Investment Banking Job Compensation Tightening Again

The boom in hiring for investment banking jobs, triggered in 2009 by rising markets and massive fiscal stimulus programs, has begun to wane. Like many politicians, the leaders at major banks anticipated a stronger recovery from the debt crisis and overhired during the 2009-2010 run-up, reports the Financial Times. Now, many investment banks are carrying too many professionals and have begun to trim their ranks, particularly in back office and operational roles that do not add to the bottom line.

Mind you, despite the serious job cuts announced by such firms as HSBC, Goldman and Royal Bank of Scotland, this still only represents between 2 and 5 percent of their global workforce.

Nevertheless, banks are under increasing pressure to both cut costs and bring down the compensation of those who continue to work for them. In addition, regulators and public pressure have forced banks to overhaul the way they structure pay for senior executives. Many bankers are now getting a greater proportion of their total compensation in the form of fixed salaries, and less as cash bonuses. Firms are tying bonuses to shares of stock that can either be deferred for several years or even clawed back in the event of an employee leaving. There are other signs that banks are reining in expenses.

At Goldman Sachs, for example, several hundred senior bankers were reminded that their higher compensation earned during the spike of 2009-2010 was “temporary” and would not be renewed, according to the Times article.

“Do I think that this will remain an industry where top performers are incredibly well remunerated? Yes, I do,” said one UK-based investment banking executive quoted. “But I also think average and even above-average people will be paid less.”

Recent business school grads and others who are looking to break into investment banking jobs at any cost, are also putting downward pressure on salaries. According to the Wall Street Journal, graduates in the U.K sent more applications to investment banking firms than any other business sector. And three-quarters of these applicants would be willing to work for free, for a period of time, just to gain the experience.

These grads know there is little hope for them without experience, and apparently Wall Street hiring managers are taking full advantage of their eagerness. One 30-year-old grad with an economics degree was reportedly offered just $30,000 a year to assist a private bank in Wyoming.

What’s your take? Would you be willing to accept what you know is a “low ball” offer just to get a foot in the door of an investment bank? Add your comments below.

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