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

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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

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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

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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

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Layoffs and Lower Pay on the Way for Asset Managers – Report

‘There are two key drivers contributing to the decrease,’ said Chris Connors, VP at Johnson Associates, ‘The primary driver is the market decline this year.’

Among fears of recession and rising inflation, major indices in the US are down this year, with the S&P down about 14% and the Bloomberg Aggregate Bond index down about 8%. Both have recovered since mid June when they were down some 23% and 12%, respectively.

Connors’ second factor, which is related to market falls, is the outflows suffered by many asset managers this year, especially from active equity funds. Investors pulled $408bn from active funds in the first six months of 2022, with $91bn of that leaving in June, according to data from Morningstar.

‘So the combination of those two things has led to a decrease in revenues in the asset management space, and bonus pools will decline as well,’ said Connors.

‘The purchasing power of the dollar is down because inflation is running rampant. So, if incentives are down 15% to 20%, and inflation is also at 8%, then your incentives are down more than 15% to 20%,’ said Connors, ‘So we think firms should be cognizant of this in terms of the salary increases, the impact of headcount going into the end of the year, and restructuring going into 2023.’

Citywire / August 5, 2022

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Wall Street Bonuses Poised to Plunge Following Slowdown in Deals

“2021 was a fabulous year and this is a real downer,” Alan Johnson, managing director of Johnson Associates, said in an interview. “We’ve had bonus declines before, but you overlay that with inflation by the end of the year and I think it’s going to be particularly painful.”

Investment-banking revenue fell 43% in the first six months of 2022 from a year earlier at the five biggest Wall Street firms. Persistent inflation, recession fears and global turmoil including Russia’s invasion of Ukraine brought on wild market swings, keeping clients on the sidelines. And the battle for banking talent has cooled, with the biggest companies more mindful of their expenses.

Equity traders, on the other hand, could see their bonuses climb 10%, while their fixed-income colleagues may enjoy a 20% increase, with the same market tumult boosting trading revenue.

“This year the traders will be subsidizing some of their colleagues in investment banking,” Johnson said. “You only like that if it’s coming toward you, not going away from you.”

“Seven-plus months into the end of the year, anything is possible, but it’s very, very unlikely it’s going to make too much of a comeback,” Johnson said. “Wall Street goes up and down — this is a down year.”

Bloomberg / August 4, 2022

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