How Wall Street candidates are gaming the salary history rule
The New York law that prevents employers from asking about salary history went into effect in November. Since that time, the ban has expanded beyond the Big Apple to New Orleans, California, Delaware, Massachusetts, Oregon, the two biggest cities in Pennsylvania and Puerto Rico. In addition, firms such as Bank of America Merrill Lynch have adopted the policy for all of their offices worldwide. When you get a job offer from a bank in 2018, your new employer may therefore be flying blind on your previous pay.
This has implications for compensation negotiations. As we've reported previously, banks have a vested interested in low-balling you. Because they can't ask about your previous pay, they might as well start by making you a (very) low offer and raising it incrementally until you accept.
On the other hand, many recruiters say the rule actually gives candidates an advantage. Candidates can now ask for higher compensation than they received previously, but this all depends upon the price at which they pitch themselves to the market.
Succeeding in contemporary compensation negotiations is all about knowing how much your peers are paid. You need to know exactly what analysts, associates or VPs at your rank are receiving in the market, and - irrespective of your historical compensation - you need to pitch yourself accordingly. As a steer, Wall Street recruiters tell us first-, second- and third-year associates are likely to get salaries of $150k, $175k and $200k, respectively, while vice presidents can expect a salary in the $220k or $225k range with hopes for a 1X bonus.
Canadian, Japanese and smaller European banks, as well as smaller regional U.S. banks and boutiques are slightly below those levels. Boutiques like Jefferies and Houlihan Lokey will sometimes pay more.
“[The salary history rule] is an advantage to the candidate,” says Mike Brothers, manager of financial services at Michael Page. “Recently an associate at an off-the-beaten-path bank got an offer, and we didn’t know where he was; he just gave us his expectation – it was within reason, not $800k or way out of the realm of possibility – and we had to run with it, which is different from before, because we can’t actually confirm what they’re making at some of these banks."
Brothers cautions candidates against pitching their pay demands too high: "There’s only so much that you can actually do in terms of throwing a higher number out there." However, he notes too that banks have become more flexible than they used to be. Previously, all the variation was in the bonus; the salary history rule now means some banks will flex salaries as well.
While candidates are gaming the salary history rule with high pay demands, some banks are simply ignoring it.
Roy Cohen, a career coach and the author of The Wall Street Professional’s Survival Guide, says a client was recently asked her age, whether or not she is a U.S. citizen and what she was earning. "– If there was a meter for illegal questions, you could check off all of the boxes in one fell swoop,” Cohen says. “If you say it’s against the law to ask me that, it’s the equivalent of chastising the interviewer and I guarantee you that it will stop an interview dead in its tracks,” he adds. “You have to do your homework, know what an appropriate range would be for an individual like yourself, with your skill set and your experience, because you can’t come up with a number that doesn’t reflect reality.
There's also the possibility that banks will try circumventing the rule by asking you for your P&L last year (especially if you're in trading), and for the percentage you received personally. This too is likely to be illegal under the salary history rule, so you don't have to answer it. Again, however, it will help to say something - at the very least you might want to say how much your group made in a "normal" year.
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