The sun is shining on Wall Street. According to the latest bonus expectations survey from eFinancial Careers, over three-quarters of respondents expect a bonus this year, compared with 59 percent last year. As many as 60 percent are expecting an increased bonus, which the survey finds is significantly higher than last year when 42 percent of financial professionals were expecting an increase.
In general, financial services professionals are feeling optimistic about their compensation. “People are feeling it’s been a better year this year. The sentiment from a macro-economic view is that people are feeling more confident,” says George McFerran, global director of sales and marketing for eFinancial Careers, a career site for professionals in the industry. The survey is based on 1,000 responses from professionals working in banks, brokers, asset management, hedge funds, private equity, and IT vendors.
Among those who expect a bonus increase on Wall Street, a third (35 percent) wager on an increase of between 11 percent and 30 percent. As for why their expectations are high, personal and company performance were cited as the top reasons for their higher bonus expectations. Those who do not expect a bonus change or anticipate a lower bonus, blamed company performance and market conditions as key reasons.
Generally, volumes have picked up in equities and the IPO market has been strong, and not just in North America. London has had a record year as has Hong Kong, says McFerran. As a sign of the optimism, 80% of private equity respondents are expecting a bonus. “They have been nurturing these companies for several years and now have a chance to take them public,” says McFerran. M&A has seen a busy year as well.
The sense of optimism is consistent across industry sectors: 91 percent of respondents working in asset management and mutual funds say they expect a bonus, 84 percent in banks, 81 percent in brokers, 86 percent in hedge funds, 76 percent in IT/data vendors, and 70 percent in insurance.
Not everyone is feeling blissful
The flip side is that not everyone had such a good year, says McFerran. Fixed income trading volumes have been down this year from last year. Hence, the expectation of fixed income professionals is not the same as people in M&A and in private equity. Fixed income is expecting a bonus, but the volumes are not as high. September volatility made up for a slower first part of the year, he notes.
The buy-side has also had good results, and also expects to receive bonuses this year, he says. However, the survey went out before the recent market correction. Overall, the buy-side has experienced a good year and has been more confident in the market, though the recent correction may have dampened that enthusiasm, says McFerran.
Hedge funds also were having a good year, before the correction kicked in, but they had a “torrid September and October.” Some are talking in the market about hedge funds being down 15 percent.
Hot jobs and wooing millennials
Certain jobs are in demand, and as a result, companies realize they need to look at raising salaries in these areas, says McFerran. Risk and compliance and the technology associated with those functions are in short supply, so that banks have to increase salaries in order to attract the talent to achieve their goals. He predicts the industry is going see pay increases in those two areas.
Banks are also weighing what incentives are needed to recruit young talent. For junior analysts, there is talk of pay increases of 20 percent. “Banks are really having to fight for talent in his area. They’re facing much greater competition from the big tech firms and consulting firms to attract the top talent coming out of college,” says McFerran. To make banking more attractive to bright, ambitious college graduates, banks have had to address work/life balance issues, because Millenials are being lured by Google and Facebook and other tech startups that offer lavish employee perks. An article in The New York Times reported that investment banks including Deutsche Bank, Bank of America Merrill Lynch, Credit, and Goldman Sachs were encouraging junior investors to take off Saturdays or work fewer hours on the weekend. “They’re having to make banking more attractive,” says McFerran. “It’s not just about bonuses, but work-life balance issues.”
Looking ahead, US financial industry workers are divided on the future of bonuses as 35 percent expect bonuses to stay the same over the next three years, 34 percent foresee an increase, and 17 percent anticipate a drop. The remaining 14 percent remain undecided, reports eFinancial Careers’ survey.Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio