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The RIF On Wall Street - No Longer The 1%
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The RIF on Wall Street  -  No Longer the 1%

Within the last couple of weeks I have received many calls from senior level finance executives at large firms who have been let go – or want to be.

These are guys (not so many women at that level unfortunately – I’ll blog about where the women are soon) whom I have chased for years; trying to convince them to move to other platforms.

So why are they being let go now or wanting to move on? What is the logic behind the RIF (Reduction in Force) on Wall Street?

Over the last couple of weeks I have heard of four stable, desirable financial firms making significant changes – one going out of business completely.

Why are these executives and firms who were considered part of the 1% now finding themselves no longer part of the club?

COMPENSATION

There used to be something known as a ‘guarantee,’ a ‘signing bonus,’ a ‘package.’ Not any more. Now, more than people realize, it’s a ‘verbal formula,’ a ‘black box,’ ‘fuzzy logic,’ a ‘kitchen table deal,’ or ‘eat what you kill.’

The money train has come full stop and it is not leaving the station anytime soon.

In the world of banking, here’s the problem. Bunches of amazing ‘rainmakers’ were hired with fantastic guarantees to join competing firms. When this was going strong in 2010 and 2011 (which as a Recruiter I saw as building years) I began to worry.

Firm X seems to be over hiring I thought. That team of bankers got a huge package to move to another firm. They better have a huge pipeline. How will the firm pay everyone else?

A bunch of these guys are putting their kids in the most expensive private schools on the planet, and buying vacation homes. They seem a little too confident with their comp expectations.

Firm Y is opening too many offices – hmm, can revenues really sustain their obvious plans for explosive growth?

Firms N,O, P and E are not even from this country. Do they really know what they are doing? It isn’t going to work.

And it hasn’t.

I am not trying to pat myself on the back for seeing these problems almost two years ago. I don’t like problems anymore than the next person. I simply put two and two together as I spoke and met with many mid and senior level employees at each and every leading firm in finance out there. A thread was forming. And the string was not going to hold.

Recent announcements only support this hope and a prayer strategy that was never answered.

To make matters worse, those that remain at the big financial firms that accepted large tranches of government money to survive are now having to pay the price with the word ‘deferred’ stamped on their forehead.

For those that remain, not only is stock being deferred, but cash is too.

What will the rainmaker do who is only getting $125,000 in cash for his millions in revenue that he made for his firm in 2011? Morgan Stanley announced this very amount as a cap on cash payout for 2011. Remember, the rainmaker is used to getting millions. How will he pay his everyday expenses? Yes, they may be more than yours or mine, but it is all relative. He too is freaking out. Much like his colleagues who are riffed because they were RIF’d (reduction in force).

At Bank of America Merrill Lynch (BAML), anyone making $1 Million or more is being capped at $150,000. As for stock in the large financial firms – everything vests later – and if you leave, you may have to give it back, even after you’ve earned it. This is called a golden handcuff. Sort of. But what about next year? Do you get some of last year and even less of this year because it may seem like you are getting too much next year? As for the stock deferral, it seems to me that having the bank’s stock go down right now is a good thing because you’ll get more shares when the formula is computed. On the other hand, who knows what the stock will be worth 1,2,3 years out. Is it even worth the wait? Will that employee who is relying on a kiss and a promise get RIF’d before then?

Hence, the influx of additional calls I have been receiving from major players at major firms who no longer want to be there.

Financial firms are retooling compensation:

Many of you may be happy about this. Don’t be. Those big earners also give money to big charities who help those in need. A long standing rehabilitation facility in my community closed suddenly this week. Why? No donations. They give to the arts, schools and their communities.

Water flows down hill and many of us will feel the repercussions of the new reality on Wall Street. More homes will go on the market so values will go down. Luxury good purchases will take a dive and other goods will increase in price. Those $35,000 a year pre-schools? Public school is just fine, thank you. If your child is in one by the skin of your wallet, you will probably pay more. Banks will keep hoarding their cash for a rainy market and using technology to eliminate even more positions (think the faster than the human brain trading machines that can create huge market fluctuations in an instant). I predict we will find ourselves thinking twice about occupying Wall Street – which may fast become a ghost town.

On the other hand, many Wall Street execs are happy to still have their jobs and glad that they were not immediately catapulted to join the 99% like so many of their colleagues. Some feel that while their compensation is slashed to pieces, they at least are getting something – while they begin looking for something better!

There are over 12 million ‘active’ job seekers out there. Competition is tough. So even if the RIF on Wall Street is here to stay and the 1% has fallen, those that have survived might be better off lowering expectations and thanking their lucky stars that they are not one of the 12 million.


Street Talk

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