SOURCE: Johnson Associates, Inc.

November 07, 2016 08:48 ET

Wall Street Year-End Incentive Awards Are Expected to Decline Again, Johnson Associates Analysis Finds

Closely-Watched Study Shows Biggest Declines Expected for Investment Banking Underwriting, Hedge Fund and Equities Professionals

NEW YORK, NY--(Marketwired - Nov 7, 2016) -  Year-end incentive payments on Wall Street are expected to be modestly lower compared with last year, marking the second consecutive year of smaller incentive payouts, according to an annual analysis released today by Johnson Associates, Inc., a New York-based compensation consulting firm. The closely-watched industry study notes payments will be down across the board with professionals in investment banking underwriting, hedge fund and equities expected to see the biggest declines. Only retail and commercial banking professionals are projected to receive slightly larger bonuses compared with last year. 

The Johnson Associates third quarter compensation analysis shows that overall year-end incentives, which include cash bonuses and equity awards, will be lower by 5 to 10% across the board compared to last year, when bonuses also fell by 5 to 10%.

"All signs are pointing to a disappointing end to an overall lackluster year on Wall Street," said Alan Johnson, managing director of Johnson Associates and one of the nation's foremost authorities on Wall Street compensation. "The investment banking sector has struggled with weakened advisory and underwriting activity for much of the year, while most other business segments battled strong headwinds and a difficult market environment. Any hopes for larger bonuses will have to wait at least another year."

Investment banking underwriting professionals will be the hardest hit, with their year-end incentives expected to decline by 10 to 20%, or more, over last year's payouts. Hedge fund and equities professionals can expect to see their payments decline by as much as 15%, while payments to asset management and staff professionals will decline by 5 to 10%. The only professionals who may see higher bonuses are those in retail and commercial banking. Payments for those professionals could increase by as much as 5%. 

   
Business Area Percent Change from 2015
Investment Banking (Underwriting) Minus 10% to Minus 20%+
Fixed Income Minus 10% to 0%
Hedge Funds Minus 5% to Minus 15%
Equities Minus 5% to Minus 15%
Investment Banking (Advisory) Minus 5% to Minus 10%
Staff Positions Minus 5% to Minus 10%+
Asset Management (Independent & Captive) Minus 5% to Minus 10%
High Net Worth Minus 5%
Private Equity 0%
Commercial/Retail Banking 0% to +5%
   

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

Outlook for 2017
"The financial services industry is facing another year of choppy waters, which could lead to a third straight year of smaller bonuses. Faced with ongoing fee pressure, regulation and cost increases, the asset management sector is at an inflection point that will require aggressive business decisions to position itself for the future. Select investment banking sectors are looking to build on momentum and streamlined business structures to provide interesting compensation and career opportunities. Firms will need to consistently reinforce performance expectations and follow through with differentiated compensation awards to attract and retain top talent," said 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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