Morning Coffee: How the bank that pays like a hedge fund poaches its people. MD promotions as a retention tool

Do you want to get hired by Jefferies? To receive a personal call from either Richard Handler or Brian Friedman, potentially offering you as much as $10m a year over three years? If so, it helps to be working for a bank that has just overlooked you for promotion and that's hired-in some less experienced outsiders with unfathomable accents instead. 

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This is one narrative of the events that occurred at Barclays in May 2023. The Wall Street Journal reports that Brian Friedman, who is Jefferies' president to Handler's CEO, was onto the situation in a flash. Friedman reportedly called up John Miller, the former co-head of Barclays' investment bank, "within moments" of him being displaced by Cathal Deasy from Credit Suisse. Friedman reportedly touted Jefferies as "the last frontier" standalone investment bank and invited Miller to join. Miller accepted and arrived with colleagues. Were they paid $10m each over three years? No one knows, but the WSJ says Jefferies isn't averse to offering packages this huge.

Jefferies pays a bit like a hedge fund. The money is big and heavily performance driven - if you don't perform, you'll get a lot less after the three years of $10m are up. The London office, especially, is often full of complaints about diminutive bonuses each December. Even if you don't like your fourth year bonus, though, you might find it hard to leave. - Jefferies pays cash but operates a clawback, plus tax, on a sliding scale over a three-year period when you quit.

People still want to work there. In the last five years, Jefferies has hired at least 360 MDs, an increase of 70%. Today's investor day might reveal that it's hired even more. Insiders say Jefferies a bit like Lehman Brothers, in a good way. Miller and others once worked for Lehman. Jefferies is entrepreneurial. In the age of a cross-selling, you won't be compelled to tout the entire array of products it offers. 

Jefferies also seems to have become a bit more gentle than before. Although Handler and Friedman are personable and try not to be "stupid or arrogant during the good times," former head of investment banking Ben Lorello was reportedly aggressive in his "managing style." He left in 2020. Now Miller's in charge, alongside Jefferies veteran Raphael Bejarano.

The two are still hiring, but only "surgically" in sectors where they think there is growth. The big question now is what happens to the 360 new MDs who've joined in the past few years when the guaranteed bonuses wear out and the clawbacks lapse.  Will they stick around for the culture and the avuncular memos? Will they stay to see Jefferies displace Citi as the fifth-biggest investment bank? It will become apparent, soon.

Separately, PWC has discovered the benefit of offering a big title to people who might leave. 

The Financial Times reports that PWC has invented a new title of "managing director" which it will be awarding to people it doesn't make partner, and which it will be using to recruit people who want a big title. 

The new PWC managing directors will have higher salaries than non-managing directors. But they will not be partners, who are earning £862k in the UK this year. It means that PWC will be able to retain existing people and to hire new people without diluting the partnership pool. 

It might end up with a lot of MDs instead, though.

Meanwhile....

Bonus deferrals are being cut in the UK but are not disappearing altogether. “The pay systems we had in many of our banks before the global financial crisis, with bonuses often paid 100% in cash at year end with no further questions asked, was a very dangerous way to incentivise senior bankers and was an important factor in the collapse of our banking system.” (Financial News) 

Millennium Management wanted to raise $10m, but it raised $20m instead. (Bloomberg) 

Consultants at McKinsey & Co and elsewhere are moving to the Gulf because it's easier to get promoted there. (Bloomberg) 

Financial services firms are all about using generative AI to build their own search engines. (Business Insider) 

Vibhav Bukkapatanam joined Cubist, the systematic trading division of multimanager hedge fund Point72, last year as head of high frequency but is leaving after less than a year on the job. (Business Insider) 

It's a great time to work in prime brokerage (The Trade) 

Asia’s stock markets are gearing up for their busiest week of listings in more than two years. “We are likely witnessing the initial stage of a recovery in the Hong Kong and China capital markets. We need more larger, high-quality companies to list in Hong Kong and continue to perform well to ensure that this trend is sustainable.” (Bloomberg) 

The TV show Industry is not much like life in banking: “They get the vibes to a tee. But the plot isn’t always realistic.” (WSJ) 

Are cringy LinkedIn posts ok? “Our professional personal lives are just more merged. There’s a balance.” (Bloomberg) 

October is the new January. Now is the time to make your plans for the next year. (WSJ) 

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