It’s Looking Grim for Wall Street Bonuses This Year

“This year is abnormally bad,” said Alan Johnson, managing director of Johnson Associates. “I think there will be a fair number of unhappy people. Some people will look for other jobs… But there will be layoffs, too.”

But Johnson says you should be concerned by the news even if you don’t work in finance.

Some people may think brokers make too much from home sales, he said, but they still want houses to sell because that’s good for their community, said Johnson. The same is true of bankers, he added.

Dealmaking is typically indicative of a healthy economic environment.

“This is a canary in the coalmine for the economy, if the canary dies that’s not good for anybody,” said Johnson.

CNN Business / November 16, 2022


Year-End Compensation for Financial Pros Could Drop by Double Digits, Experts Say

According to Chris Connors, vice president at Johnson Associates, this year is unique due to declines in both equities and fixed income.

“There’s kind of a double whammy in that the equities markets are down significantly, but also the fixed income market is down significantly,” he said by phone Monday. “That in tandem is hard on the long-only strategies.”

Johnson Associates estimates compensation changes based on its public and proprietary data, according to Connors. Investment bankers who work on underwriting will likely have it hardest this year, with bonus compensation falling by 40 to 45 percent year over year.

Their colleagues working on the advisory side of investment banks will see compensation fall by 15 to 20 percent, as will staff at equities-focused hedge funds. Johnson predicts that private equity employees will see a decline of 5 to 15 percent, depending on the size of the firm.

“There’s obviously been pressure on fundraising; valuations for portfolio companies are down,” Connors said. “That cocktail of what’s going on in the macro environment has hurt portfolio valuations at PE shops and venture capital in general.”

Looking ahead to 2023, Johnson Associates expects that firms will actually increase salaries. “We’re seeing salary pools increasing by 4 to 5 percent for next year, which is even higher than the 3 percent historical norms as firms kind of look to battle inflation,” Connors said. 

Institutional Investor / November 15, 2022


Bankers to See Bonuses Plunge Amid Drop in Mergers, Stock Sales

“It’s a cyclical business, and it fell off of a cliff this year,” Alan Johnson, managing director of Johnson Associates, said in an interview. “There will be a lot of unhappy people by the end of the year.”

“We’ve gone from red-hot labor markets to a cool-down to layoffs,” Johnson said.

There are some bright spots ahead, with base salaries expected to increase 4% to 5% for a second straight year, according to the Johnson Associates report. But for public companies, pain in the stock market could negatively impact compensation, with equity prices falling below original grant values.

The same market tumult that’s hurt dealmakers has been good for equity and debt traders. As a result, equity traders are likely to see their incentive payments stay the same while their fixed-income colleagues are set to get a 15% to 20% increase. 

“Overall, that business will continue to be the star,” Johnson said of fixed-income trading, while those in equity underwriting and M&A bankers are likely to be disappointed by their end-of-year compensation. “They should see it coming, but deniability is always strong.”

“It will be surprising end of the year for most,” Johnson said. “They thought things would be better. They had job offers, pay raises and patted themselves on the back repeatedly. Now it doesn’t feel so good.”

Bloomberg / November 15, 2022


New York City’s Pay-transparency Law is Coming. Wall Street’s Big Paydays Will Stay Secret, But Other changes Could Shake Up Finance.

“For more senior positions, I think it will have less impact because salary is a smaller part of pay,” Alan Johnson, the managing director of the compensation consultancy Johnson Associates, told Insider in an interview.

Still, firms are worried about the legal impact of the rules.

“Maybe the biggest thing is, people are worried about litigation,” Johnson said. They’re wondering, “are we going to get sued over this? Will law firms take advantage of the ambiguities of the law?”

He also said he does expect the new law to have a bigger impact on the workforce at banks as opposed to asset managers.

“I think banks have unique problems because they have so many administrative employees. Many money managers don’t have that many administrative jobs compared to banks,” Johnson said, noting that banks may have tens of thousands of staff in administrative roles whose pay is mostly salary.

Business Insider / November 1, 2022


Economic Uncertainty May Slow Manager Diversity Efforts: Recruiters

Economic headwinds, including the threat of a recession, may have a negative impact on diversity within the asset management industry, some recruiters told FundFire…

A slower economy will mean less hiring from outside the industry and less hiring in the bottom and middle ranks, said Alan Johnson, the managing director of Johnson Associates.

“If we’re having less intake, and that intake is more within the industry, we’re naturally going to have less progress on diversity,” he said. “I don’t think it’s a lack of will, I just think it’s the circumstances.”

FundFire / September 21, 2022


Goldman Sachs Prepares for Layoffs as Deal-Making Slows

Still, for executives across Wall Street, assessing the requisite size for layoffs can be difficult. There are conflicting signs about the state of the U.S. economy, with some estimating that it may already be in a recession, or about to enter one, while others believe that there will be a slowdown but no contraction. And deal-making, which can return as quickly as it fades, has shown recent signs of optimism, like the upcoming initial public offering of Porsche, That makes bankers wary of finding themselves understaffed should deals begin to roar again.

But for now, Wall Street banks may simply have too many deal makers.

“They just don’t need as many bodies as they have,” said Chris Connors, a vice president at Johnson Associates, a compensation consulting firm. “Production has fallen off a cliff.”

The New York Times / September 12, 2022