Terra Firma has taken a radical approach to ensuring that it doesn’t attract graduate applications from the sort of cookie cutter recruits that apply to large investment banks – it has cut salaries and eliminated cash bonuses for the first five years of a new employees’ tenure.
Now, starting salaries for those joining its graduate programme are £35k ($42.6k) – a 50% reduction on previous years – and there are no cash bonuses. There is, however, something far more exciting for young people struggling to get a foothold in London: Terra Firma will put money aside so that its young employees can put a deposit down on a house.
How much money? Speaking at a conference this morning, Terra Firma founder Guy Hands didn’t say exactly. He did say: “We’ll pay for a deposit on a house in London…40% of the average cost of a house in London – in a good area.”
Average house prices in London are £473k across all areas, rising to £1m+ for flats in Notting Hill. Hands may not have Notting Hill in mind for his juniors, but assuming they buy a house costing £500k, this implies a “gift” from Terra Firma of £200k, or £40k a year.
This makes good financial sense for Hands, who’ll be saving £35k a year on salaries and won’t be paying any cash bonuses. The move follows a cut in salaries across Terra Firma at the end of last year.
Hands presented the new pay structure as a way of repelling the wrong kind of applicant. “We used to try and pay what Goldman Sachs does, and also give cash bonuses,” he added. “But we decided that it wasn’t attracting the right person – it was attracting people with short-term aims.”
If this seems like a way to turn off applications, it’s worth noting that Terra Firma can afford to do so. Last year, it received 3,000 applications for the handful of graduate roles that it offers.
Hands said the new ‘house deposit Terra Firma’ wants to hire graduates who demonstrate an openness to learning new things, emotional intelligence and a longer term outlook instead of an interest in earning lots of money. To this end, it’s will be eliminating minimum academic requirement for the 2018 intake. Terra Firma previously asked for a 2.1 degree, but will now accept applications from all academic backgrounds. This is all part Hands’ philosophy that academically gifted students are not necessarily the best recruits and many have to “unlearn” their education in order to succeed in the real world. Hands himself is dyslexic.
“I don’t want to discourage you,” Hands told the London School of Economics Alternative Investment Conference today. ‘But it will be your personality and behaviours that will matter much more going forward and you should build this up prior to leaving university. Join student societies, get work experience, do charitable work, community forums – demonstrate that you know how to think outside of the classroom.”