Wall Street Bonuses Likely to be Smaller This Year: Johnson Associates Analysis

“The pandemic is wreaking havoc on many parts of the U.S. economy this year, and the financial services industry is no exception,” said Alan Johnson, managing director of Johnson Associates…

Even with an optimistic vaccine view, the pandemic will continue to weigh on the economy in 2021, but likely to a lesser degree than in 2020, the firm projects…

“For 2021, we expect some stabilization with early projections for modest salary increases, and flat to slightly increased incentives,” he said.

Seeking Alpha / November 15, 2020

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COVID-driven Divide Emerges on Wall Street as Bonus Season Looms

“The majority of professionals at traditional and alternative asset firms as well as retail and commercial bankers will see smaller bonuses,” said the firm’s managing director, Alan Johnson. “Conversely, fixed income pros will be rewarded handsomely as uncertainty and high volatility contributed to record trading.”

Hedge funders will have a check about 5 percent to 10 percent smaller to drop into their fleece-vest pockets, according to Johnson, as the industry has struggled to get back in the black after the shock of the spring.

“As compared to many sectors of the economy, select areas of financial services have rebounded,” Johnson said. “Unfortunately, as we look to 2021, even with an optimistic vaccine path, the pandemic will continue to negatively influence businesses, but perhaps to a lesser degree than in 2020.”

New York Post / November 12, 2020

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The Giant Schism in Asset Management Paychecks

Experts see a small pay cut coming for executives at traditional asset managers, hedge funds, and private equity shops, particularly at smaller firms, given disruption in the underlying economy because of the coronavirus.

The predicted five-to-10 percent compensation drop would make for two down years in a row, according to Johnson Associates’ third-quarter report on year-end incentives.

But that average belies striking differences between the haves and have-nots in asset management…

Costs have continued to grow as investors want more hand-holding, data, and analytics, while compliance burdens expand, according to Johnson Associates. At the same time, investors continue to pressure managers for fee deals. Some asset managers are still cutting staff given shrinking asset bases or only modest inflows as the industry consolidates. Last month, for example, Morgan Stanley announced plans to buy asset manager Eaton Vance.

Institutional Investor / November 12, 2020

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Fired Bankers’ Job Prospects Fade With Firms Under Pressure to Cut Costs

“Financial services and banking has too many people,” said Alan Johnson, the head of compensation-consulting firm Johnson Associates Inc., who predicts the industry’s headcount will shrink 10% by mid-2021 from its level as the pandemic began. “Next year is going to be very low hiring. There’ll be some layoffs.”

One silver lining for job hunters now is that the industry’s unemployment rate of 3.1% last month is much lower than in sectors hit harder by the pandemic, such as the 15.9% rate for hospitality and food services, according to the Bureau of Labor Statistics. So for now, competition for openings isn’t too harsh.

Expect that to worsen in the coming months, said Johnson, the consultant.

“Firms are not hiring at the levels they were,” he said. The trajectory of economic recovery “is so unknown and it’s so uncertain and it’s so significant, and you overlay the pandemic and remote working and Zoom — if you’re a laid-off employee, this is a very difficult set of circumstances.”

Bloomberg / November 10, 2020

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Banks Warn Bonuses Will Not Keep Pace with Profits

“This is the first time since the financial crisis that we’ve had such a dramatic difference between parts of the big banks,” said Alan Johnson, founder of New York-based pay consultancy Johnson & Associates, referring to the gulf in the performance of the banks’ retail business and their advisory and trading divisions…

Johnson said issues around pay would be less contentious at Morgan Stanley and Goldman Sachs because they did not have the same exposure to coronavirus-related loan losses as the big lending banks. Morgan Stanley and Goldman have collectively taken just $3.5 billion in loan loss charges this year…

“It’s smart to message that [lower bonuses] now. . . .  If your income is up 50%, probably bonuses will be up 25%,” Johnson said, adding that bonuses would probably be significantly higher in fixed income, up by less in equities, and down in mergers and acquisitions, where fees are running below last year’s after deals dried up in the early months of the pandemic…

Johnson at Johnson Associates said that while the “very best” who were unhappy with their packages could “absolutely” move to another bank or hedge fund, the “good and the average” would have few options in the current environment.

Financial Times / October 18, 2020

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Hartford to Offer Buyouts, Cut Hundreds of Staffers

Hartford anticipated about $70 million in severance costs in the third quarter, according to its second-quarter results.

“They’re probably looking at getting whole head count down 10% or 12%” through both buyouts and layoffs, says Alan Johnson, president of compensation consulting firm Johnson Associates…

The fact that the pandemic now appears likely to stretch well into next year and possibly into 2022 may have played a role in the timing of the firm’s employee reduction, Johnson says.

“I generally advise clients to do [buyouts and layoffs] sooner rather than later and be as generous as you can possibly be with people,” he says. “The timing is terrible. But is it better to wait and not tell people the truth and be cheap with severance later?”

Ignites / October 14, 2020

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