Wall Street bonuses are on the rise again — from banking to investing — and experts predict ‘robust’ hiring as a result

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Richard J. Chang Finance Editor at LinkedIn News

Financial services companies are ready to pay out larger bonuses for the first time in three years, according to data from compensation consultant Johnson Associates, Inc., with up to a 35% increase projected for bankers involved in bond sales. Equity underwriters and traders are also expected to see a bump to their bonuses of up to 25% and 20%, respectively.

The increases are a signal to Wall Street workers that the industry’s health is improving and its growth prospects brightening, after underwhelming results across finance in 2022 and 2023. Deal activity is starting to pick back up, and the S&P 500 is up by a whopping 25% this year.

Experts say the jump in bonuses demonstrates that companies across the industry are investing more in retaining top talent going into 2025.

“The environment for talent is not what it was in 2021, when we had a metaphorical ‘war for talent,’ where every sector of financial services was booming,” said Chris Connors, a principal at Johnson Associates who authored the report. “Now we’re seeing healthy pipelines following performance. It's a very robust talent market.”

But Connors doesn’t expect employee headcount across finance to change significantly going into 2025. After many firms overhired in 2021, leading to layoffs across the industry over the past three years, companies will hire selectively and cautiously, he said. He does expect some sectors such as investment banking to see an uptick in headcount.

“It will be a measured growth in hiring,” said Deepali Vyas, senior client partner at management consulting firm Korn Ferry.

But after a slow first half of 2024 and, in some cases, laying off too many people, financial companies are poised to hire with an excess of cash reserves. Heading into 2025, they are determining which areas of their businesses present the most opportunity for the coming year.

The data was collected before former President Donald Trump was reelected — after which investors rallied around bank stocks in anticipation of a decrease in regulation in the sector. As the market climbed, that could have an indirect impact on compensation for traditional asset managers before the end of the year.

There is more mobility within finance, Vyas noted, and the desire to retain key staff is one of the drivers behind firms ramping up their compensation. Some companies that have only seen mediocre growth, meanwhile, may be trying to offer greater incentives to retain their high performers, Connors added.

“There will likely be some movement in talent as firms go to build out [new teams] or opportunities for professionals who have a track record to potentially get promoted from their existing role,” Connors said. “If you look at 2021, we had a highly mobile talent market — there was a lot of poaching going on.”

Some sectors within finance are growing more than others. Investment and commercial banks are seeing some of the biggest increases in compensation, driven by higher revenues from debt issuance, client equity trades and a revived IPO market.

Alternative assets has become a buzz word over the past several years, and more firms are moving quickly to hire or acquire teams to offer alternatives such as private credit, infrastructure and real estate to clients. In private credit, which Johnson Associates calls the “hottest sector” and a “highly competitive” talent market, incentive pay has risen 10%.

Many of these alternative investments have higher fee levels than traditional investments, which has driven the growth in the number of firms engaging in alternatives. In turn, these employers are doling out greater compensation to workers.

Across private equity, meanwhile, the introduction of generative AI to complete mundane tasks has led to greater efficiency for professionals, said Vyas. While many in the industry previously feared the role and potential threat posed by AI, they are now seeing the returns in efficiency and higher bonuses, she said.

Bonuses in fintech are also experiencing an upward trend alongside a rebound in funding for the sector. Vyas estimates that compensation is up by about 10% for junior roles in fintech, on par with other areas within finance.

“It recalls that there’s a definite path for growth, and companies are likely seeing a lot of adoption, customer growth and streams of revenue,” Vyas said. “If they’re seeing that, then they have to pay for talent — to incentivize them not only to stay, but to grow with them.”

We take a quick dive into a company making a bet that others are running from.

Three years ago, Synchrony Financial CEO Brian Doubles decided not to require employees to return to the office. Now, after a vast majority of companies in finance have enforced return-to-office mandates, Doubles has doubled down on his argument in an opinion article in Fortune, where he writes that offering workers a hybrid model is better for the employee experience and indicates that he will keep it a part of the bank’s culture.

Synchrony allows both hourly and salaried employees to work from home, in the office or both — and doesn’t require that they live within commuting distance of their offices. The company does encourage workers to come to the office for in-person events, collaboration and coaching from managers.

Doubles maintains that Synchrony has seen stronger productivity and better outcomes from allowing staff to work from home, adding that trusting employees’ feedback and being adaptable to their wants and needs translates to a measurable improvement in business.

“For those who say that innovation cannot coexist with remote work, I disagree,” he wrote. “Our story is proof that when you build a culture of trust and accountability, you can expect a lot more from your people, and they will come through for you.”

John Sweeney is CEO of Brookfield Oaktree Wealth Solutions. He served as a managing director and head of product management for the alternative investments business at Morgan Stanley and also as head of product management at Citi Private Bank, before joining Oaktree in 2013.

Chang: What have been the biggest changes or surprises you’ve seen over your career? 

