Talent-hungry small firms cheer Wall St job cuts

By Jonathan Spicer - Analysis

NEW YORK (Reuters) - Smaller financial firms have found a way to capitalize on their larger rivals' woes, moving to snap up some of the top talent cast adrift by sweeping layoffs at leading investment banks.

Such firms, many of which have ducked the troubles gripping Wall Street, are plucking what they see as gems in the fallout from the credit crunch, which has led to more than 100,000 financial-sector job losses so far in 2008.

As accountants at the biggest banks prepare for next year's budgets, their smaller cohorts are betting the cuts will continue well into next year, making the pool of unemployed talent both deeper and cheaper.

"You buy your straw hats in the winter," Ed Wedbush, president of Wedbush Morgan Securities, said of the windfall of affordable talent.

The Los Angeles-based investment bank, with annual revenue of $250 million, has grown from 600 employees to 820 in the last two years, Wedbush said. "We've been able to take advantage of the situation, clearly."

One year after problems in the U.S. mortgage market bloomed into a full-blown financial crisis, big banks are under immense pressure to contain losses caused by write-downs.

Many have responded by trimming payrolls: New York-based Citigroup Inc has wielded perhaps the biggest ax, chopping 14,000 jobs this year alone. Over the same period, Merrill Lynch & Co Inc trimmed some 4,200 staffers.

But unlike in past financial crises, not everyone is caught in this firestorm. While mortgage-related securities rot on the balance sheets of larger players, firms that avoided the worst of those products finally have the leverage needed to hire the talent that was previously out of reach.

"This has been a great environment for boutiques and regional firms," said Gary Goldstein, president and chief executive of Whitney Group, an executive search firm specializing in financial services.

The job cuts are "music to their ears," he said. "There's just that much more to choose from."

CUTTING INTO THE BONE

Top managers at financial firms earned about 35 percent less in total compensation last year, according to recruiters and consultants.

With year-end bonus season on the horizon, they expect a further decline this year as even talented, well-performing employees are sacked in an effort to lower overall costs.

Paul Sorbera, president of financial-executive recruiting firm Alliance Consulting, said banks and other financial shops are increasingly trimming staff among groups that are performing well and ahead of budget.

"They're kind of cutting into the bone," he said, repeating the adage that Wall Street firms tend to over-hire and then over-fire. "But people are very opportunistic when attracting good people, and there's a lot of hiring going on right now."