Consultants rocked by downturn

Jarvis says: 'I want to get back into corporate finance recruitment, but the jobs aren't there. Instead, I've been working part-time as an estate agent. It's frustrating, but it will tide me over.'

Tony Barnes of Waters Associates, which finds consultants for financial services recruitment firms, paints a grim picture. Hundreds have lost their jobs in the past 18 months, he says. Those who find new ones must often accept lower pay and diminished prospects.

'One guy was on a 65,000 (€104,000) salary. I told him that now he's worth 45,000 if he's lucky,' says Barnes. Bonuses, which are much higher than salaries for successful consultants, are being hit even harder. Equities, fixed income and corporate finance are among the worst affected areas.

The shake-out is changing the face of the financial services recruitment industry. Many big firms are shrinking and may lose their place in the pecking order. At the same time, opportunities are emerging for the ambitious and the entrepreneurial, who are positioning themselves for an upturn.

Some of the best-known recruitment firms have suffered the worst, after expanding rapidly - their critics say recklessly - during the boom years of the late 1990s and 2000. The Economist Intelligence Unit (EIU) estimates that revenues of most global search firms, across all sectors, have slumped by up to 40% since the start of 2001. Heidrick & Struggles is one that has had problems. It has cut staff by more than 600 across all sectors in the past year, a quarter of the total, and its share price is languishing 70% below its level two years ago.

In financial services in London, the firm has lost a string of high-profile names. Some were pushed out, some quit in frustration at the way the firm is run, and some simply saw a better opportunity elsewhere.

Last week, in a move that symbolises its difficulties, Heidrick closed its City of London office just a year after opening it. The remaining staff have moved to London's West End. Heidrick declined to comment. However, one of its disgruntled ex-employees says: 'Overheads are too high and consultants in different places don't co-operate with each other. The firm isn't managed well enough to cope with the downturn.'

Many well-known smaller firms have slimmed down radically, too. Armstrong International, one of the leading search boutiques in London, says it has shrunk from around 60 staff to about 20 in the past 18 months. But a lean operation can be an advantage. Armstrong says that, unlike Heidrick, it remains highly profitable.

Martin Armstrong, the founding partner, says: 'The really big firms are never going to come back. The margins aren't in the business. There is a price war going on.

'What Heidrick & Struggles should do is buy my firm and make me head of Heidrick & Struggles. I would get rid of a lot of underperforming people.'

In an industry where personal relationships are paramount, the best brand consultants can have is often their own name, rather than the name of their company. Many are trying to capitalise on this by setting up by themselves, to avoid having to share profits with colleagues. Tanya Lutyens and Gemma Da Cunha, both ex-Armstrong, set up their own firm - Lutyens da Cunha - a few weeks ago to focus on hedge funds. 'We have low overheads and we know the right people. And hedge funds are one sector that is thriving,' says Lutyens.

She says consultants from less buoyant sectors are moving into hedge funds out of desperation. 'Lots of headhunters are trying to pose as hedge fund experts. They come from corporate finance and equities where there is nothing to do. They're winging CVs around in a totally random way, and it won't work,' she says.

Brian Hamill, chief executive of the recruitment firm Imprint, agrees it is hard to move into an unfamiliar sector. He says: 'We won't look at someone with an equities background to go into debt. They don't know the product and they don't have the contacts.'

Imprint, set up last year, is one of several medium-sized firms that have been expanding aggressively in the downturn, hoping to move into the space occupied by declining rivals. But there are too few of them to soak up all the redundant consultants on the market.

Hamill says many of them, especially in corporate finance and equities, will have to look for different careers if the banks do not increase recruitment soon. He adds that is unlikely to happen this year.

Jarvis, the unemployed corporate finance expert, says he is losing hope of getting back into the industry and might retrain as a lawyer.

The larger firms might yet stage a comeback. Nancy Garrison Jenn, who writes on recruitment for the EIU, says companies such as Heidrick & Struggles, Korn/Ferry and TMP Worldwide are improving their management and having some success with other services, such as assessing executives. TMP owns monster.com, the highly profitable internet recruitment site.

But for many individual consultants, the good days have gone for ever.