If you want to earn a big salary in banking or financial services, work at Goldman Sachs. If you want to earn an even more gargantuan salary, work at Brevan Howard. If you want to earn a comparatively ‘ok’ salary, try JPMorgan.
There have been rumours of Goldman Sachs paying enormous salaries for some time. Back in 2010, Goldman Sachs was rumoured to be paying $750k salaries to its managing directors in London. In fact, this appears to have been an understatement: Goldman’s Pillar 3 disclosure for 2011, released in late December 2012, reveals that the average salary for each of its 95 ‘code staff’ in London was actually $937k (£583k) that year.
Sounds generous? It is when you compare it to JPMorgan, where the average salary for London-based code staff was a ‘mere’ £366k over the same period.
And yet JPMorgan and Goldman Sachs both look parsimonious compared to UK-based hedge fund Brevan Howard, which has recently released its accounts for the year ending March 31st 2012. Over those twelve months, Brevan Howard spent £74m on remuneration for its 49 partners, and allocated another £270m to them in the form of shared profits. ‘Remuneration’ – which we assume to be mostly cash – therefore amounted to £1.5m per head. This was supplemented by £5.5m each in shared profits.
Even better, Brevan Howard’s Pillar 3 disclosure reveals that it’s classified as a tier 3 firm by the UK Financial Services Authority. As such, it is absolved of the legal need to defer bonuses unless it feels inclined to do so. Brevan Howard also explicitly states that it has no clawback provisions for its pay: if you earn £7m at Brevan Howard, it’s yours to keep.
By comparison, both Goldman Sachs and JPMorgan reserve the right to clawback bonuses (although as we have noted already, Goldman hasn’t actually exercised this right).
Our analysis of the Pillar 3 statements of Goldman and JPMorgan suggests that if you want cash and certainty, you’ve historically been far better off at Goldman Sachs. In 2011 salaries were 33% of the compensation paid to non-senior management code staff (ie. traders, heads of businesses and senior risk and compliance professionals). At JPMorgan, salaries were only 16% of the comparable package, with far more paid in bonuses liable to be clawed back in the event of wrongdoing.
Although only recently released, all of this information is – sadly – a year out of date. With bonuses likely to be down across the board, salaries will undoubtedly account for a higher proportion of compensation at all banks for the year ending 2012.