UK
With bonuses being slashed anything from 50-80% this year and UBS, Morgan Stanley, and Credit Suisse all amending reward structures to the probable detriment of bonuses in the near future, is now the time to increase base pay?
According to equities bankers questioned by search firm Marshall Warburton, it is.
“Below main board level there has been little increase in basics in recent years and they remain well below the levels in industry, commerce and some of the professions,” write the report’s authors.
With doctors and headteachers on six figures, are bonus-less bankers in danger of being underpaid?
Given the hours and level of commitment required, why would anyone work in investment banking for anything less than 200k? The industry has a choice: increase base pay or watch everyone go and do something a little less demanding instead.
This piece is so true. I have been wondering this in the last couple of weeks. Base needs to go up to reflect the amount of work being done!
Rather than increase Basic pay, we need to demand commitment, extra hours (without overtime), greater productivity etc, however increments can be in single digit or completley done away with for a year, so that there is a freeze on the salary bill. With inflation coming down nobody may mind it (you dont miss what dont have)!
M&A monkey on six figures, or junior Doctor on 6 figures? Choose.
Complain about losing a six figure salary this year, please give back the surplus from your 7 figure salary 10 years down the career road.
Well below what levels? The average annual salary in this country is about 25k. That’s a mean, skewed by high earners. The MEDIAN salary is about 15k. After putting aside the idea that banking is somehow harder, more stressful, longer hours etc than any other job you can think of (not seen many bomb disposal experts on 6 figure salaries have we), now that the rate of value creation in this industry has turned out to be a lot less than it once was made to appear, shouldn’t bankers be paid less?
Relax. Decent bonuses will return within 5 years. When the economic cycle rebounds, and once the financial industry has found its next credit loophole, the good times will roll again.
Hmm … some of these comments really do reflect the unrealistic expectations and skewed self-perceptions we have all allowed ourselves to evolve into. Agree the point about value creation ….. it really just isn’t there for 80% of folk.
Whoever wrote this article is in cuckoo land. The very reason the economy is going to “TANK” is because there aren’t going to be bonuses, and there aren’t going to be pay rises. The whole of the south east of England piggy backs of the city, and most of it simply refuses to accept that it has come to an end. The bulk of city folk are of little use in other industries, so when offered a pay cut, they will take it. They cant be Doctors, nor Head Teachers, so the comparison is daft. For years, bankers in Europe – Belgium as just one example were badly paid in relation to other industries- this will become the new model. Banking- a Boring Badly paid job !
Salaries reflect demand and supply dynamics. I doubt that the number of people that will decide to switch careers and leave the Investment Banking sector for less demanding/lower stress jobs will outweight the decrease in demand from Ibanks.
On the other hand, anyone that argues that banking salaries or salaries of other professionals like doctors, lawyers, etc., are comparable to the average annual salary in the country forgets that these people: 1. have spent years studying (and spending money rather than getting paid) to obtain qualifications 2. not only work long hours (12 hours a day plus), but have to be available at short notice (evenings, nights, weekends and holidays) 3. work under pressure 4. can easily get fired if they don’t perform.
I am still not convinced why investment bankers should be paid significantly higher than other professionals. No other profession rewards mediocrity like investment banking. To suggest that investment banking requires more commitment than other professions is naive to say the least. Investment bankers are no more technically qualified than anyone else. They have almost non-existent management responsibility. They haven’t been accountable for their results and still can’t come to grips they have been wrong. Most wouldn’t make it in other professions where the full range of skills are required. Many investment bankers earn more than people leading organisations with 1000s of staff. Let’s face it, junior investment bankers earn more than the prime minister! How is an investment banker that plays with a valuation model think they are worth hundreds of thousands of pounds. The industry needs a massive reality check and brought back down to earth. This should start with more reasonable pay levels. After earning massive pay + bonuses during the boom, why should pay reach the same heights now? You can’t have your cake and eat it too. Be humble & thankful for your previous massive bonuses.
Investment bankers work long hard hours, and besides are the drivers of one of the world’s major financial centres. Its a lot of responsibility and they have to get it right. Now such an argument suggests that they are worth their weight in gold, but………… Reality Check is 100% correct. Firstly, there is no responsibility to the investor, especially as they are happy to invest in Madoff-type ventures, without doing their homework. Secondly, the level of intellect required to do the job should not command that type of money, believe it or not there several careers which demand more intellect under pressure and pay less. Try Surgeon, Prime Minister, or even the Rocket Scientist and the Neuro-surgeon. So as Reality Check points out, a lot of Bankers need a reality check. For Bankers, 2009 equals, more job losses, no bonuses or toxic asset bonuses, wage cuts….. Bankers will be exposed to the same high risks that have undermined their operations and brought the financial system to it knees. Its going to become less appealing to the money grabbers, only those who genuinely love banking will stick to it…
let’s face it. most banking services are not really needed by the outside economy as much as by bankers themselves. if we search deep down in our souls and conscience we can secretely admit to ourselves, we can admitt that a lot of financial “innovations” and products/ services are for the primary purpose of creating high fees for the banks and bankers.
If the world economy were to be without investment banks from tomorrow morning on, it would survive (ignore the transitional unwinding and untangling bit for a moment) – that would not be the case for commercial banks.
So while banking in general will always be there, there is actually not really an economic need for the typical reader of this weekly. They were tolerated while increasing GDP numbers in the modern service economy, but once the financial mess attributed to them starts to really hurt mainstream economy, they will inevitably ask the question, why not cut them loose. Sent them off to become wine growers, math teachers and internet entrepreneurs.
Frankly 90% of stafff in investment bankers are not producers, they’re either juniors hanging on the coat tails of the experienced, or in true support functions like IT and OPs. Producers generating low -capital, non flow revenue, should be paid well, but the problem comes when banks use capital they haven’t got or people think that a client calls them as opposed to the firm. Most of these people couldn’t survive in the outside world..I left and survivied and cant find good staff from the banks.
“Banking- a Boring Badly paid job !”
Sounds about right.
People will continue to be disproportionately well-paid in banking.
Why?
Because the IB Markets model will contiune to generate revenue. Granted, the issues of the last 18m won’t go away overnight, and will continue to hurt the bottom lines of institutions as a whole, BUT this simply means that banks NEED to retain high quality staff (appreciate this is a relative, not absolute measure) to generate some of the revenues to offset this (much of this can be low credit risk).
Take flow trading operations: e.g. FX, cash equities, cash bonds, commodities. Mature business models with an established salesforce will continue to bring in the market “organic” business (real money, corporate etc), and cross bid-offer spread. Add to this skilled traders who can further leverage this client business, not to mention revenues from (first generation) derivative business in a similar manner. As well as FO personnel, support staff (IT, Ops, Risk etc) are needed to allow the machine to operate efficiently.
The point i am making is that the business i describe above IS NOT DEAD, and banks will still pay up to hire/retain the right people needed to make it work. Watch and see.