Good news, you’ve been promoted! But there’s a catch. In the immediate pre-crisis period, financial services professionals were given more responsibility but no promotion. The new thing in investment banks now is to hand out promotions, but without the subsequent uplift in pay.
Recruiters suggest that investment banks are handing out promotions at a faster rate, but budgetary restrictions mean that these are not immediately rewarded. Instead, the promotion is given and a promise made to review salaries once the purse strings start to loosen.
At first glance, this seems like a cynical attempt at retention or the ongoing trend for juniorisation – replacing expensive senior staff, promoting the younger generation and paying them less. If this happens to you, should you accept? Or should you stick with the easier life on the same pay grade?
One big question to ask is whether you would have been handed a promotion had the market conditions been better and if the whole process would have been more rigorous in better times.
“You may not have 100% of the skills needed so your manager is willing to take a risk to expedite your promotion,” says Sabrina Zook, the former head of talent management at J.P. Morgan investment bank who now runs executive coaching firm Talent Development Strategies. “Ideally they will increase your pay later on as you grow into the role and gain the requisite skills required for the elevated position.”
These days, it’s all about getting the biggest salary possible as banks on Wall Street and the City clamp down on bonus payments. But moving up the ranks means that your bonus potential has increased, says Andrew Pullman, the former head of HR at Dresdner Bank who now runs People Risk Solutions.
“The more senior you are, the greater your bonus entitlement. This should be a negotiation point, and get any agreements in writing,” he says.
Promotions may be aimed at engendering loyalty, but it’s also a chance to scope out the competition. You may not be getting a pay rise, but what do the equivalent roles pay at other banks? What’s the temperature of the job market at this level? Could the promotion in your current employer be a step towards a better paying job elsewhere?
“Think of it as a springboard, both internally and externally,” says Chris Roebuck, the former head of recruitment at UBS investment bank and adjunct professor of leadership at Cass Business School. “A year in the new role will look great on your CV and could lead to a rapid pay rise if you move to an equivalent role in another bank.”
There are no guarantees, but during a period of rapid contraction, getting promoted is an indication that you will avoid the chop. Even if a salary increase isn’t forthcoming, turning a promotion down is is not advisable.
“If you have been promoted, and it feels as if a contraction is coming down the pipeline, the promotion may be a signal that you are not on the restructuring list,” says Jennifer Rosenthal, a former director of recruitment at Bear Stearns investment bank and EMBA Career Services Consultant at Columbia Business School.
Money may be your main motivation, but if this is the case you’ll never really progress up the ranks in investment banking, says Roebuck. “At UBS there were people who refused to go past managing director because their earning potential would have been less,” he says. “When you move to from an operational role into a strategic management position there’s a trade off – both professionally and financially.”
Yes, you may have been offered a promotion at a time of cost-cutting and career uncertainty, but still take it, says Pullman. “Be careful about turning down a promotion – you may not be offered one again,” he says.
If a pay increase isn’t an option, you should push for softer perks like increased holiday allowance, or even flexible working, says Zook. Moreover, you need some sort of guarantee that this is temporary situation driven by market conditions and not a permanent state of play where you’re given more work for no extra money.
“You might trust your manager, but do they have the clout to ensure that they can promise an increase in pay down the line?” says Pullman. “Has HR been involved? They should be – and don’t leave that meeting without a confirmation letter!”