With smaller Wall Street bonuses, one-percenters say they feel the pinch

March 3, 2012

Andrew Schiff was sitting in traffic in California after giving a speech on gold at an investment conference. He turned off the satellite radio, got out of the car and screamed a profanity.

“I’m not Zen at all, and when I’m freaking out about the situation, where I’m stuck like a rat in a trap on a highway with no way to get out, it’s very hard,” said Schiff, director of marketing for broker-dealer Euro Pacific Capital.

Schiff, 46, is facing another kind of jam this year. Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Conn., summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.

“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.”

The smaller bonus checks that hit accounts across the financial-services industry this month are making it difficult to maintain the lifestyles that Wall Street workers expect, according to bankers and their accountants, therapists, advisers and headhunters.


Andrew Schiff, director of communications and marketing at Euro Pacific Capital Inc., is seen in this undated handout photo provided to the media on Tuesday, Feb.12, 2012. Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country's top 1 percent by income, doesn't cover his family's private-school tuition, a Kent, Conn., summer rental and the upgrade they would like from their 1,200-square-foot Brooklyn duplex. (via Bloomberg)

“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say, ‘I got three kids in private school. I have to think about pulling them out?’ ”

Facing a slump in revenue from investment banking and trading, Wall Street firms have trimmed 2011 discretionary pay. At Goldman Sachs and Barclays Capital, the cuts were at least 25 percent. Morgan Stanley capped cash bonuses at $125,000, and Deutsche Bank increased the percentage of deferred pay.

“It’s a disaster,” said Ilana Weinstein, chief of IDW Group. “The entire construct of compensation has changed.”

Most people can only dream of Wall Street’s shrinking paychecks. Median household income in 2010 was $49,445, lower than the previous year and less than 1 percent of Goldman Sachs chief executive Lloyd Blankfein’s $7 million restricted-stock bonus for 2011. The percentage of Americans living in poverty climbed to 15.1 percent, the highest in two decades.

Comfortable New Yorkers assessing their discomforts is at least as old as Edith Wharton’s 1905 novel “The House of Mirth,” whose heroine Lily Bart said “the only way not to think about money is to have a great deal of it.”

Wall Street headhunter Daniel Arbeeny said his “income has gone down tremendously.” Executive-search veterans who work with hedge funds and banks make $500,000 in good years, said Arbeeny, declining to discuss his income. He said he no longer takes annual ski trips to Whistler, Tahoe or Aspen.

On a recent Sunday, he drove to Fairway Market in the Red Hook section of Brooklyn to buy discounted salmon for $5.99 a pound. “They have a circular that they leave in front of the buildings in our neighborhood,” he said. “We sit there, and I look through all of them to find out where it’s worth going.”

He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex.

“Wow, did I waste a lot of money,” Arbeeny said.

Richard Scheiner, 58, a real estate investor and hedge fund manager, said most people on Wall Street don’t save.

“When their means are cut, they’re stuck,” said Scheiner, whose hedge fund, Lane Gate Partners, was down 15 percent last year. “Not so much an issue for me and my wife, because we’ve always saved.”

Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club. 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 each per outing, he said.

Still, he sold two motorcycles he didn’t use and called his Porsche 911 Carrera 4S Cabriolet “the Volkswagen of supercars.”

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 with a net worth of at least $10 million, have been forced to “reexamine lots of assumptions about how grand their life would be.”

He described a feeling of “malaise” and a “paralysis that does not allow one to believe that generally things are going to get better,” listing geopolitical hot spots such as Iran and low interest rates that have been “artificially manipulated” by the Federal Reserve.

The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is chief executive. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. 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 a dishwasher. We do all our dishes by hand.”

The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health insurance and 401(k) contributions. The closing costs, renovation and down payment on one of the $1.5 million, 17-foot-wide rowhouses nearby, what he called “the low rung on the brownstone ladder,” would consume “every dime” of the family’s savings, he said.

“I wouldn’t want to whine,” Schiff said. “All I want is the stuff that I always thought, growing up, that successful parents had.”

M. Todd Henderson, a University of Chicago law professor who’s teaching a seminar on executive pay, said the suffering is relative and real. He wrote two years ago that his family was “just getting by” on more than $250,000 a year, setting off what he called a firestorm of criticism.

“Yes, terminal diseases are worse than getting the flu,” he said. “But you suffer when you get the flu.”

Dlugash, the accountant, said he’s spending more time talking with Wall Street clients about their expenses.

“You don’t necessarily have to cut that — but if you don’t cut that, then you’ve got to cut this,” he said. “They say, ‘But I can’t.’ And I say, ‘But you must.’ ”

A Wall Street executive who made 10 times that amount and 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 $500,000 a year,” he said, “and dreamed even less that they’d be broke.”

— Bloomberg News

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