Career Advice Nov 08 2011

Wall Street Bonuses to Shrink 20% to 30%

By brett philbin

Wall Street bonuses are set to shrink by an average of 20% to 30% from last year, with even steeper declines for bond traders, according to a widely watched compensation survey.

The projections, to be released Tuesday by consulting firm Johnson Associates Inc., reflect the tough times at many banks and securities firms since last spring.

Business has been difficult because of fears about the U.S. economy, the sovereign-debt crisis in Europe and volatile equity markets. Along with cuts in bonuses, many financial firms are eliminating jobs and pruning other expenses.

"This year started with great promise for a banner year on Wall Street, but hopes for larger bonuses faded over the summer and continue to dim as we approach year-end," said Alan Johnson, managing director of Johnson Associates.

The quarterly survey is based on publicly disclosed data in regulatory filings and conversations with employees at investment banks, commercial banks and asset-management firms.

Lower bonuses will be widespread, with the average managing director taking home about $900,000, down from about $1.2 million in 2010.

The figures don't include employee salaries. For many Wall Street traders, investment bankers and executives, bonuses typically account for a high percentage of overall compensation.

Fixed-income businesses will be the hardest hit, according to the projections. Bond traders are likely to take home as much as 45% less than in 2010, while equities traders and senior managers will see their bonuses 20% to 30% lower.

Trading results generally have been weak in the second half of 2011 and "somewhat masked" by positive accounting charges on credit spreads, the survey said.

Johnson Associates said small bonus increases are possible for employees in commercial and retail banking as well as financial advisers who work with high-net-worth clients. Still, even that growth is likely to be just 5% or so.

Through the third quarter, incentive-based compensation, which includes cash and stock awards, was on track to be at the lowest level since 2008.

There might be one silver lining. Pay trends could improve in 2012, because job cuts mean there will be fewer employees around to get bonuses.

"We're betting mostly on the cost cuts" to boost compensation per employee, Johnson said.

"Most firms added more people on 2010 and 2011, but now they will get skinnier and more focused," he said.

This story originally appeared on

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