Associate Promotion - Clawback
I'm a first-year analyst in a very good bulge-bracket group. I've decided to forego recruiting this year since I'm considering trying to do a third year. With the policies at most banks now offering a direct associate promotion after two years, if selected I am considering becoming an associate after my two years.
If I accept the associate promotion after two years, but then leave after one year as an associate (therefore having stayed in IBD for three years) - 1) Is there a clawback on the associate signing bonus? - 2) Is there a clawback on the associate pro-rated bonus that comes in December? - 3) Will my co-workers hate me, or will just HR hate me and the rest of my coworkers understand why I've left (for PE or Corp Dev)?
Looking for responses of those who may have chosen a similar path!
Thank you in advance
Things may be different in IBD, but I don't remember getting a signing bonus. I remember getting a bonus and a promotion.
The general rule of thumb (and this will vary firm to firm) is to expect a 12 month clawback of a signing bonus for a new hire.
There's typically no clawback on a year-end bonus paid in cash, provided the money clears your checking account.
IBD may be different, but a lot of people leave after bonus checks get paid.
To be sure, a bonus is income you have already accrued. You don't get a year-end bonus the day you show up at the firm-- you get a year-end bonus after working there for a year. That's money you have earned. And it's generally your right to leave and keep the money you earned.
1) Yes, there will be clawback on your associate signing bonus. One year is a sensible assumption. However, at my EB the clawback for A to A promotes was actually two years. I can't say for certain, but I also recall hearing at my firm that those who accepted A to A offer did not receive their signing bonus immediately (i.e., they did not get the check immediately after accepting the offer about 12 months in on the job).
2) No, there should not be a clawback on your pro rata/"stub" bonus. As mentioned above, your bonus is paid out to reflect work already completed. Say you formally get promoted in June/July to associate after completing two full years as an analyst. In this case, you should be receiving a stub bonus at the Associate level for your work over the remainder of that year.
3) Tough call, depends on your group and how you handle it. I think it becomes a lot harder for your team to hold a grudge if you put in over a year after the promotion (to avoid the clawback) before walking away saying the job really isn't for you anymore. Leaving any earlier than that I can understand why some people would be particularly upset about your departure. In one extreme example, I recall an analyst at my bank accepting the associate promotion offer about one year in. He ended up looking at other opportunities during his second year and reneging the offer right around his two year mark (i.e., right before he was suppose to go to associate training). Needless to say, he did not leave the firm on the best of terms but didn't really care since he decided to leave finance anyway.
One other point you should take into consideration is how this promotion will impact your ability to recruit outside of banking. I can't say I know anyone from personal experience who took the A to A promotion then recruited for PE, etc. after becoming an associate. However, based on my experience with PE recruiting I can only imagine being in such a position would make it more challenging. That being said, I assume your plan is to secretly go through traditional recruiting as a second year analyst, secure an offer, then quit the following summer (at which point you'd be an associate for almost a year). If this is the case and you plan to be recruiting after already accepting the early promotion offer, I would be extremely careful.
One year signing bonus (for me). Annual bonus, none as soon as it hits your bank account.
This should all be stipulated by HR when the bonus is provided. Will depend by shop, but I would expect at least a year.
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