The shrinking U.S. dollar is pushing the compensation of many London bankers well ahead of their New York brethren's. But don't listen for a giant sucking sound on this side of the Pond.
Base salary figures cited by recruiters on both sides of the Atlantic indicate first-year associates earn as much as 30 percent more in London than their peers in similar roles in New York. But while arbitrage may be the lifeblood of both Wall Street and the City of London, few individual bankers relocate in order to pocket the difference - which is partially eroded by London's dramatically higher cost of living.
Selected numbers quoted by various headhunters point to a widening compensation gap. John Durrant, a recruiter with Selby Jennings in London, says investment banks there are offering 58,000 - 65,000 base salary for first-year associates with a quant Ph.D., in functional areas such as quantitative research and strategy, model validation, or algorithmic trading systems. Bonuses vary but the median has been roughly 100 percent of base, he says.
At Monday's sterling exchange rate of $2.06, that translates to $120,000 - $133,000 base, and $240,000 - $266,000 total compensation.
Similar roles in New York carry a base of $100,000 - $125,000, says Ken Murray, president of Mercury Partners in New York. He pegs bonuses for these roles at "50 percent-plus," with wide variations. Other recruiters quoted similar or somewhat lower ranges.
For first-year investment banking associates coming out of MBA or analyst programs, Selby Jennings Principal Consultant Tom Robson quotes a London base range of 60,000 - 75,000, though he calls the upper figure "quite exceptional." He says bonuses can be as little as 50 percent of base, or as much as 150 percent, depending on an individual's rank within the team. Again taking 100 percent as the midpoint, the equivalent range in dollars would be $124,000 - $155,000 base, and roughly $250,000 - $300,000 total compensation.
The same position in New York comes with a $95,000 base, says Murray. The annualized bonus for last year's hires was typically close to 100 percent, although Murray expects it to be substantially lower this year.
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Despite the sizable-looking gap, people don't transfer across the Pond to capture pay differentials. The few trans-Atlantic moves that do occur often involve candidates from third countries such as France, pursuing opportunities within French banks in major financial centers.
"No one really comes or goes to the U.S. from London for the comp," says Sanjeev Sharma, a recruiter at Michael Page International in New York. When the question of location arises at all, Sharma says it usually revolves around medium- to long-term opportunities rather than current compensation. For instance, working in the U.S. offers the chance to be involved in the very largest deals. London's attraction lies in its greater exposure to the rapidly growing markets of eastern Europe, the Middle East and Asia. Energy and commodity markets also have a higher profile in London.
Trading New York for London may bring higher pay, but not a higher standard of living, Sharma says. And the exchange rate notwithstanding, a banker moving from London to New York shouldn't expect to be offered a dollar salary that's double his former sterling-denominated figure. "Their comp over there has a lot less to do with the offer they're going to get here," Sharma says. He'll look at a candidate's U.K. compensation as a gauge of their performance, "but it isn't a benchmark of what they'll get offered here."