Should you trust a bank when it offers to pay you a generous bonus, but it won't put that promise in writing? Generally, we would say no. But if you're an analyst or associate the answer might be yes.
Such is their need for experienced junior bankers that recruiters say banks are still trying to hire third year analysts and experienced associates even though we're getting close to bonus time. Analyst bonuses have traditionally been paid in the summer, but associates typically receive their bonuses in January and February, making a move at this time of year unwise - unless the hiring bank is willing to compensate for the bonus that's left behind.
This is happening, allegedly. "Banks are talking about buyouts for the first time in years," says Andy Pringle, director at Circle Square Recruitment. "It's difficult to persuade an associate to move without one - why would you walk away from a bonus for the past 10 months of work?"
Another recruiter, who asked not to be named, said banks are declining to offer guaranteed bonuses but are promising experienced associates who join them now that they'll be eligible for a full year's bonus, even if they turn up just before bonuses are paid out. Demand for experienced associates is still strong, he adds: "When the market picked up in 2012 a lot of the then-senior analysts went across to private equity or hedge funds. Consequently, a couple of years on there just aren't enough senior associates to go around."
Associate-level bankers typically change jobs for prestige, with switches from tier two to tier one banks common. Goldman Sachs hired Victor Kochemirovskiy, an associate-level derivatives structurer, from Credit Suisse in August. Morgan Stanley poached Matteo Dilmani, an IBD associate from Credit Suisse in July. Morgan Stanley also poached Ali Tariq, a UK M&A associate from SocGen in September. Barclays poached David Eliet, a leveraged finance origination associate from Bank of America earlier this month. Macquarie is said to be hiring. So is HSBC, which is reportedly recruiting 35 people at all levels for its European investment banking business.
In most cases, moving for a bonus when you haven't got that bonus promised in writing is a bad idea. Take the sorry experience of Andrew Brogden and Robert Reid, who moved to Investec in 2007 on the understanding that they'd be paid bonuses according to a favourable formula derived from 'economic value added' and the 'institutional market rate.' When those bonuses dried up, they had nothing in writing to prove that their agreement had ever existed.
However, recruiters of associates say banks won't renegue on their new bonus promises to junior staff. "Some associates are being offered 'make whole' bonuses to move. If they include an indicative rather than a firm value, they need to take that at face value," says Logan Naidu, chief executive of recruitment firm Dartmouth Partners. "You should expect that banks will honour what they say."