eFC Briefing: Bonus Survey Raises Eyebrows

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Two thirds of financial market professionals surveyed expect a year-end bonus this year, and more than one-third expect more than they received last year. For populist lawmakers, those numbers look like a red flag waving in front of a bull.

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An eFinancialCareers survey of bonus expectations found a near-equal division among Wall Street professionals who expect a bonus larger than last year's, smaller than last year's, or no bonus at all. However, many who anticipate a hefty year-end payout will be disappointed, an investment banking headhunter told eFinancialCareers News. Anecdotal evidence indicates 2008 year-end payouts on average will shrink at least 40 percent from last year. Nevertheless, a majority of financial markets professionals probably will see something in their envelope.

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Compliance professionals at all levels will likely be somewhat insulated from the bonus downturn, headhunters say. While early chatter varies from firm to firm, there are indications some banks might award more than expected, says compliance recruiter Stuart Rosenthal of Legend Global Search. The way things are going, a bonus 25 to 30 percent smaller than in 2007 could be considered "fairly good," he observes. Unlike in other areas, compliance bonuses might be acceptable enough to keep professionals at their current jobs.

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The battle is under way for client assets and commissions generated by the Merrill Lynch brokerage force in the run-up to integration with Bank of America. Many of Merrill's 15,500 U.S. brokers are being aggressively courted by rival banks and headhunters, as well as by B of A itself. But most who produce less than $500,000 in annual revenue appear to be out of luck. While rivals dangle offers as high as 200 percent of an advisor's annual production to induce Merrill advisors to jump ship, B of A is offering just 25 percent to 50 percent over seven years for most of those who agree to stay, says headhunter Darin Manis, chief executive of RJ & Makay.

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With bank revenues still catastrophically low, further headcount reductions appear baked in the cake. An eFinancialCareers News analysis of various institutions' revenue and compensation data shows that to bring their respective compensation ratios back in line with 2007, Merrill Lynch would have to ax almost 96 percent of its workforce (a staggering 58,195 positions), Credit Suisse would need to eliminate 75 percent (16,161 slots) and Deutsche Bank, 33 percent (5,130 slots). However, the figures shouldn't be viewed as predictors of the extent of future layoffs at any particular institution.

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Until a few months ago, both job-seekers and investors saw hedge funds as something of a haven from the financial crisis. But as fund assets shrivel, industry bigwigs now predict that one-third to two-thirds of its current players will leave the field in coming years. GLG Partners' Emmanuel Roman said about 30 percent of fund companies will be forced to exit, according to Bloomberg News. Soros Fund Management's George Soros offered an even bleaker forecast, looking for the industry to shrink "by anywhere between half and two thirds." A separate report from Tabb Group predicts hedge funds will slash spending on information technology by 40 percent next year, according to Wall Street & Technology.

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The hiring outlook at campuses across the U.S. has plunged since August, according to an October survey of employers by the National Association of Colleges and Employers. Respondents plan to hire 1.3 percent more graduates in 2009 than they hired this year - down from a planned 6.1 percent rise when the same group was surveyed just two months earlier, according to The Wall Street Journal. A drop that severe is "extremely unusual," the association observes. The Journal says that both financial and non-financial corporations are paring campus hiring targets.

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