☰ Menu eFinancialCareers

Robbing MDs to pay associates

It looks like MDs are being sacrificed for the good of associates.

According to a mystery (and therefore possibly spurious) post on yesterday’s Deutsche Bank article, associate pay at DB is down only 20% on last year, while MDs are being paid down 80%.

Similar things seem to be happening at BofA, where Ken Lewis yesterday sent a memo with the following message for junior bankers –

I know that every associate in the company is disappointed as we have cut year-end compensation awards across the company…[but] higher-ranking managers with larger incentive targets took progressively larger hits in relation to more junior associates.

VPs and MDs at US firms confirm that associates haven’t done badly compared with senior bankers. “There’s a big difference between giving a junior guy zero and giving an MD zero,” says one. “MDs have stock from previous years and should be able to survive, but for juniors it raises a question of subsistence.

However, one recruiter questions whether associates have been paid well: “Most are too embarrassed to say what they go this year.”

Comments (29)

Comments
  1. “Robbing MDs to pay associates”?
    About time.

  2. At last, some moral leadership in the City, well done DB, looks like you understand the “new world”.

  3. At Dresdner Kleinwort, it has been the opposite as all associates in M&A were down 50 to 60% to 2007 whilst VP and above saw their cash component cut by only 30%!!!

    DK very poor bank Reply
     
  4. Dresdner’s such an old boys club. Unless you are a german from the right university and /or right connection, you are gonna get the shaft when it comes to pay.

  5. I’ll know 1st hand next week…

    From the floor Reply
     
  6. I am playing the smallest violin in the world.

  7. In good years, the MDs stand to make the most money in a hierarichal pay structure. And, so when the going gets tough, its only fair that they get to bite the bullet.

  8. Good grief – the complete lack of understanding of the economics of professional services is stunning. This is no moral dimension to this decision. Allow me to spell it out. The reason why an associate, perhaps a few years out of university, earns a multiple of the salary of a nurse or teacher is not because the IB associate is a vital and irreplaceable cog in the mighty engine of global capitalism. Many think that their academic credentials (phd, captain of the chess club) makes them special and worthy. The realty is they are, usually, highly numerate clerical workers who process the mountains of paper generated by the MD. The AD/D/MD are SALESPEOPLE. They are the circling sharks at the top of the IB pyramid. They too (and me) are also full of it, but guess what – it all starts with them. They bring in the cash so associates can one day live in West London or the West Village. Under paying producers is a very, very poor idea. If I was an associate at BofA (a house known for what exactly?) I would be deeply troubled if I knew that those responsible for getting my mortgage paid were now second rate.

  9. The contrast between Associates receiving bonus and MDs receiving none may seem stark, but bear in mind that bonuses where they exist are tiny (three or four figures for most).

  10. Well, anything else would be just unfair.

    MDs have been making millions for years, and will have saved up enough to cope with one bad year, no problem.

    Associates on the other hand.. it is frankly impossible to try surviving in London on a meagre 55-60k salary (ie like 3.3k/mth) – I rely on my bonus divided by 12 on top just for bare survival / subsistence in London, and if this “deferred cash component” is over half I’m screwed.

    Another Associate Reply
     
  11. Anonymous:

    “… bear in mind that bonuses where they i exist are tiny (three or four figures for most) …”

    What on earth are you talking about??? There is a LOT of rubbish posted on this site, but i THINK that this is the most confusing i’ve come across. Are you talking about retail branch staff?

  12. on the rocks – Do you realise most of the bonuses currently being paid out are sales/trading bonuses, not M&A ones? And in sales/trading, any Associate will be making REAL money with their OWN clients? Its not unusual for good associates to generate more revenue/P&L than many VPs and some Directors.

    Anonymous – bonuses will be three or four figures? Are you kidding? Only secretaries and back office will see 4 figures. All analysts will still get a decent 5 figures (apart from the 4/5 figure “stub” grads get having just been training a few months), and ALL associates will get either 5 or 6 figures. If this isn’t the case where you are then you’re being screwed over (ie are at Dresdner).

    An Associate who just got a 6 figure bonus Reply
     
  13. @on the rock: rewarding producers for their production is normal. If the MDs you refer to bring in no business or lose money to the firm, they should not be rewarded. Associates who still have done the work they were supposed to do should absolutely be rewarded for their loyalty, dedication and effort.
    @Another Associate: calling a 60k salary meager and barely sufficient for survival is an insult to the enormous majority of people who work and live in London on a third of your income. You are not talking about survival but lifestyle. Keep this in mind and lose the arrogance.

  14. Many firms have not yet announced their bonus figures. It is absolutely disgusting if Associates and Analysts, who have worked 80+ hour weeks for the last year are not being recognised and rewarded. We will simply move into something else, and work less hours, and get more pay.

  15. RM, you actually think the “enormous majority” of Londoners live on under 20k? You are deluded, the average salary across the country is 24k and for London it’s 32k. And its barely survival, its a sub-subsistent existence. 20k is poverty for London – look up a definition of poverty.

