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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