Raids may be good news for those not poached

Overlooked by the Barclays Capital raiding teams pillaging Wall Street? You could still see a bump in your paycheck, even without changing firms.

BarCap hired nine bankers in late September for its residential mortgage-backed securities division in the U.S., hitting up Citigroup for four of them plus one each from Goldman Sachs, Prudential Financial, UBS, and JP Morgan Chase (see related article).

Valerie Germain, a partner in Heidrick & Struggles global chief information officer and financial services practices, says BarCap has made a habit in the past of hitting the ranks of Morgan Stanley and Goldman Sachs. That has boosted salaries for those who move to BarCap's handsome midtown trading operations, but it has also benefited those who stay behind.

Germain says, 'Barclays Capital has done a lot of hiring at the junior level - people with three to five years experience - and it often dips into Morgan Stanley and Goldman's talent pool. That creates an issue in those firms because they have to backfill the talent, and that is raising the pay price points.'

It is a little like what Deutsche Bank did to salaries in 1998-2000 when it single-handedly moved the market for compensation as it undertook massive hiring to build its investment banking business.

Firms are taking defensive action, moving compensation levels off-cycle to respond to what they perceive as a market threat, predominantly in derivatives, so they can prevent attrition. That, then, creates a ripple effect that requires banks to hire replacements and often raise pay of existing employees to keep them from moving.

But not always, says Shaun Springer, CEO at Napier Scott in London, a recruitment firm specializing in derivatives and fixed income hires.

Springer says, 'When a team is hunted and people are left behind, you do tend to find there is a reason for them being left behind, and it doesn't necessarily follow that the bank is going to cherish them all the more.'

Before they start lavishing pay hikes on remaining staff, a bank is apt to look at how deep the raid was. Losing one trader on a desk of ten isn't bad, but if the bank loses two out of a group of three, the remaining employee is apt to be cosseted.

Because derivatives staff tend to be highly specialized, once a bank loses an employee it has to go looking for a replacement. The result is a series of moves across the sector that resembles musical chairs - good for recruiters, says Springer, but expensive for the banks.