Here’s What Wall Street Bonus Season Means for Real Estate This Year

“We’re not having a flush year” as an industry, said Alan Johnson, managing director of Johnson Associates…

When it comes to real estate, Johnson noted the 2017 federal tax overhaul’s impact. He said the capping of state and local tax deductions has made living and working in New York City more expensive for many companies and individuals. Though the changes were first felt in 2018, Johnson said the fallout is only beginning now.

“It usually takes people two to three years to get their heads around [tax changes],” he said. He said several clients are looking at quietly relocating employees to Florida, Texas or Utah.

“New York is just very, very expensive,” he said. When it comes to wealthy financiers buying apartments, “why buy it here if you can buy it in Miami?” he asked.

Johnson did note, however, that there’s a bright spot for bankers compensated in equity in recent years. With bank stocks up, they could have “more money in their pocket than they thought.”

The Real Deal / February 14, 2020

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Frozen Wells Fargo Bonuses Show a Peril for Bankers After Crisis

The situation has swept up executives who haven’t been accused of any misconduct, according to the people, who asked not to be named discussing the confidential process. For denizens of the financial industry, it offers a cautionary tale about what can happen now that banks are diverting billions of dollars annually into stock awards to be doled out in the future…

“That’s the fear: You’re going to be at the wrong place at the wrong time — you didn’t do anything bad but you’re going to be judged in a politically, potentially arbitrary way,” said Alan Johnson, managing director of compensation consultant Johnson Associates. “It’s like nuclear fallout. The bomb didn’t drop on you but you were within five miles of it.”

Highly paid executives at banks typically received as as little as 30% of their earnings in the form of long-term compensation before the financial crisis — a portion that’s grown to 50% to 60% today, according to Johnson Associates. Wells Fargo’s top five earners received 72% of their pay in long-term awards by 2018, according to its most recent annual proxy statement.

Bloomberg News / February 6, 2020

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Despite Strong Year, Bonus Hike Not in the Cards

Managers are currently “loath to add in fixed costs, and I don’t see that changing,” said Alan Johnson, managing director of Johnson Associates Inc., New York. And given industry headwinds such as fee pressures, he doesn’t believe managers would try to make up for a dearth of big bonuses by increasing salaries or other entitlements for staff.

“As the industry continues (in this direction), it will make some people uncomfortable because pay isn’t as predictable as it once was,” he said.

Since 2015, year-end incentives for asset management professionals in traditional equities and fixed income have wavered, drifting down in 2016, then increasing in 2017 and 2018. Johnson Associates predicts year-end bonuses for 2019 will be flat to down 5%.

In comparison, 2019 bonuses for private equity and hedge fund professionals are expected to be flat to up 5% over last year, Johnson Associates predicts…

Recruiters had mixed thoughts on the effect that technology may have on pay.

Chris Connors, an associate at Johnson Associates, said in an email that the advent of new technologies for money managers will have a “neutral” impact on professionals in investment and sales.

“Assuming they have the analytical skills that are required going forward, (they) should not be heavily impacted,” he wrote.

For professionals in support roles, however, “we believe there will be a negative impact on pay due to technology. There will be more people than jobs available and technology will likely reduce their impact going forward,” Mr. Connors wrote.

Pensions & Investments / January 27, 2020

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With Record Profits on Wall Street, Small Bonuses Will Annoy Bankers: Experts

Most Wall Street banks announced their fourth quarter profits beat industry expectations last week. But by the end of this week, bank sources and compensation experts told Reuters, most of their staff will be underwhelmed by their bonuses…

“Markets can go up, earnings can go up, but that doesn’t mean pay has to go up,” said Alan Johnson, who advises financial firms on pay. He expects bonuses to be flat at best for most Wall Street workers.

The New York Times / January 22, 2020

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Firms See Technology as Savior to Cut Costs, Offer Competitive Edge

As money managers continue to evolve to better integrate technology into their business, demand for professionals with this expertise also grows.

And while firms are moving to lower-fee investment products and facing increased operational costs, the “best technologists and data analytics (professionals) continue to be expensive,” said Alan Johnson, managing director of Johnson Associates Inc., New York.

Despite this, moving into 2020, pay for asset management staff, on average, is expected to look similar to 2019, “down slightly,” according to Mr. Johnson.

Year-end incentives, which include cash bonuses and equity awards, for asset management professionals were projected to be flat to down 5% compared to year-end 2018, a November report by Johnson Associates said.

“I think (compensation declines) probably would be worse, but firms continue to look at their headcount to make sure they don’t have too many people,” Mr. Johnson said of pay projections heading into 2020.

Pensions & Investments / January 13, 2020

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Choppy Markets Leave U.S. Bank Bonus Decisions in Limbo

“There may be people working New Year’s because they’ve got to finalize this January 10 or 15,” said compensation consultant Alan Johnson. “People are going to be particularly vigilant to make sure that they’re going to be paying the right amount, figuring it out right up to the end of the year.” At one bank last year, trading heads were told in late-December that millions of dollars needed to be shifted from their bonus pool to other divisions, a source familiar with the matter told Reuters on the condition that the bank and person not be named. The industry is trying to avoid situations like that again this year, Johnson said.

Johnson’s firm publishes a closely watched annual report forecasting where Wall Street bonuses are headed. It found that most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%, Johnson Associates predicted.

Reuters / December 10, 2019

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