Investment Banks Likely To Counter Competitors' Offers

High-level moves at Morgan Stanley and UBS reflect heavy competition for talent and indicate a job market ripe for defections to greener pastures. Fresh off a record of more than $20 billion in bonuses in 2005, big banks are fighting to retain key people. With cash to dole out, many have turned to "buybacks," or increased pay.

"Buybacks are popular because retention is a huge problem," says Mark Jaffe, a consultant at search firm Wyatt and Jaffe. "They're all drawing from the same pool of people."

Jaffe says that buybacks can include new titles and responsibilities, but are more frequently about higher compensation. Investment banks are usually at least matching offers, and often exceeding them by 20 percent or more, by digging into windfalls and creating upside earning potential, such as bonuses or pay for performance. In some cases, Jaffe says, buybacks can be accompanied by profit sharing in the form of equity ownership and restricted stock options.

Some measures, however, are defensive. Morgan Stanley, for example, has extended notice periods for its managing directors from one month to three. Citigroup has lifted the notice period for top bankers, instituting a 75-day lock-in for managing directors who resign to join a competing firm.

Alan Johnson, a compensation expert at Johnson & Associates, says that today banks aggressively fight to retain key personnel. "Firms are much more willing to entice staff," he says. The frequency of counteroffers, he observes, is "almost a given" in the current Wall Street boom.

Firms who are on the prowl for greater headcount include Lehman Brothers, Bank of America, and the firm of Joe Perella, the former head of banking for Morgan Stanley. Perella has already lured several former Morgan Stanley execs.

Remaining at a firm solely because it's floated a hefty bonus may not always be the right choice, recruiters say. It's critical to choose the organization that provides you with the most opportunity to contribute and has a template in place for career advancement. If your current firm's trying to keep you on board, get all offers in writing and make sure compensation and responsibilities are clearly outlined.

"Firms are willing to entice you once you've decided to move," says Johnson. "Once the door slams, that's it."