LOS ANGELES — Erin Baggott never dreamed of being a public finance recruiter.
That was her father, Richard’s, job.
"Growing up, I had no idea what a bond was and little interest in anything that involved finance or numbers," Erin said.
She ultimately changed course, joining her father's business and adding her own generational insight as public finance faces transformational changes wrought by technology and differences in the way that millennials work.
As with prior generations, workers in their 20s and 30s are drawn to public finance because providing financing for government projects and school buildings feels like working for the greater good.
Millennials harbor no illusions about the loyalty of companies that could lay them off if a recession hits. With technology skills in abundance, municipal bond companies have to compete with Silicon Valley finance companies that are often culturally a better fit for the younger generation.
According to 2015 data from the U.S. Census, 420,000 full and part-time professionals work in finance administration for state and local governments.
A music major at the Berklee College of Music in Boston, Erin envisioned a life as a music industry executive. After graduating, Erin had a choice: move to Los Angeles to work in the music industry or stay in Denver and work with her father.
An internship with her father in 2007, and the pull of her Denver hometown in the beautiful Rocky Mountains, cemented the decision.
“It wasn’t in my plans and I never grew up dreaming of being a recruiter, but I enjoyed the internship and it somewhat organically turned into a career opportunity,” she said.
"It was enjoyable to spend time with my Dad when we first started working together," Erin said. "For the first time, I saw him as someone other than "Pops," and he started to learn what I could offer his company as a younger business-minded individual."
It was natural, the 33-year-old Erin said, for her to start recruiting analysts and associates who were close to her in age. She also brought marketing skills and the younger generation's ease with technology. She went on to earn a master's degree in marketing from the University of Colorado in 2016.
The senior Baggott said he wasn’t entirely surprised when his daughter decided to work with him at Executive Search Placements, the firm he founded in 1989.
“I talked about the business around the house, all the time, as she was growing up; she learned the jargon that way,” he said.
Richard Baggott worked as a retail municipal bond salesperson, trainer, manager and brokerage owner before launching the search company. He started selling bonds in 1978, when they were still bearer or unregistered securities, and moved into recruiting in 1989.
His accomplishments as a recruiter include placing a 22-person capital markets team without word hitting the street.
A managing member of the company the team had abandoned called Baggott up and said: “Richard, you raided my entire team.”
Baggott said, however, that he doesn’t “raid” public finance firms. He has just created a network of public finance professionals by attending conferences and making cold calls. When someone becomes dissatisfied with a job, he or she gives him a call.
“If someone is no longer happy in their job — it is better for the company, if they do leave,” he said.
Companies don’t want dissatisfied workers, and who can blame public finance professionals for wanting to be in a position where they can advance in their career, he said.
The Baggotts' role in the recruitment industry gives them a bird’s eye view of the transformation the municipal finance industry is undergoing.
“Pops can speak better to this since my analysts and associates are primarily still generalists,” Erin said. She works with public finance bankers, bond attorneys, credit analysts and institutional sales associates.
Her father works with executive-level clients.
"It is incredibly important to be honest and trustworthy in this industry," Erin Baggott said.
She mentioned candidates who didn't fully disclose their background to her, or all the details about why they left a firm.
"That always screws them over and ruins what might have been the perfect opportunity for them, if they were only upfront and more honest," she said.
Many of the changes wrought in the muni industry have occurred as a result of the consolidation of firms, Richard said.
"Erin came up with a schematic of firms over the past 15-16 years, or so," Richard said. "All of those firms have either gone out of business or consolidated into four firms — that is a loss of 96 firms."
When Richard first started in the business, he said, there were easily 350 firms across the U.S. of varying sizes. Today, many of the local firms have been absorbed by larger firms.
"That is one of the biggest changes I have seen — large broker-dealers have turned into bank holding companies," he said.
As a result, the muni business is not nearly as profitable as it once was.
"When I sold bonds, it was not uncommon to see $20 to $25 spreads in most of the bonds in the secondary market," Richard said. "Today, you are seeing $7 and $8, the spreads have just narrowed tremendously."
The senior managers or managing directors who are now beginning to retire are used to seeing seven-digit compensation levels, and they are not seeing that now, he said.
The personnel remaining in public finance changed during the internet phase, Richard said.
"We had a lot of bankers with just eight-to-10 years' experience leaving and going to internet companies," he said. "And, even today, Google, Apple, and many of these companies are going after good public finance analysts."
Those analysts have spreadsheet training — and that experience is transferable, Richard said.
"Good analysts are hard to find now. It is a shame that so many are leaving, because with senior bankers retiring there are spots opening up and there will be great opportunities in public finance," he said.
The money may not be quite as good as it used to be for prior generations of bankers, Richard said, but with the consolidation, there will not be as many bankers to cover clients, so that might result in bigger paychecks for those who choose to remain.
And the country's infrastructure needs a lot of work.
"Schools need to be built, transportation, higher education," Richard said. "Without the personnel and companies, the issuers do not have as many people responding to their RFPs. That will help spreads — but only time will tell."
Changes wrought by technology-driven firms like Neighborly are breeding fear that existing jobs in the industry will be eliminated, said Susan Munson, a managing director and senior portfolio advisor at Government Portfolio Advisors.
“There are some people who are concerned that those firms are trying to eliminate the need for public finance people, by creating templates for bond documents, so they can circumvent The Street,” Munson said.
Those fears could be unfounded, said Munson, though she acknowledges that she does not know “how that all plays out." She thinks the industry will always need people.
Munson, founder of the Orange County, Calif.-based Fixed Income Academy who returned to banking this summer, said she has “become increasingly interested in [hiring trends] over the years as we see first-hand how students and graduates are using our programs to prepare current and future generations for jobs in public finance departments."
"As a generality, I am seeing a lot of opportunities in California, Texas and New York; and those cities with credit problems like Chicago and Detroit have been more difficult for all of our clients and candidates," she said.