Dive Brief:
- Wall Street workers are expected to get year-end bonuses that are as much as 35% higher than they received last year, marking the first time since 2021 that the incentive payments have grown as a whole for the financial services industry, according to a press release from Johnson Associates, a New York City-based consulting firm, sent to CFO Dive, and a report on their analysis.
- Many but not all types of finance professionals will see double-digit percentage increases in their payouts, according to the analysis. The debt and bond underwriting sector will likely bag the biggest gains, with 25% to 35% increases compared to 2023, while equity underwriting will get 15% to 25% bonus hikes, JA said. The holidays could be a little less jolly for real estate finance professionals, who will see no YOY increases, and for retail and commercial banking executives, who will likely see their bonuses hold steady or shrink 5%.
- The more generous payouts will put some pressure on other parts of the financial services sector to boost bonuses but won’t “explicitly” affect bonus pools in other industries like tech, Chris Connors, a principal at JA said. “Wall Street bonuses are far more volatile than most other industries,” Connors wrote in an emailed response to questions. “Many other industries...have more stable bonus opportunities.”
Dive Insight:
The bonuses are the stuff of Wall Street lore, but beyond the drama, a good or bad bonus year can make or break the financial health of the sector’s professionals. That’s because executives at banks, private equity firms and asset managers generally get a large chunk of their compensation in the form of end-of-year incentive payments, which are typically paid out in February, Connors said in an interview.
Virtually none of the public firms pay the bonuses all in cash, with many firms paying more cash to employees that make less while executives higher up the ladder get a larger share of their bonuses in stock that is often deferred or vested over a three-year period, he said. “It’s typically on a graduated scale, the more money you make the larger percentage of the money you make in deferred equity,” he said.
That might mean that an analyst at a major bank with a $110,000 salary could get a $40,000 bonus that is all cash, while someone higher up might make $400,000 and get a $1 million bonus, of which $600,000 would be in cash and the rest in stock, Connors said.
Connors doesn’t expect companies to make changes to their bonus pools due to Donald Trump prevailing in the Nov. 5 election. However, if the stock market continues to rise it could boost assets under management and potentially have an impact, he said.
Financial services bonuses have been dampened over the last three years as some investors switched from higher-fee investment products to passively managed products like ETFs that have lower fees, offsetting some of the gains in the stock market, Connors said.
Looking ahead to 2025, banks are more optimistic and aiming to sustain improvements in the mergers and acquisitions market, JA said in its release. Still, “headcount and efficiencies” remain a priority. Johnson Associates based its forecast on public information from and interviews with more than 80 finance firms, Connors said.
