Wall Street Bonuses Seen Shrinking Amid Market Volatility, Dealmaking Slowdown

Wall Street, NYC Financial District

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Key Takeaways

  • Low mergers and acquisition volumes, fund outflows, and higher costs are likely to drive down 2023 incentive bonuses for many financial industry workers versus last year, a new report said.
  • Those advising on M&A at investment banks could be hit hardest, with bonuses as much as 25% lower than last year.
  • Regional retail and commercial bank workers may face bonuses up to 20% below their incentives last year.
  • Asset management firms could give bonuses 5% to 10% lower than in 2022.
  • Equity underwriting teams at investment banks may buck the trend, benefiting from increased business compared with last year, with bonuses projected to be as much as 15% higher.

Year-end incentive bonuses across much of Wall Street are likely to fall by as much as 25% this year compared with 2022 amid poor mergers and acquisition (M&A) advisory volumes and substantive fund outflows in traditional asset management, according to a report by compensation consulting firm Johnson Associates.

A prolonged slowdown in dealmaking has suppressed investment banking advisory business further after a weak 2022. Of all financial professionals on Wall Street, those in advisory roles at investment banks could find their incentives hit hardest, with bonuses expected to decline by 15% to 25% relative to last year. Debt underwriters at investment banks may receive bonuses as much as 10% lower than for 2022.

Many other areas of the financial sector are also likely to be affected by broader market volatility, underperforming business units, and increased funding costs. Regional retail and commercial bank professionals, for instance, are likely to see bonuses 10% to 20% lower than 2022.

Asset management employees are likely to find bonuses dropping by 5% to 10% for this year, as rising markets have somewhat offset outflows amid broader economic skepticism. Revenue for asset managers is down as these firms face product-fee pressure for active investment offerings and due to low-fee products like exchange-traded funds (ETFs).

Not all areas of the financial world are likely to follow this downward trend, however. Equity underwriting groups at investment banks could see a boost to bonuses of up to 15%, as business has improved relative to 2022.

In addition, major global retail and commercial banks are benefiting from deposit inflows, although they are partially offset by cost increases. Employees in these areas may benefit from a bonus up to 10% higher than last year.

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  1. Johnson Associates. "Financial Services Compensation Third-Quarter Trends and Year-End Projections."

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