Beware banks negotiating down recruitment fees
Things are looking good again for financial services recruitment firms. When Michael Page announced its results last week, it said financial services hiring in London had doubled compared to last year. Selby Jennings, another financial services recruitment firm, puts the increase at a more modest, but still impressive 20%.
But as hiring picks up, some City recruiters are reporting an unfortunate side effect: fee compression.
"We're earning half as much per placement than we used to," complains one search consultant. "There are fewer guarantees around, and banks are less willing than previously to let us charge fees based on guarantees. There are also a lot more fee caps in place.
"HR departments are really using this opportunity to squeeze people down."
JP Morgan, BofA Merrill and RBS are cited among the alleged fee squeezers.
Not all financial services recruiters are suffering similarly, however.
Robert Morton, an analyst at Investec, says middle and back office recruiters, who didn't typically charge fees based on guarantees in the past, are now doing rather well. "Most of their fees are a percentage of basic salaries, so increased basic salaries are feeding straight through to their bottom line," he says.
However, the head of one search boutique in London says he's also had the best start to the year ever. "All I can say is that we're charging it, and banks are paying it," he says. "I was worried that they wouldn't let us charge fees on guarantees as they're now pegged on performance and not certain, but we're charging for them, and it's working.
"Combined with higher salaries, this is bumping our fees up. Long may it last!"
