Want to earn a lot of money in the finance industry? Guess what: any pay increase will almost certainly come in the form of a deferred bonus.
Such is the non-cataclysmic finding of a new study by two professors of finance at the Stockholm School of Economics. After scrutinising data from 531 finance professionals earning an average of $300k each in 23 countries between 1997 and 2012, they discerned that rising pay in the financial services industry is very strongly correlated with rising 'long term compensation' - especially if you work in a major financial centre.
The Stockholm School of Economics is a well-respected university which counts at least 24 alumni as current and past employees of Goldman Sachs and a further 29 as current and past employees of J.P. Morgan and Deutsche Bank. You'd think, therefore, that its professors of finance would be sufficiently aware of the trends in financial services compensation not to write a paper stating the obvious. Seemingly not.
"The level of pay in the financial sector is positively associated with the fraction of total long-term incentive pay," they claim in a new paper titled, 'Compensation and competition for talent: evidence from the financial services industry'.
Any banker beyond VP (vice president) level will already be well aware of this trend. While junior bankers at Morgan Stanley and elsewhere are receiving a growing proportion of their bonuses in cash, deferrals for senior staff have increased significantly since the financial crisis. However, the Stockholm academics do clarify an interesting point:[efc_twitter text=" if you want to make really big money in finance now, you have to wait for it. "]The pay increases that take you to the top level of pay are no longer about instant gratification.