Good morning.
Looks like this won’t be the year of big Wall Street bonuses.
An industry analysis released on Tuesday by Johnson Associates, Inc., a New York-based compensation consulting firm, finds bankers’ bonuses will decline or be mostly flat. But there are some exceptions, like high-performing wealth management professionals, who are in high demand.
A lag in M&A and rising interest rates means investment banking advisory professionals can expect to see their year-end incentives (cash bonuses and equity awards) decline 15%-25% this year, compared to 2022. Meanwhile, awards to regional commercial and retail bankers are projected to decline 10%-20%, according to the analysis.
“Most Wall Street professionals will have to wait another year for a rebound in year-end bonuses,” Alan Johnson, managing director of the firm, said in a statement. With the macroenvironment, “most business segments remain under pressure to keep compensation costs down,” Johnson said.
However, Johnson also points to some bonus bright spots. Global retail and commercial bankers are projected to receive awards as much as 10% larger compared to 2022. Investment banking equity underwriters are projected to receive a 5%-15% increase. And wealth management pros are expected to receive up to 5%.
Is high inflation driving the wealth management bonus bump? “It’s not directly tied, but it may be a contributing factor,” Chris Connors, principal at Johnson Associates, tells me. “The key drivers are client demand and the competitive landscape for talented wealth management professionals,” Connors says. “We describe this as a booming space and a growth area for banks and traditional asset management firms.”
According to recent McKinsey research, “a decade of favorable macroeconomic conditions and relatively easy growth has ended, signaling a new urgency for US wealth managers to rethink operating models and reenergize growth.”
Johnson Associates’ analysis also projects that those at hedge funds, private equity, asset managers and in sales and staff positions can expect modestly smaller to flat year-end payments. The analysis is based on the firm’s monitoring of the financial services industry, numerous proprietary data points, and public data from six of the nation’s largest investment and commercial banks, and 10 of the largest asset management firms.
And 2024 is “unfortunately expected to be another challenging year,” according to Johnson Associates. Many sectors will launch from a lower starting point next year, “leading to compensation challenges that require attention and creativity,” the firm predicts.
Sheryl Estrada
sheryl.estrada@fortune.com
