Bonus clawbacks for investment banking analysts

Investment banks are all about being kind to their junior recruits. Reduced working hours, free weekends, rapid promotions, increased pay and more interesting work are all being rolled out to ensure that millennials don’t head off into fintech or private equity.

But it’s not all sweetness and light – some banks are using the stick as well as the carrot to motivate their analysts.

We understand that Rothschild, for example, has introduced a scheme to claw back bonuses for analysts if they leave before the two-year training programme comes to an end. If an analyst leaves of their own accord before this period, they’re required to pay back both their sign on bonus and the first year variable award, according to headhunters working with juniors.

“Most banks appear to be changing the way they’re contracting juniors, and it’s not all positive retention tools – it’s an evolving situation,” says one headhunter who declined to be named.

Aggressive tactics for keeping junior analysts are in part a response to private equity firms changing their recruitment processes, suggest headhunters. PE firms have been interviewing first year analysts in Q1 2016, even though the job doesn’t start until September 2017, they suggest.

However, increasingly some private equity firms require an earlier start – poaching analysts before they’ve even been in the job for 12 months.

Analysis by the Wall Street Journal suggests that, despite a range of initiatives to engage junior bankers, the average tenure is 17 months, compared to 26 months for those starting out in the industry 10 years ago.

Despite this, it’s still not an entirely easy ride for juniors. We understand, for example, that analysts and associates have been included in the latest round of job cuts within Nomura’s equities and IBD businesses in London.

What’s more, recruiters suggest that bonuses have been reduced alongside other ranks after a dismal fourth quarter last year. Most banks increased salaries for juniors by 20% in London – following the lead of New York – but overall compensation is down by 5% on 2014.

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