Recruitment: Headhunters face collateral damage
New rules and regulations on bankers’ compensation are changing the tempo of financial services headhunters’ business. Many are finding that the dance of recruitment is adagio. Nick Lord reports
NEW YEAR’S DAY 2011 might be seen as the moment when the music stopped for the UK’s bank bonus culture. As a consequence everything also changed for the financial services recruitment business. January 1 was when the new Financial Services Authority Remuneration Code came into effect. It aims to severely limit banks’ ability to pay big bonuses. One of its effects will be to change the way that financial services headhunters conduct their business in London and in continental Europe. Before the crisis, financial services headhunting was a relatively easy way to make a lot of money. Clients were charged one-third of the total compensation (base salary and bonus), with the fee only occasionally capped. Thus, successfully completing 10 searches a year would generally mean that an individual headhunter could take home a six-figure salary.
But since the crisis, compensation levels in banking have come under attack. Many banks are making a valiant effort either to ignore the rules or to manage their way creatively around them. The long-term trend is clear: bank pay will decline and the business of moving bankers about will become more difficult, more expensive, more professional, and less lucrative.
Relationships start to matter
The first change that most headhunters report is on the overall relationship between the banks and the search firms.