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Rich Lawyer, Poor LawyerIn the land where hedge fund and private equity czars still reign, lawyers making a million dollars a year are a dime a dozen
Lawyers -- the underclass? To even a marginally rational person, that would be a stretch. Fact is, big-firm lawyers have never been richer. But beneath the surface, discontent brews. As other professions have hit the stratosphere, lawyers have nose-dived on the socioeconomic ladder, especially in uberprivileged enclaves like Manhattan. The upshot: In a land where hedge fund and private equity czars still reign supreme, lawyers making a million dollars a year are a dime a dozen.
The American Lawyer2007-12-18 12:00:00 AM
The prize was a home-cooked dinner for eight, prepared by a parent -- one of New York's most celebrated chefs and a perennial on the Food Network. The bidding started at $3,000 -- a fabulous bargain. Nearly two dozen paddles shot up in the air. The bidders were the usual suspects -- Wall Streeters, big-firm lawyers, a sprinkling of doctors, a few people with money but no visible means of support.
Nursed by a steady stream of champagne cocktails, the bidders were a competitive lot. At $7,000, the doctors dropped out of the game; at $10,000, most of the other professionals were gone; at $15,000, the lawyers and the trust fund babies bit the dust. With only the financial titans in the game, the bidding got intense: $20,000, $25,000, $30,000. Sold for $40,000! The winner: the wife of a 30-something hedge fund manager.
There's nothing like a fundraiser at a private school in Manhattan to define your social station. Time was, lawyers were near the top of the heap. Investment bankers and other finance types have long eclipsed them, but the difference used to be one of degree. Then came private equity investors and hedge funders, and lawyers nose-dived on the socioeconomic ladder. "Face it, we have no status," says an Am Law 100 partner of the pecking order at his sons' private school. "We go to these school functions, and this well-heeled group looks right through you. They won't give you the time of day. You're just one step ahead of the doorman."
Lawyers -- the underclass? To even a marginally rational person, that would be a stretch. Fact is, big-firm lawyers have never been richer. The average Am Law 100 partner took home profits of $1.2 million last year. Lawyers in major firms "are doing great," says Steven Kaplan, a professor at the The University of Chicago Graduate School of Business, noting that the compensation of that demographic has increased 2.6 times since 1994, even discounting for inflation. In large swaths of the country, anyone making that much money could live like the sultan of a minor principality. So why are some lawyers feeling sorry for themselves?
In the uberprivileged enclaves of New York and Silicon Valley, "lawyers are just a little above middle-class," says Palo Alto, Calif.-based recruiter Carl Baier. But unlike New York lawyers, those in Silicon Valley seem to complain less. "There's more memory of lessons learned," says recruiter Avis Caravello about lawyers who joined dot-coms that quickly crashed. And despite reports that the Valley is overheating again, lawyers remain chastened, adds Caravallo.
Not so in New York. Even with the recent dip in the credit market, lawyers show plenty of hedge fund and private equity envy. Who can blame them? Literally and figuratively, lawyers live in the shadows of those financial gods. They share the same upscale neighborhoods, eat at the same trendy restaurants and relax on the same stretches of white sand in the Hamptons. The difference is that Wall Streeters will buy three or four apartments and combine them, and pick up choice properties by the water. "Our place is on the poor side of town -- north of the highway [away from the water]," says a lawyer, sipping a drink poolside at her East Hampton weekend retreat. "Only the bankers can afford the south side."
Real estate causes a great deal of angst in these rarefied precincts. "Our cost of living goes up because of these people," says a fifth-year associate about the hedge fund crowd. "Wall Streeters are buying up the pre-eminent prewar apartments on the Upper East Side," gripes a partner who lives on New York's Upper West Side. What about the newly gentrifying areas of lower Manhattan or Brooklyn? Get real. "It's bullshit that partners are living all over the city by choice," he says.
If the ability to buy a home in Manhattan -- where a three bedroom apartment in a "good" building can top $5 million -- is the true measure of wealth, lawyers are coming up short. "Twenty years ago, almost all my clients were doctors or lawyers," says real estate agent Dolly Lenz. "Now 80 percent are from Wall Street."
"It's clear," adds another real estate agent, Judith Thorn, "that young partners cannot afford the same properties as their colleagues in hedge funds."
A silver lining for some: Many big-firm partners have passed the $1 million mark -- that unspoken demarcation between the top and middle drawers of the profession, and those who might plausibly afford a piece of Manhattan. But these days, the real contenders for a snazzy apartment are partners in the $2 million league, says Thorn. (She adds, though, that older partners who bought decades ago and have benefited from the dizzying climb of Manhattan real estate prices can trade up and even fetch apartments in the $6 million to $10 million range.)
And what about those poor schleps making a mere $600,000 or so -- the average profit per partner of The Am Law 200? Should they head for the outer boroughs, the suburbs or Cleveland? "It's still doable [in Manhattan]," says real estate agent Lenz, though she says that a family headed by such a lawyer might just have to squeeze into a tidy 1,600-square-foot apartment. It would also help, she adds, if the partner had some family money.
It's enough to make otherwise sensible lawyers resent their clients. "You have these young people making $5 million a year," sputters one 60-something partner. What's worse, he adds, "they are inexperienced and have to be led by lawyers."
Deep down (or is it right on the surface?), lawyers feel they are smarter than the average Wall Street Joe they service. "Some seem not to have that much education," sniffs one lawyer. "Why am I doing all the thinking when I'm making a quarter of what they make?" (A question that may answer itself.)
All this bitterness about money strikes lawyer and author Philip Howard as a perversion of the profession. "Law was never supposed to be a profession to get rich," says Howard, a partner at Covington & Burling in New York. He says that the fixation with money is symptomatic of the bottom-line focus that drives law firms today. "The profession has gotten confused," he says. "Lawyers have always been butlers to business." Besides, he adds, "lawyering skills don't translate well into trading skills."
Plenty of lawyers would agree. Some seem relieved not to be on the front lines of business. "There are plenty of hedge funds that collapse," says a partner who specializes in the field. "Lawyers crave stability, and people who are risk-takers should be rewarded." And even lawyers who have defected to Wall Street hedge their bets. "I'm keeping up my CLE," says a former associate who's now an investment banker.
In fact, some lawyers feel vindicated by the recent turbulence in the financial markets. Calling it schadenfreude would be too strong: Lawyers make money off Wall Street, too. It's more like nostalgia for staid, simpler times, when lawyers had a secure place in the social firmament, young financiers knew their place, and everyone recalled the lessons of the psalmist: You can't take it with you.
Of course in those days, no one had to bypass Manhattan to take it to Brooklyn.