Sweeney: Specifically in alternatives, there’s greater importance of individual investors to some of the most sophisticated alternatives. When I started, as we were building these alternatives, there were no models that called for asset allocation for individuals to alternatives. We were not a big part of any allocation. At that time you were really just convincing people, this is something you should look at. Then what you started to see happen is the research teams at all of these firms at least having: Here's an allocation to alternatives. And then the next leg was private equity, hedge funds, real estate. Now, it's amazing to me – from where I came at zero and no love to the specificity – that you're seeing allocations in model portfolios.

We’re seeing wealthy folks buying alternative investments not just for return, but for portfolio diversification, and financial advisors incorporating alternatives into portfolios. Now any meeting you go into, you see people, a lot of ETFs, a lot of beta in the portfolios, a lot of passive investments, but really want to understand, OK, where can I incorporate alpha?

In 25 years, I've come out of the shadows and into the mainstream, where we're front and center and very topical. But I can't say I knew that was coming as I started this conversation. So don't discount what you can learn even when you're past your formal schooling days.

Chang: How do you expect these dynamics and changes will affect talent and hiring in this field?

Sweeney: I've seen that there's been a lot of hiring into alternatives from banks, from wirehouses, from brokerage firms. There's been a lot of hiring from traditional firms to alternatives firms. And there's been a lot of hiring from alternative firms to other alternative firms. It's a challenge. So the way I see it is the following: building your team. To me, people are the most important thing. So I look for people that have two attributes. One, I want people that are accountable. I want them to think like an owner, and I want them to have a great ability to execute. A lot of good ideas die in the execution phase. And then it goes without saying, look for people with the highest integrity. That doesn't mean you don't always need to hire your superstar. But most importantly, and what I've found over my career, hiring people that believe in shared success and growing the pie – that's how we're going to win. I think it helps me retain and attract talent. As alternatives has been hot, hiring has been challenging. I've definitely lost some people that I didn't want to.

Chang: What are your priorities for your team heading into 2025?

Sweeney: I think a good word moving forward is “democratization.” It’s all about offering the funds to clients, but based on the terms or based on how they want to invest through strategies. For those big asset classes – credit, infrastructure, real estate and private equity – moving forward let's get away from just offering those private 12-year funds for institutional investors. Let's build these democratized containers. We’re trying to focus on credit verticals, real estate and infrastructure that are more wealth-friendly containers. Where we're spending a lot of time right now is on the private equity side. We'd love to take the capabilities that we have in private equity back to that same team, same market, same investment process in a wealth-friendly evergreen container.

Here are the latest updates in the world of finance, private equity, banking, real estate, markets and more:

BlackRock's Bitcoin Bet Pays Off: BlackRock’s bitcoin ETF has amassed $40 billion since launching in January, surpassing the asset pace of all 2,800 ETFs introduced in the past decade, according to Bloomberg. As bitcoin hit all-time highs, rising above $90,000 on Wednesday, the world’s largest asset manager has reached a milestone in its crypto-focused fund. BlackRock once shunned the cryptocurrency, and CEO Larry Fink was previously skeptical before turning around earlier this year as a “major believer” in bitcoin.

Citadel Warns Recruiters of Confidential Info: The hedge-fund firm reminded external recruiters not to solicit or share confidential information about its staff or promote fake jobs to them as a means of obtaining data. The warning comes after a Bloomberg report in October based on allegations from multiple unnamed sources about phone calls from headhunter firm Odin Partners. The calls, made by people who sometimes disguised their identity and that of their firm, sought salary and other details from Citadel staff. Citadel and Odin have declined to comment on the report.

Credit Card Debt Tops $1.17 Trillion: Americans carry a record $1.17 trillion in credit card debt, per the Federal Reserve Bank of New York. Despite the high level of borrowing, delinquency rates improved, with 8.8% of balances falling into delinquency over the past year, down from 9.1% last quarter. While consumer spending remains strong, credit card balance growth has slowed, with the average outstanding amount rising just 4.8% year-over-year. Many lower-income households, however, are struggling as average credit card interest rates surpass 20%.

NYC Shifts Broker Fees to Landlords: New York City renters are celebrating after the city council approved a new bill that transfers the responsibility of paying broker fees from tenants to landlords. Unlike most cities in the U.S., where landlords typically pay the brokers they hire, renters in New York have been required to pay the hefty fees, which could cost as much as 15% of a property’s annual rent. The median rent on new leases in Manhattan hit $4,295 in October, a three-month high.

Fintech's Klarna Plans U.S. IPO: Buy now, pay later giant Klarna has confidentially submitted initial public offering documents with the Securities and Exchange Commission, the company said Tuesday. The stock market listing – the timing of which is subject to market conditions – is expected to value the Swedish fintech firm at $15 billion to $20 billion, according to the Financial Times, less than half its $46 billion valuation in a 2021 funding round led by Japan’s SoftBank. Klarna’s decision to list in the U.S. follows a similar decision by Spotify in 2018.

Data from consulting firm Johnson Associates indicates a rebound in year-end bonuses for professionals in financial services, driven by an increase in activity across equities, fixed income, funding and debt issuance, along with a well-performing market.

We want to hear from you: Do you expect professionals will change firms or sectors amid the projected growth within financial services? Why or why not?

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