“My name is Rebecca Nicholson. I’m a recruitment consultant at Assbury Moron.” This HR chick has obviously mis-dialed and has no idea that this is not Assbury Moron, or wherever else she’s looking for.
“A recruitment consultant. A headhunter. Are you free to speak for a few moments?”
Ah, the infamous headhunter: you can’t hate them even though you really, really want to. You could try to love them, but do that at your own peril.
There are lots of misconceptions about what headhunters actually do, how they get paid, and who they work for.
So let’s fix all that right now.
What Headhunters Do
Back when I explained what investment bankers actually do, I likened them to Ari Gold. Bankers don’t create; they’re not there for the long-term; they just sell.
But if there’s anyone more deserving of the “Ari Gold” title than investment bankers, it’s headhunters.
Recruiters are hired by investment banks, private equity firms and hedge funds to find potential candidates for hire. The recruiter does NOT work for you – he works for the firms that hire people.
When you get hired via a headhunter, he/she might receive around 30-33% of your base salary in compensation – from the firm that hires you.
So if you see any “Should I get a headhunter on retainer?” questions, please ignore them or find the person in real life and beat him/her into submission.
The fact that headhunters are paid on commission isn’t a bad thing, but you need to take it into account when making decisions: all else being equal, the headhunter is motivated to place you and get paid.
The Recruiting Process
The headhunter contacts you directly by phone or email and introduces himself/herself, and then sees whether or not you’re a fit for the opportunities he/she has available.
For private equity recruiting, this happens in the March/April time frame for the mega-funds and later on if you’re aiming for smaller places or you’re not at a bulge bracket bank; they may even contact you in January, midway through your first year, to introduce themselves.
Sometimes recruiters won’t contact you at all, especially if you’re not at a brand-name firm – in which case you need to be aggressive, get referrals from your friends at other banks, and do some cold-calling yourself.
Headhunters are not looking to “take a chance” on you if you’re from a non-traditional background – 99% of the time they want people whose qualifications match the job requirements exactly.
You need to meet in-person so you can tell your “story” and so they can do a better job introducing you to the right firms. Meeting in person can also help you overcome a weaker finance background or a non-brand-name bank.
If you make a strong first impression – solid deal experience, a social/confident personality, and you can explain how you’ve made money for your firms in the past – then you get past the first round and will interview with the bank(s) / private equity firm(s) / hedge fund(s) directly.
The headhunter might stay involved past that, or they might back away and focus more on other opportunities – just remember that they are incentivized to make a “deal” happen because that’s how they get paid.
Good recruiters won’t tell you to take a horrible offer just so they can get paid – but if you’re on the fence and they think it’s a good fit, they will encourage you to go for it.
Why They’re So Prevalent In Financial Services
Recruiters exist in every field, but they’re most prevalent and most influential in financial services for 2 reasons:
- The highest pay of any industry out there. Even junior-level employees make over $100,000, and mid-level hires will get between $500,000 and $1,000,000. Try finding that in manufacturing.
- Incredibly high turnover at all levels. Some analysts switch firms multiple times per year, and some senior bankers have worked at pretty much every major bank. People get burned out quickly and lust after new opportunities equally as quickly.
Headhunters get paid around 1/3 of these six-figure salaries and everyone in the industry is hopping around a lot – that translates into nice cash money.
The other factor is that the finance industry – and especially the private equity firms and hedge funds on the buy-side – is very small, and even the largest firms in the world such as Blackstone have fewer than 500 employees.
As a result, it’s easy for a few recruiting firms to “own” all the relationships and have a monopoly (or oligopoly, to be precise) on the market.
That’s much harder to pull off in an industry like technology, where brand-name firms have tens of thousands of employees – no 2-3 recruiting firms can dominate the entire hiring process.
So, Should You Look for a Job Through Headhunters?
You pretty much have to if you’re ever interested in working at a private equity firm or hedge fund: almost everyone uses them.
Investment banks, by contrast, don’t rely on headhunters as much because they are much larger and have dedicated HR teams. So you have to think about headhunters more once you’re already working in the industry and you’re looking to make a move elsewhere.
I constantly stress how important networking is, and it’s no different here: headhunters can get you introductions, but you have a much higher chance of success if you have already spoken with people at the firm.
Networking for exit opportunities can be more difficult because the firms are so much smaller than banks – but it always helps, and if your resume doesn’t match the job qualifications 100% you need to network your butt off anyway.
But watch out for a few points when going through headhunters:
Introductions, Not Decisions
Never rely on a recruiter to make a decision on whether or not to accept an offer.
It’s not that they’ll try to lead you astray or force you into something you don’t want – it’s just that the decision needs to be yours.
So don’t just stop at the recruiter’s opinion – ask around, see what others have said about the company, and get a feel for its reputation. As bankers would say, do your own due diligence.
The Tough Market
Besides financial institutions, guess who else suffers when the market tanks?
When hiring slows down and the number of people being laid off exceeds the number hopping between firms, headhunters lose their main source of revenue.
So in a recession, you need to be even more careful and persistent in how you approach the recruiting process – headhunters can still help, but you need to consider all angles and network on your own when you’re “in the market.”
Coming From Non-Bulge-Bracket Banks
Some headhunters will ignore you if you’re not from a bulge bracket bank. It’s just a matter of return on time for them – they are more likely to place candidates who come from “better” names, so that’s where they spend most of their time and energy.
Don’t just give up if you’re not at a top bank, but diversify your recruiting, network on your own and get referrals from friends.
Some recruiters also focus on middle-market firms, so seek those out rather than just going through the 3 biggest firms.
If you want to work in finance for the long-term, you’ll have to work with headhunters – regardless of whether you’re hopping between firms or you’re starting your own firm and need to hire employees.
So get to know them, and speak with as many as you can to get introductions – they are very well-connected.
But keep in mind that you also need to do some work on your own, and that you shouldn’t rely on headhunters for everything.