Investment bankers, traders and others who work at big securities firms are still the best-compensated workers on Wall Street, according to a new analysis from The Wall Street Journal, but the pay gap is shrinking.
The Wall Street Journal analyzed employee compensation at 25 publicly traded commercial banks, securities firms and asset managers that have reported full-year results for 2010. In 2010, those who worked at the securities firms took home approximately $286,000 on average, compared to $209,000 for asset management firm employees and $111,000 for those who work in commercial banks.
While securities firm employees made two-and-a-half times more than their counterparts at commercial banks in 2010, in 2006, the first year in the analysis, securities employees made three-and-a-half times more. Asset managers have also closed the pay gap in that time. In 2006, securities employees were compensated about 75% more than asset management employees. That difference dropped to about a third in 2010.
In 2008, in the middle of the financial crisis, compensation at securities firms dropped by about a quarter while compensation at asset managers and commercial banks dropped only 3.1% and 5.6%, respectively, accounting for much of the decrease in the pay gap.
Regardless of who earned more than whomever else, 2010 was a banner year for pay on Wall Street. Total 2010 compensation at the banks in the Wall Street Journal study reached a record $135 billion, up 5.7% from $128 billion in 2009. Record revenues of $417 billion helped to justify the increase in pay, though revenues only rose about 1% from 2009 numbers.
Write to Julie Steinberg and Jeremy Greenfield
To tabulate the compensation and benefits at major Wall Street firms, The Wall Street Journal reviewed financial statements by publicly traded companies classified in their Securities and Exchange Commission filings as brokers or dealers of securities and commodities, investment advisers or exchanges.
The Journal¹s analysis includes 25 of the largest firms with a stock-market value above $1 billion that have reported as of Feb. 1, 2011. It also includes three commercial banks with large Wall Street operations: Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co.
The 25 companies have a combined market value of about $760 billion.
When a compensation and benefits line was not available in a company's financial statements, the Journal used the closest approximation, such as "personnel" costs.
Per-employee compensation and benefits are based on the most recent employee count disclosed by each company in its quarterly report, annual report or financial results announced to shareholders.
The analysis includes important caveats. Figures don't reflect results of acquired companies before they were purchased. For example, BlackRock Inc. bought Barclays Global Investors in 2009, while Bank of America Corp. acquired Merrill Lynch & Co.
Below is a breakdown of the firms in each category:
Commercial banks: JPMorgan Chase, Bank of America and Citigroup
Securities Firms: Goldman Sachs Group, Morgan Stanley, BlackRock, Charles Schwab, TD Ameritrade Holding, Jefferies Group, SEI Investments, E*Trade Financial, Raymond James Financial, Waddell & Reed Financial, Greenhill, Knight Capital Group and MF Global Holdings
Investment Advisers: Franklin Resources, T. Rowe Price Group, Invesco, Legg Mason, Eaton Vance, Affiliated Managers, Federated Investors, Janus Capital Group and Cohen & Steers