By: Ken Chase.
In a new report released on August 4, compensation consultancy firm Johnson Associates predicted potential job losses and bonus reductions for the financial industry in the immediate future. The report cited the recent collapse of IPOs and equity issuance as factors that will likely have a negative influence on the investment banking sector.
According to data from SIFMA, total equity issuance has fallen roughly $57.7 billion in 2022, and is down nearly 80 percent from this time last year. Meanwhile, IPO issuance has declined by more than 95 percent since July 2021.
Many investment firms, asset management companies, and hedge funds use consultancy firms like Johnson Associates to assist them in their bonus and severance package design. The company relies on a wide range of public and proprietary data to provide its clients with the insight they need to structure their incentive packages.
The firm’s managing director, Alan Johnson, told CNBC that “There are going to be a lot of people who are down 50%. What’s unusual about this is that it comes so soon after a terrific year last year. That, plus you have high inflation eating into people’s compensation.”
Johnson suggested that there would also be layoffs in some areas of Wall Street, noting that some companies will want to reduce their staff by as much as 10 percent by next February. At the same time, however, layoffs and bonus reductions will not be universal, and many companies will need to boost base salaries to strengthen talent retention and meet rising inflation pressures.
He also predicted that some thriving sectors of Wall Street will see increased bonuses, particularly for bond traders and equities trading personnel. Some hedge fund traders could also see rising bonuses.
However, the report pointed to a number of areas in which employees may see significant bonus reductions, including banking personnel who underwrite securities, some asset managers, private equity professionals, and merger advisors. Johnson Associates’ forecasts for those bonus reductions range from 10 percent to 45 percent or more.