SOURCE: Johnson Associates

November 10, 2014 08:44 ET

Wall Street Incentive Awards to Be Mostly Flat in 2014, Johnson Associates Analysis Finds

Closely-Watched Barometer Shows Largest Increases Expected for Investment Banking and Private Equity Industries, Lower Payments for Fixed-Income, Equities Traders

NEW YORK, NY--(Marketwired - Nov 10, 2014) - Year-end incentive payments on Wall Street are expected to be mostly flat compared with last year, although payouts will vary significantly by business segment, according to an annual compensation analysis released today by Johnson Associates, Inc., a New York-based compensation consulting firm. The closely-watched industry study notes investment banking and private equity professionals will receive the largest increases in payouts while fixed income and equities traders are in line for smaller awards compared to 2013.

"A mixed bag of fortunes awaits Wall Street professionals this bonus season, despite a moderately positive year across the financial services industry," said Alan Johnson, managing director of Johnson Associates and one of the nation's foremost authorities on Wall Street compensation. "The asset management industry is experiencing another strong year and as a result will have a positive impact on year-end incentives. On the other hand, 2014 is turning out to be another difficult and disappointing year for investment and commercial banks. And while some professionals can expect slightly large payments, overall year-end incentives will be flat."

The Johnson Associates third quarter compensation analysis shows that overall year-end incentives, which include cash bonuses and equity awards, will be mostly flat this year compared to last year. However, there will be significant variation by firm and business, the analysis noted.

Indeed, private equity professionals and investment bankers on the advisory side can expect to see the largest increase in year-end incentives -- a jump of 10 to 15% over last year's payouts. Incentive payments for asset management and high net worth professionals will increase from 5 to 10% while investment banking underwriters' awards are expected to increase between 5 and 15%. Conversely, fixed income and equities traders can expect awards that will be flat or decline as much as 10%. Incentive payouts for the rest of the financial services industry, including retail & commercial banking and staff positions will be mostly unchanged from last year.

   
Business Area Percent Change from 2013
Investment Banking
(Advisory)
+10% to +15%
Private Equity +10% to +15%
Investment Banking
(Underwriting)
+5% to +15%
High Net Worth +5% to +10%
Asset Management
(Independent & Captive)
+5% to +10%
Commercial/Retail
Banking
0%
Staff Positions 0%
Senior Management Minus 5% to +5%
Hedge Funds Minus 10% to +5%
Equities Minus 10% to 0%
Fixed Income Minus 10% to 0%
   

Johnson Associates regularly monitors compensation trends among a wide range of commercial and investment banks, and financial services companies. Its quarterly compensation analysis is based on the firm's ongoing monitoring of the financial services industry and public data from eight of the nation's largest investment and commercial banks and ten of the largest asset management firms.

Outlook for 2015
"Looking ahead to 2015, we expect to see continued improvement in many segments of the financial services industry. While ongoing global issues continue to add uncertainty and create turbulent markets, most are optimistic, while recognizing the business challenges going into 2015. Asset management incentives may increase 10% or more, and are again projected to outpace investment and commercial bank's broad projected incentive increases of 5% next year. Accordingly, the paradigm shift is expected to continue toward non-bank compensation and careers. Firms will continue to focus on expenses, with need for fundamental changes in cost structures at banks and some asset managers," concluded Johnson.

ABOUT JOHNSON ASSOCIATES
Johnson Associates is a boutique compensation consulting firm specializing in the design of annual and long-term incentive plans and establishing appropriate market pay levels. The firm is well-known for providing candid advice and for its expertise and in-depth knowledge of the financial services industry, including major investment and commercial banks, asset management firms, hedge funds and other alternative investments, insurance companies, and brokerages. For more information, visit www.jaiconsulting.com

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