Wall Street’s bonus pool may rise as much as 10 percent this year for asset managers while fixed-income traders could see a 15 percent cut, according to compensation consultant Johnson Associates Inc.
Incentive pay will probably rise the most in investment-banking advisory services, at private-equity firms and prime brokerages and for asset and wealth managers, Johnson said in a May 12 report. Financial firms are poised to boost assets under management and benefit from an increase in mergers and acquisitions, and independents facing fewer regulations may win business from larger banks, Johnson said.
“This is really a sea change,” Alan Johnson, founder and managing director of the New York-based consultant, said in a phone interview. “It’s been coming and coming and now it’s finally apparent that the largest paychecks don’t come from Wall Street banks.”
Companies including Goldman Sachs Group Inc. and Bank of America Corp. are facing a slump in trading revenue that eroded first-quarter results. JPMorgan Chase & Co. said this month that fixed-income and equity-trading revenue may fall about 20 percent from last year’s second quarter amid “a continued challenging environment and lower client activity levels.”
The largest investment banks shrank pay pools for traders and bankers by more than 2 percent last year and set aside a smaller portion of revenue for total compensation. The bonus pool across all of Wall Street rose 15 percent to $26.7 billion in 2013, fueled by deferred pay, New York state Comptroller Thomas DiNapoli said in March.
“Many asset-management firms pay the same or better than the big banks, and this year that gap will get even bigger,” Johnson said in the interview.
The report found that advisers in mergers and acquisitions may see their bonus pool expand by as much as 15 percent. Incentive pay for senior management at banks, excluding the executives named on proxy filings, may fall as much as 10 percent or rise as much as 5 percent while staff pay remains unchanged. Johnson’s estimates are for incentive compensation, which doesn’t include salary.
Bonuses for equity traders may fall as much as 10 percent from last year, the report found. As Wall Street profits continue to shift from trading to investing, so will compensation, Johnson said.
“There’s going to be even more emphasis on managing other people’s money,” he said.