Bonuses booming this year on Wall Street

With the broad stock market roaring, big-time year-end bonuses are returning to Wall Street, with investment bankers, traders and private equity managers, who have been particularly active in buying registered investment advisers, all seeing significant increases in their compensation when compared to a year ago, according to a new study by a compensation consulting firm.

Financial advisers typically don't receive end-of-the-year bonuses, given the quarterly fee many typically charge on clients' assets. But that doesn't mean others in the broader financial services industry won't see a bumper year, with the S&P 500 stock index hitting new records in 2021 and up roughly 27% this year through trading Tuesday afternoon.

"This year’s bonus season on Wall Street should be one for the record books," Alan Johnson, managing director of Johnson Associates, said in a statement. "Virtually all financial services industry segments, including investment banking, asset management and alternative investments, are performing at record levels. This, in turn, will translate into incentive award increases we haven’t seen in the industry since before the Great Recession."

Johnson Associates estimates overall year-end incentives, which include cash bonuses and equity awards, will be significantly higher compared with last year, when the country was hit hardest by the Covid-19 pandemic. Last year, most professionals saw a decline in bonus-type awards.

According to the analysis, incentive payments to investment banking underwriters are projected to jump by as much as 35% while investment banking advisers and equities sales and trading professionals can expect to see awards increase 20% to 30%.

Double-digit increases are also projected for professionals at private equity and asset management firms, hedge funds, and those in management and staff positions.