The biggest question I am getting now from potential candidates is: What does a good offer look like? It is a general question, but it depends on the type of firm that you would be going to. For instance, I am not as knowledgeable about the compensation packages for bulge bracket firms since I do not represent them. What I can speak to is the compensation packages from regional and super regional investment banking firms as well as law firms. There has been a shift from the salary portion of your paycheck to the bonus potential, speaking specifically. Meaning salaries have been lowered over the last couple years; however, the bonus has been increased during that same time frame.
Your “Top Gun” Financial Package With Bonus Potential
Let’s address the key components of a financial package in an offer for (using the expression I have carried over from the last two blogs) a “top gun”. This can be simply defined as a managing director that is confident in moving his or her business to a new firm. The average revenue expected for one of these “top guns” is a minimum of $800,000 in their first year. With that as the background, let us look at a typical offer. The offer itself usually comprises a salary component, a guaranteed bonus, as well as a signing bonus potential. What we have seen over the last 6 to 12 months is that guarantees are now being extended to two years rather than the one year, as we saw a couple years ago. Hiring managers are looking at potential revenue as their guideline to determine where you fit in the spectrum of salary and bonus components. The biggest angst that hiring managers have is bringing in a “top gun” and upsetting the balance of compensation as it relates to existing employees. This is causing hiring managers to get creative when putting together packages for these “top gun” candidates.
Salaries & Your Historical Revenues
Salaries are typically running anywhere from $150,000 to $250,000 when a manager expects at least $800,000 in revenue in their first year. Hiring managers are asking specifically for historical revenues to make sure that their average over the last three to five years is commensurate with what most bankers/lawyers did last year. As we all know, last year was a record-breaking year for revenue in the field of public finance. Therefore, managers are not just looking at last year, but they are looking at the last three to five years to make sure the revenue they are using in their financial models is not a one-year blip. If you can demonstrate that you have consistently earned more than $1,000,000 during the last three to five years, then hiring managers are offering everything that I mentioned above. But, what about bonus potential?
The Guarantees Of Bonus Potential
As for guarantees, hiring managers are aware that there is a ramp up period for any new banker or bond counsel from when you start to when you start bringing in deals. This is the reason we can get two year guarantees for our “top gun” candidates. The two-year guarantee takes the pressure off the banker. That pressure being he must bring in deals immediately rather than taking his or her time to develop new clientele and increase their revenue precipitously during that ramp up period. However, what we have seen is that these “top gun” candidates (the ones very confident that business will move) usually wind up bringing 80 to 85% of their projected revenue to a new firm. Thus, the guarantee usually turns out to be a minimum and not a maximum bonus potential.
Signing bonuses are typically done in the form of a note over 5 to 7 years; thus, becoming a major retention tool that firms are utilizing. If a candidate gets a signing bonus, he or she is aware that they are recourse. Should they leave, the balance of the note must be paid back. The reason for a signing bonus is the incentive for someone to leave their existing firm with money on the table and join a new firm. Their new firm would compensate them for any bonus potential they were expecting but will now not receive due to not being there. Next week we will address the different covenants in one’s offer.
If you would like to discuss your options, please reach out for a confidential conversation at 760-477-1284 or email at [email protected]. He can also be reached on LinkedIn. Subscribe to our monthly newsletter here, which is a compilation of our weekly blogs so you never miss one.
About Harlan Friedman, JD & Founding Member, H. Friedman Search LLC. Harlan is a thirty-year veteran Public Finance Banker turned recruiter who specializes in the placement of all levels Public Finance Bankers, Health Care Bankers, Municipal Financial Advisors, Compliance Officers, Issuers, and Bond Counsels.