Bonus Blues on Wall Street: In a recent study conducted by Johnson Associates, a New York-based compensation consultant, the financial realm is gearing up for a notable adjustment in year-end bonuses. The report predicts a dip of 15-25% for investment bankers offering counsel on mergers and acquisitions in 2023 compared to the previous year.
This adjustment is not uniform across the banking sector. Commercial and retail bankers at regional banks are expected to witness a bonus reduction ranging from 10% to 20% compared to the previous year, as indicated by the findings.
The consultancy’s principal, Alan Johnson, remarked, “Most Wall Street professionals will have to wait another year for a rebound.” He pointed out that the financial markets and the overall economy have been grappling with uncertainties, putting pressure on various business segments to manage and curtail compensation costs.
However, amidst these general trends, there are exceptions. Investment bankers engaged in equity underwriting might see a more favorable scenario with anticipated payouts that could be 5-15% higher than the previous year. Similarly, wealth managers might expect awards with a 5% increase. On the other hand, retail or commercial bankers in larger institutions could either witness flat bonuses or a modest rise of about 10%.
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Looking ahead, Johnson Associates foresees 2024 as yet another challenging year for the financial sector. Factors such as higher interest rates and ongoing geopolitical uncertainties are expected to constrain activity. The report suggests that companies are evaluating headcount and staffing models as turnover declines. Smaller bonus pools might be divided based on individual performance.
For specific roles, bonuses for debt underwriters are expected to either remain stagnant or experience a decrease of up to 10%. Equity trading could see a decline of 5-10%. Finance professionals engaged in fixed income trading, hedge funds, private equity firms, and asset management should brace for either flat bonuses or marginal gains or losses.
As the financial landscape continues to evolve, professionals in the sector find themselves in a dynamic environment, navigating through challenges and adapting to the shifting tides of the industry. The forecasted adjustments in bonuses highlight the ongoing impact of economic uncertainties and the need for resilience in the financial sector.
Our Reader’s Queries
What is the average bonus plunge on Wall Street?
In 2022, the average bonus for New York City bankers dropped by 26%, bringing it back to pre-pandemic levels. This comes after two years of record profits on Wall Street. Despite the decrease, the average bonus is still 2.5 times higher than the median U.S. household income of $70,784. According to the City Comptroller, one in 11 jobs in NYC are linked to Wall Street.
How much are Wall Street bonuses down?
This season, Wall Street investment bankers are likely to see a decrease of 15%-25% in their bonuses. While bonuses across the industry are expected to remain mostly stagnant, there are three exceptions worth noting. To put it simply, the bonus outlook for investment bankers is not looking as promising as it has in the past.
What are the bailout and bonuses on Wall Street?
During the 2008 financial crisis, TARP bonuses were given to bank employees using funds that were meant to bail out some of the largest U.S. financial institutions. These bonuses were intended to prevent a depression and financial collapse. However, the use of TARP funds for bonuses was controversial and raised questions about the ethics of rewarding employees during a time of crisis.
What percentage of salary is bonus in finance?
In the banking and finance sectors, it’s common to receive a higher percentage of your base salary as a bonus, ranging from 10% to 30%. However, in the tech and startup industries, bonuses tend to be lower, typically around 5% to 15%. Executive-level positions usually come with higher bonuses, while mid-level managers can expect to receive around 10% to 20%.