Published On

June 9, 2014

Published In


February 29, 2012 5:01 AMWall Street Bonus Withdrawal Means Trading Aspen for Cheap ChexAndrew Schiff was sitting in a traffic jam in Californiathis month after giving a speech at an investmentconference about gold. He turned off the satelliteradio, got out of the car and screamed a profanity.”I’m not Zen at all, and when I’m freaking out aboutthe situation, where I’m stuck like a rat in a trap on ahighway with no way to get out, it’s very hard,” Schiff,director of marketing for broker-dealer Euro PacificCapital Inc., said in an interview.Schiff, 46, is facing another kind of jam this year: Paida lower bonus, he said the $350,000 he earns, enoughto put him in the country’s top 1 percent by income,doesn’t cover his family’s private-school tuition, aKent, Connecticut, summer rental and the upgradethey would like from their 1,200-square- foot Brooklynduplex.”I feel stuck,” Schiff said. “The New York that I wantedto have is still just beyond my reach.”The smaller bonus checks that hit accounts acrossthe financial-services industry this month are makingit difficult to maintain the lifestyles that Wall Streetworkers expect, according to interviews with bankersand their accountants, therapists, advisers andheadhunters.”People who don’t have money don’t understand thestress,” said Alan Dlugash, a partner at accountingfirm Marks Paneth & Shron LLP in New York whospecializes in financial planning for the wealthy. “Couldyou imagine what it’s like to say I got three kids inprivate school, I have to think about pulling them out?How do you do that?”Bonus CapsFacing a slump in revenue from investment bankingand trading, Wall Street firms have trimmed 2011discretionary pay. At Goldman Sachs Group Inc. andBarclays Capital, the cuts were at least 25 percent.Morgan Stanley capped cash bonuses at $125,000,and Deutsche Bank AG increased the percentage ofdeferred pay.”It’s a disaster,” said Ilana Weinstein, chief executiveofficer of New York-based search firm IDW Group LLC.”The entire construct of compensation has changed.”Most people can only dream of Wall Street’s shrinkingpaychecks. Median household income in 2010 was$49,445, according to the U.S. Census Bureau, lowerthan the previous year and less than 1 percent ofGoldman Sachs CEO Lloyd Blankfein’s $7 millionrestricted-stock bonus for 2011. The percentage ofAmericans living in poverty climbed to 15.1 percent,the highest in almost two decades.House of MirthComfortable New Yorkers assessing their discomfortsis at least as old as Edith Wharton’s 1905 novel “TheHouse of Mirth,” whose heroine Lily Bart said “the onlyway not to think about money is to have a great dealof it.”Wall Street headhunter Daniel Arbeeny said his “incomehas gone down tremendously.” On a recent Sunday, hedrove to Fairway Market in the Red Hook section ofBrooklyn to buy discounted salmon for $5.99 a pound.”They have a circular that they leave in front of thebuildings in our neighborhood,” said Arbeeny, 49, wholives in nearby Cobble Hill, namesake for a line ofpebbled-leather Kate Spade handbags. “We sit there,and I look through all of them to find out where it’sworth going.”Executive-search veterans who work with hedge fundsand banks make about $500,000 in good years, saidArbeeny, managing principal at New York-based CMFPartners LLC, declining to discuss specifics about hisown income. He said he no longer goes on annual skitrips to Whistler, Tahoe or Aspen.He reads other supermarket circulars to find goodprices for his favorite cereal, Wheat Chex.”Wow, did I waste a lot of money,” Arbeeny said.$17,000 on DogsRichard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’tsave.”When their means are cut, they’re stuck,” said Scheiner,whose New York-based hedge fund, Lane Gate PartnersLLC, was down about 15 percent last year. “Not so muchan issue for me and my wife because we’ve always saved.”Scheiner said he spends about $500 a month to parkone of his two Audis in a garage and at least $7,500 ayear each for memberships at the Trump National GolfClub in Westchester and a gun club in upstate New York.A labradoodle named Zelda and a rescued bichon frise,Duke, cost $17,000 a year, including food, health care,boarding and a daily dog-walker who charges $17 eachper outing, he said.Still, he sold two motorcycles he didn’t use and calledhis Porsche 911 Carrera 4S Cabriolet “the Volkswagenof supercars.” He and his wife have given more than$100,000 to a nonprofit she founded that promotesemployment for people with Asperger syndrome, he said‚ÄòCrushing Setback’Scheiner pays $30,000 a year to be part of a New York-based peer-learning group for