Has De-Equitization Subsided?


What is De-Equitization?

Three years ago, at the height of the financial crisis, the phenomenon of de-equitization was also at its peak. This de-facto termination of older partners who may have had high billing rates but who brought in less business than their fellow partners was a purely financial strategy that had enormous human impact. Times of crisis led firms to take drastic action rather than hold on to partners who were once added for a reason.

Retirement Plans are Offered to Older Partners

We now appear to be past the peak of the de-equitization tsunami, but that doesn't mean the phase-out of older partners has gone away at larger firms. One large Wall Street firm currently offers a lucrative "retirement" or buyout plan for older partners (62 - 65 years of age). This plan calls for payment for several years at the rate of 50 percent of the partner's previous five years' average partnership draw. This is a tantalizing incentive to retire. It's the same strategy the automakers have used to reduce pension liabilities for years, and for the same reason: pensions at some of the biggest law firms are vastly underfunded, and firms need to reduce the burden.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ed Poll, LawBiz | Attorney Advertising

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