Attitudes to money in the City of London are changing. Where once seven figures were seen as barely enough to get by, today's analysts and associates have much more modest expectations than their predecessors. They're also much better at living on a budget.
"In ten years' time, I'd hope my net worth to be more than £250k," says one first year IBD analyst at a European bank in London modestly. "Money doesn't mean much," says another associate. "You just need enough to be comfortable, not to worry, and to go on a few holidays."
Headhunters say bonuses are to blame. "Ten years ago, people got huge bonuses. They were tied to performance and you could make loads. People were pretty ruthless and the saw money as a projection of their self-worth," says one trader-turned-headhunter. "That's changed. Today's it's much more about salary. Once you're aged 30 plus in a front office role in the City, £250k a year is the new baseline - survival money. £500k is enough to live the good life."
With the median salary in the UK £28k and the median salary in the City of London £48k, £250k a year sounds outrageously high. One fund manager, says it is. "£250k is insanely high. To say that's your baseline is simply to signal your status as an over-pampered overpaid prima donna."
The head of HR at one European bank in the City, says her mid-ranking staff have learned to get by on less. "Two or three years ago, we found that our people earning below £250k were struggling. They were still living in this dream that they'd be making mega-bucks in future and had geared their lives up on that basis. Things started to come unstuck when it became apparent that wasn't going to happen."
She says today's analysts, associates and vice presidents have far less rose-tinted expectations of future pay. "They don't have those lifestyle expectations. -When we did a postcode analysis on where our people live, they were surprisingly broadly dispersed. People are prepared to live further away and in cheaper areas to cut living costs."
It helps too that bankers today are more likely to have working spouses. "In the past you had professional wives who were at home," says the head of HR. "That sounds sexist, but it was often a reality. Now you have households with two incomes."
Headhunters say the re-basing of pay expectations is a factor driving the juniorisation process. As senior staff with grandiose expectations disappear, pay can be brought down to a more normalised level. Junior bankers agree: "Old school bankers still have the mentality to squeeze out every single penny and get the hell out. Those senior guys have to move out from the banks asap," says one.
However, some in the City suggest the combination of lower pay and high London house prices favours junior bankers with inherited wealth, or whose parents live in London. "There are those who come from 'banking families' where the dad has been a banker," says one ex-J.P. Morgan MD. The baseline is higher for bankers from Continental Europe, points out another London finance professional: "They'll have a second home where they are from. That needs to be paid for, unless they inherited it."
Retirement money? Four times the value of your primary residence
With pay falling, early retirement is mostly out of the question.
The fund manager we spoke to said he'd run some calculations and reached the conclusion that in order to retire you need net assets worth "four times your primary residence".
"Firstly you need that primary residence, mortgage-free," he says. "Then you need three other properties of approximately the same value to sustain the costs of your primary residence and additional living costs."
With the average London house worth £531k, this implies you'll need to amass £2.1m to be within a sniff of retiring.
One former MD at a European bank says his expectations of "retirement money" have diminished with time. "When I started out, I was working towards a much larger number than I aspire to now. Nowadays, I just want the flexibility to do what I want, when and how I want - but with a very practical grounding. I just want to put my girls through school and to provide a good life for my family and friends."
Photo credit: The Golden Cuffs by H. Michael Karshis is licensed under CC BY 2.0.