investors called TIGER 21.Founder Michael Sonnenfeldt said members, most witha net worth of at least $10 million, have been forced to”reexamine lots of assumptions about how grand theirlife would be.”While they aren’t asking for sympathy, “at their level, ina different way but in the same way, the rug got pulledout,” said Sonnenfeldt, 56. “For many people of wealth,they’ve had a crushing setback as well.”He described a feeling of “malaise” and a “paralysis thatdoes not allow one to believe that generally things aregoing to get better,” listing geopolitical hot spots suchas Iran and low interest rates that have been “artificiallymanipulated” by the Federal Reserve.Poly PrepThe malaise is shared by Schiff, the New York-basedmarketing director for Euro Pacific Capital, where hisbrother is CEO. His family rents the lower duplex ofa brownstone in Cobble Hill, where his two childrenshare a room. His 10-year- old daughter is a studentat $32,000-a-year Poly Prep Country Day School inBrooklyn. His son, 7, will apply in a few years.”I can’t imagine what I’m going to do,” Schiff said.”I’m crammed into 1,200 square feet. I don’t have adishwasher. We do all our dishes by hand.”He wants 1,800 square feet — “a room for each kid,three bedrooms, maybe four,” he said. “Imagine fourbedrooms. You have the luxury of a guest room, howcrazy is that?”The family rents a three-bedroom summer house inConnecticut and will go there again this year for onemonth instead of four. Schiff said he brings home lessthan $200,000 after taxes, health-insurance and 401(k)contributions. The closing costs, renovation and downpayment on one of the $1.5 million 17-foot-wide rowhouses nearby, what he called “the low rung on thebrownstone ladder,” would consume “every dime” of thefamily’s savings, he said.”I wouldn’t want to whine,” Schiff said. “All I want is thestuff that I always thought, growing up, that successfulparents had.”Vegas, IbizaHans Kullberg, 27, a trader at Wyckoff, New Jersey-based hedge fund Falcon Management Corp. who saidhe earns about $150,000 a year, is adjusting his sights,too.After graduating from the Wharton School of theUniversity of Pennsylvania in 2006, he spent a $10,000signing bonus from Citigroup Inc. on a six-week trip toSouth America. He worked on an emerging-marketsteam at the bank that traded and marketed syntheticcollateralized debt obligations.His tastes for travel got “a little bit more lavish,” he said.Kullberg, a triathlete, went to a bachelor party in LasVegas in January after renting a four-bedroom ski cabinat Bear Mountain in California as a Christmas gift to hisparents. He went to Ibiza for another bachelor party inAugust, spending $3,000 on a three-day trip, includinga 15-minute ride from the airport that cost $100. In Mayhe spent 10 days in India.Wet T-ShirtEarlier this month, a friend invited him on a trip to MardiGras in New Orleans. The friend was going to be a judgein a wet T-shirt contest, Kullberg said. He turned downthe offer.It wouldn’t have been “the most financially prudentthing to do,” he said. “I’m not totally sure about whatI’m going to get paid this year, how I’m going to bedoing.”He thinks more about the long term, he said, and plansto buy a foreclosed two-bedroom house in Charlotte,North Carolina, for $50,000 next month.M. Todd Henderson, a University of Chicago law professorwho’s teaching a seminar on executive compensation,said the suffering is relative and real. He wrote two yearsago that his family was “just getting by” on more than$250,000 a year, setting off what he called a firestorm ofcriticism.”Yes, terminal diseases are worse than getting the flu,” hesaid. “But you suffer when you get the flu.”‚ÄòHave to Cut’Dlugash, the accountant, said he’s spending more timetalking with Wall Street clients about their expenses.”You don’t necessarily have to cut that — but if you don’tcut that, then you’ve got to cut this,” he said. “They say,‚ÄòBut I can’t.’ And I say, ‚ÄòBut you must.'”One banker who owes Dlugash $20,000 gained theaccountant’s sympathy despite his six-figure pay.”If you’re making $50,000 and your salary gets down to$40,000 and you have to cut, it’s very severe to you,”Dlugash said. “But it’s no less severe to these other peoplewith these big numbers.”A Wall Street executive who made 10 times that amountand now has declining income along with a divorce,private school tuitions and elderly parents also suffers,he said.”These people never dreamed they’d be making $500,000a year,” he said, “and dreamed even less that they’d bebroke.”–With reporting by Patrick Clark and Michael J. Moore andin New York. Editors: Robert Friedman, Peter Eichenbaum