eFC Briefing: New Landscape Impacts Jobs, Pay

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Trading and other leverage-dependent activities will be most affected by the bulge brackets' move to take refuge under the umbrella of bank regulators. Boutique investment banks may gain ground - and talent.

Converting Goldman Sachs and Morgan Stanley into regulated bank holding companies effectively unites U.S. finance into a single sector. Headhunter Richard Lipstein, managing director at Boyden Global Executive Search, says additional oversight and regulation will have the biggest career impact on individuals such as traders, who rely on leverage and traditionally reaped large payouts during particularly good years. Observers expect less impact on traditional capital markets businesses, M&A, and private wealth management - activities that don't directly deploy banks' capital.

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Rather than ending all investment banking, the disappearance of large, free-standing IBs is likely to create opportunities for pure-play boutique investment banking firms. Experts tell eFinancialCareers News the bulge bracket's flight will likely drive high-stakes, high-risk-loving professionals into the open arms of boutiques. People who perceive themselves as highly talented won't want to work at a bank because they won't be compensated or rewarded for their expertise, says Stuart Kruse, CFA, president of Kruse Asset Management in Chicago. Instead, "They'll look for a more entrepreneurial venture where they can eat what they kill, or go to private equity or a hedge fund where there's less regulation."

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Wide-ranging re-regulation of investment banks' activities will reduce leverage, profitability and compensation, says Alan Johnson, an influential Wall Street compensation consultant. The coming changes will profoundly affect hedge funds and buyout firms as well, Johnson told eFinancialCareers News. All activities that depend on financial leverage, whether buy-side or sell-side, are likely to be scaled back. The driving force behind this notion is the prospect of higher capital requirements. "That means less profit, and less profit means less compensation," Johnson explains.

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While the industry's altered structure will create more work for accounting and compliance professionals in the short run, it may lead to eventual layoffs in those departments.

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Barclays Capital promised to pay the full accrued bonus amounts and maintain current terms of employment - including severance in case of dismissal - for some 10,000 U.S. employees of Lehman Brothers, if its proposed purchase of Lehman's U.S. investment bank takes place. Citing documents filed with the U.S. Bankruptcy Court in New York, Financial News reports Barclays agreed to pay 100 percent of the accrued bonus pool for transferred employees on or before March 15, 2009. However, the bonus payments can be reduced if more than 10 percent of the employees transferred to Barclays voluntarily choose to leave.

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A number of sell-side equity analyst positions have opened up recently in Chicago as replacements for poor performers terminated by top-tier firms. "Companies are trying to find better performers in order to be more competitive in this market," says a senior analyst at a top firm. "Firms are shopping for talent to replace current analysts." The Chicago-area openings generally require professionals well known among buy-side clients.

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Deutsche Bank promoted Mark Fedorcik to head of leveraged capital markets, responsible for leveraged finance, high yield, loan capital markets and loan trading and sales businesses globally. He was U.S. head of high yield and leveraged loan capital markets. His predecessor, David Flannery, left in August to take the same role at Bank of America. According to Leveraged Finance News, the move is part of a complete overhaul in Deutsche Bank's capital markets group.

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