    Another Associate Reply
     
  16. Interesting debate.

    The thing to bear in mind, and something that is clearly being forgotten in many of these threads, is that MEAN AVERAGE figures on City compensation (or indeed any compensation) are of extremely limited use. Other statistical measures (MEDIAN?) are often more appropriate. Equally, we should look at the RANGE of compensation for employees at a given level (and across Tier 1,2,3, institutions, not to mention asset class). Add to this the variable of internal politics and individual performance, and you have difficult question to answer indeed. Furthermore, owing to the wall of secrecy surrounding compensation, much of the discussion is conjecture.

    For what it’s worth, I know for a fact that there are Associate level bankers (i’m talking sales & trading here) who have recently been paid approximately in line with Feb08. Approximate range $150k-$300k bonus; i’d imagine 75% of people with 2-5y experience at a Tier 1 bank are compensated like this.

    MD comp is more opaque (makes sense: fewer people are privvy to the numbers), but if previous “downturns” are anything to go by, they’ll be looking at a >50% cut on last year, even in performing areas.

  17. It has become very confusing or maybe there is a lot of dispersion across banks or sectors!?! Associates (sales / trading) used to make around 100k a good year and it is very difficult to imagine they would still make this in current situation, I would say below 50k or lower, unless exception. And close to zero for D and MDs as they generated no business and they live on a higher basis. VPs are in between. Any thoughts?

  18. Zeberline – “Associates (sales / trading) used to make around 100k a good year and it is very difficult to imagine they would still make this in current situation, I would say below 50k or lower, unless exception” – what awful 3rd tier bank do you work at where Associates only got 100k in a good year?!!!!

    fxo man – “For what it’s worth, I know for a fact that there are Associate level bankers (i’m talking sales & trading here) who have recently been paid approximately in line with Feb08. Approximate range $150k-$300k bonus; i’d imagine 75% of people with 2-5y experience at a Tier 1 bank are compensated like this.” – Sounds very accurate, thankyou for bringing some sensible numbers to the table.

    Tier 1, Front Office Trader Assoc Reply
     
  19. Tier 1 front office – in case you have missed the currency (a pity for a trader by the way) fxo man is talking in $ so he agrees with me in !!! And Tier 1 bank as well to answer your question and not in charge of coffees to be precise

    A senior associate who is up for VP promotion on a good year can reach 150k but i am positive the average is closer to 100k in bull market. So I believe this is much lower this year and likely below 50k… this is an interesting question and would like views on this as some dispersion amonst banks are likely here

  20. “A senior associate who is up for VP promotion on a good year can reach 150k but i am positive the average is closer to 100k in bull market. So I believe this is much lower this year and likely below 50k”

    That is utterly hilarious! Associates average 100k and at best 150k in a good year? Multiply your numbers by 1.5-2. I know many top Associates who during the good years on the way to VP were on more like 350-400k bonus.

    320k as an Assoc in 06 Reply
     
  21. 320k as an Assoc – 350k bonus is for senior VP or even junior D level in bull market… unless you were a trader in a very specific area but we are talking average or median here… but please give us some details

    You are joking… Reply
     
  22. you guys are all talking porkies!! Assocate on 350k my a$$!! You wannabees

  23. 2005-07 pay bands at tier-1 banks in sales/trading:
    Analyst: 40k-120k [2nd/3rd yr analyst at top places]
    Associate: 150k-300k
    VP: 300k-500k
    Director: 500k-1m
    MD: 700k+

    THAT is realist.

    Actual Realist Reply
     
  24. they total comp or bonus numbers???

  25. Total comp.

    In our hottest area, 2nd year analysts got 150k and 1st yr assocs 250k. Those were the days!

    Actual Realist Reply
     
  26. i think those are top top end numbers… i’d imagine something like structured credit sales at a top house in 2005/06 (JPMorgan perhaps?!)

  27. Man I got mugged, at BOA salary was 44k as second year analyst and bonus was 15k what a pittance, pure mugging and now I get fired before this year’s bonuses.

  28. Looks like I was far from spurious then… Associates today slightly down to slightly up. MDs crushed.

  29. think it’s curious that no one’s really pointing out that the biggest payouts were significantly favoring one department over the past couple of years: credit – Need I say more?

    I’m happy with what I got but what I’d really like to know is if this dept got their payout reduced by far greater proportion than everyone else.

    In comparison to businesses like FX / MM / Rates which have brought in stable income with far less utilization of banks’ balance sheets. Every boom year these depts. get told “Sorry credit made more, they are our growth business” and now we find out it’s all not really true.

    Open up the FT and it’s all been just erroneously optimistic MTM, upfront booking of 5-10yr PnL “arbitrage” trades, foolish assumptions on default risk… And getting paid more for it? Time for some fairness to the departments that didn’t have and didn’t take part in THAT sort of “luxury”

The comment is under moderation. It will appear shortly.

React

Screen Name

Email

Consult our community guidelines here