“My new job pays 50% less. Pay deflation in finance is real”
Suffer the equities salespeople. With 55% of equities flow trading now conducted electronically and small banks ceding market share to larger ones, there’s less need for them than there used to be. Some salesmen and women are getting out of the industry altogether. Others are hovering around on the margins trying to get back in, and accepting big pay cuts to do so.
We spoke to Clive Roberts (a pseudonym), an equities salesman who spent 15 years working for European banks in the U.S.. Roberts lost his job early last year and has only recently found a new one at a greatly reduced salary. He says regulation and changes to market structure have killed equities sales roles on both sides of the Atlantic.
Below is a description of the superannuation of a generation of equities salespeople in Roberts’ own words.
“It’s a wasteland out there. There are almost no jobs for someone like me. This is the reality.
I’ve held senior equity sales positions at two major banks but there’s very little interest now in someone with my profile. The Fiduciary Rule has seriously damaged the profitability of a lot of equities franchises in America. By mandating the full disclosure of commission rates it’s encouraged a rush to the lowest cost providers possible and a huge deflation in commissions.
You see this deflation most clearly in the retail sector, where there’s a price war between Charles Schwab and Fidelity but it’s gone all the way up through the value chain. The institutional sector is affected too. My clients are funds. They’ve lowered their turnover rate and are now much more active in looking for the best execution deal and the lowest levels of commission. It’s similar in Europe under MiFID.
The problem is being compounded by electronic trading. All the big liquid trades are now placed electronically. There’s still some human interaction in the middle but it’s disappearing quickly. Anything halfway liquid will be executed electronically soon.
I’m lucky. I found a new job a few weeks ago, but it’s at a small firm and I’ve had to accept a big pay cut. There’s a tremendous dislocation of talent in the market, huge numbers of people like me are looking for work and this is putting big pressure on pay.
My new role pays half as much as my old one and from what I’m hearing this is standard. Total compensation has gone down a lot just in the past few years. When you’re out of the market you’re bid less than 50% what you earned before. This seems to be particularly the case for more senior people like me – you read about bonus pools at big banks being down 15%, but what that generally means is that juniors are being paid flat or slightly up and directors and managing directors are down by 50%+.
Of course, these new lower rates of pay have repercussions. It’s become impossible to build any wealth when you’re working in equities and much harder to build wealth across finance in general. You’re going to see this float up the whole value chain. People are going to be less willing to pay for expensive education like MBAs now that finance pay has been rebased. A finance job today will pay for you to live in a major city, but it’s not going to let you save anything for the future.
Most people my age are just sitting where they are, watching their pay fall. They know that if they’re out of the market they’re going to have to take an even bigger pay cut to get back in.
Would I like to get out and do something different? Sure, but this is a very difficult skill-set to transfer. I’m an institutional equities salesman. I sell equities to investment clients. I know about a bunch of different industries, but only really in the context of equities prices. I’m not an operations person and there’s so much talent around in each industry vertical that finding an opening there is impossible. The only answer is acceptance, and less pay."
Bleak.
Contact: sbutcher@efinancialcareers.com
Photo credit: sorbetto/Getty
