinsey fires investment bank researchers after policy breaches

McKinsey has fired or suspended several members of its investment banking research team as it investigates violations of its policies, in an embarrassing blow to the consultancy giant’s fledgling attempt to become a dominant provider of industry insights to Wall Street. 

Partners informed clients last week that the CIB Insights team, which sold data to corporate and investment banks, was halting work on their projects and it has since removed references to the unit from its website. A person familiar with the matter said some team members had been terminated while others had been placed on administrative leave, and that the unit’s work had been suspended.

“We have decided to pause the production of a banking analytical product (known as CIB Insights) pending a review into various personnel matters. Our review is ongoing and we are taking appropriate steps,” a McKinsey spokesman said. He declined to comment on the nature of any alleged policy breaches. 

One of the world’s biggest management consultancies, McKinsey established CIB Insights in 2019 to offer analytics to big financial services clients such as Goldman Sachs and Deutsche Bank on their advisory and trading businesses. 

McKinsey hoped to build the dominant industry platform by poaching staff aggressively from Coalition, a smaller firm whose league tables are the traditional yardstick used by many investment banks in external presentations and internal evaluations of their businesses.

CIB Insights achieved some early success, attracting clients including Credit Suisse, Deutsche Bank and Morgan Stanley, but had just six active customers by the time its work was halted. In recent weeks, clients were told only that the service had been “paused” pending an internal investigation, three people familiar with the matter told the Financial Times. 

One client said they had been told the probe was into unspecified breaches. “Despite pressing for more details on the ‘breaches’ we’ve been told nothing but that we will be advised in due course if the breaches impact us,” the client said.

A second client said they had not been given information about the nature of the investigation. A person familiar with the matter said McKinsey had found no evidence that employees had misused material non-public information, compromised the security of banks’ data or provided inaccurate information to clients. 

The setback to McKinsey’s ambitions comes after a series of blows to the reputation of the 30,000-person firm. The FT last week reported that it was close to an agreement to pay hundreds of millions of dollars to settle US states’ claims about the advice it gave drug companies at the centre of the country’s opioid epidemic. 

Last December, it agreed to repay tens of millions of dollars in fees to South Africa over alleged irregularities in some of its contracts in the country, and in 2019 it struck a $15m settlement with the US Department of Justice to resolve claims that it had failed to properly disclose conflicts of interest in bankruptcy cases. 

Kevin Sneader, who was appointed global managing partner in 2018, has tried to enhance its legal and governance teams and enforce compliance with its policies.

The suspension of CIB Insights represents a setback to his strategy of adding more data analytics to its core consulting offering.

CIB Insights is not likely to have been a material earner for the multibillion-dollar consultancy, however. Coalition, which works with more than 30 global corporate and investment banks, had revenues of just £35m in 2019, and a net profit of £11.4m, according to accounts filed with Companies House. 

Recent job listings described CIB Insights as being a team of McKinsey partners, data scientists, analysts and banking specialists in New York, London and Gurgaon in India. 

Among the “holistic benchmarking solutions” it offered clients was “granular” detail on costs, revenues, capital and headcounts across the industry, drawn in part from data contributed by the clients themselves. 

“The combination of the data made available to us and our deep expertise with top financial institutions allows us to deliver unparalleled insights regarding resource allocation within their financial institution,” one job ad claimed.

Additional reporting by Arash Massoudi in London