As we approach the end of the first quarter, we have noticed that M&A advisors are back in action and business is reactivating. Banks are adjusting to the new tax regulations and are dealing with the fact that they lost or let go of many people last year. Now they are recruiting again and are feeling the stress of the shortage of people.

We have seen evidence of this in the significant increase of base salaries, especially for the associate pool. Many banks have readjusted their base salaries to guarantee a minimum fixed income. We were surprised to see increases of 23% to 75% for 1^st year, 2^nd year and 3^rd year associates, respectively.

The bonus range has also increased at this level. Associate bankers are receiving bonuses from 90% up to an unprecedented 230%. Of course the range varies from bank to bank, but the reality is that they are trying to make sure that their associates do not suffer from the new tax regulations and are not only readjusting the base salaries, but also bonuses.

The way bonuses are structured is also changing. We are finding out that some banks are paying partly in cash and partly in long-term stocks at the associate level, which we had previously seen only at more senior levels. The cash component ranged between 65% to 75% and the stocks had a vesting period of 3 to 5 years.

Interestingly, associates acknowledge that they are an asset that is now scarce, especially the good ones. And even though their bonuses were part in stock, they are feeling very pleased about their new compensation levels.   More...

At the beginning of the year, with all the uncertainty in the market, analysts and associates from banking became more and more interested in making a quick move into private equity. They fell into two groups: the ones that were genuinely interested in private equity, and the ones that saw private equity as an escape route from the crisis within their banks.

During this turmoil, the banking teams experienced a decrease in work activity, which combined with several rounds of redundancies made candidates more and more uncertain about their future and prompted them to become more open minded about their career options.

Salaries and bonuses were also uncertain. The market was predicting that it might be one of the lowest paid years in a long time. So in the first half, with limited work to do and with more time on their hands, candidates found themselves with the motivation and availability to interview for a new role.

As a result, banks saw a further outflow of people that had chosen to leave their teams as well as the earlier redundancies, and coinciding with an increasing feeling that the market was picking up again, the summer marked a clear shift in attitude.

Investment banking teams decided to give special attention to retaining staff.  Analysts and associates were given salary increases, with special attention being given to the middle levels, and workload increased. As a result they were getting increased exposure to transactions again and with limited numbers on the team, having to work very hard. The candidates that remain in each of the teams have become the “survivors” giving them confidence in their position within the bank.

So suddenly, the motivation and availability to interview for a new role changed.  Mid-year bonuses were not as low as expected and there is the expectation that year end bonuses given to associates will not be as low as they thought. The teams have more work and candidates are getting more exposure and more challenges.

The reality is: since the end of the summer, there are more opportunities for analysts and associates in private equity but less availability and willingness of the candidates to move. Star candidates are receiving multiple offers. Other stars prefer to hold on to their jobs for a while and gain more experience rather than move into a market that they perceive is still recovering.

What does this mean for your analyst and associate recruitment programme?  You may need to adapt to the new scale of salaries, recognizing that for many of the candidates, base salaries have increased by up to 20%.  Secondly, be willing to give a high level of involvement and exposure and make sure that this is communicated within the recruitment process. And lastly, move quickly. Once you find a star candidate, there is always the risk of losing them to the competition or to internal promotion.

Contact me if you would like to know more about the compensation increases we’re seeing and other remuneration benchmarks. maria.nieto@perecruit.com