What's the difference between a lawyer working for an investment bank and his or her counterpart working for a top international law firm? The answer is simple: lawyers working for investment banks receive hefty bonuses, lawyers working for law firms don't.
At this time of the year, this discrepancy becomes something of a nightmare for law firms looking to retain their staff. While investment banking lawyers pocket bonuses equal to several multiples of their salaries, their magic circle cousins have to contend with a paltry 20% or so. To make matters worse, investment banks globally are in dire need of lawyers, particularly those familiar with derivatives, and international law firms are their prime hunting ground.
"There is a very real shortage of derivatives lawyers in the London market," says Siobhan Lewington, a consultant in the legal team at search firm Sheffield Haworth. She says, "Demand is outstripping supply: law firms tend to have quite small teams in this area and although banks are trying to poach from them, there aren't enough people to go around."
Recruiters in other financial centres report a similar phenomenon. Edna Messick at New York City-based E M Messick Legal Recruiting & Consulting says, "Equity derivatives are especially hot."
Does the lack of talent mean anyone with a passing familiarity with derivative products and a law firm on their resume can walk into a legal position in an investment bank? Unfortunately not: Messick says shortages on Wall Street are partly a function of banks' fussiness. "Banks like Goldman Sachs and Morgan Stanley are looking for the crème de la crème in terms of candidates," she says. "They want them from the top law schools, and they want them to be working for the top five or ten law firms in New York. They're also looking for between four and seven years' post qualification experience."
Antoine Morgaut, head of financial services recruitment at Robert Walters in France, says the Parisian market is suffering a similar dearth of derivatives lawyers, while Gary Mackney of Frankfurt-based Neumann Legal Recruitment, says the German market is starved of derivatives lawyers with between two and three years' experience. Maximillian Redolfi, a consultant at Michael Page in Milan, says financial services lawyers are in equal demand in Italy, although the country's smaller financial services market means fewer are specialised in a particular product class.
In many countries, law firms themselves are also hiring. In London, for example, Lewington says law firms are trying to lure derivatives lawyers back from investment banks. In Germany, US corporate law firm Sidley Austin Brown and Wood poached two capital markets lawyers from rival Lovells to open a Frankfurt office last October.
In Milan, Corrado Angelelli, a partner in the finance team at Freshfields Bruckhaus Deringer, says he is looking to make an unspecified number of mid-level and junior hires with experience in banking, debt capital markets, and securitisation.
In Continental Europe, the hiring bar is raised by the fact that legal hires, particularly those working with derivative products, need to speak fluent English as well as the local tongue. According to people recruiting in the region, this skill set is about as common as a palm frond in Antarctica. "The best derivative lawyers are trained in England," says Angelelli at Freshfields. "But it's not enough to know how to structure derivatives - they also need to speak fluent Italian."
Some banks are adopting a lateral approach to the staff shortage. According to a recent article in The Lawyer magazine, for example, Dutch bank ABN Amro has contracted law firm Clifford Chance to train its non-specialised attorneys in London, New York and Hong Kong in the art of derivatives law.