Fixed Income Incentives Seen Down 45 Percent For 2011; 20 to 30 Percent Declines Projected For Other Wall Street Pay, On Average

Fixed income traders will be hardest hit by declining year-end incentive payouts this year, says compensation consultant Johnson Associates.

The New York-based firm reports today that for the second time in four years, Wall Street professionals can expect to receive sharply lower year-end incentive pay as compared to the previous year.

Johnson Associates' third quarter compensation analysis shows that cash bonuses and equity

pay will decline by an average 20 percent to 30 percent this year as compared to 2010.

"Fixed income traders will be the hardest hit, with their year-end incentives expected to decline by as much as 45 percent," the firm said in its announcement.

Equities traders and senior management will see their year-end bonuses trimmed by up to 30 percent while year-end payments for investment bankers will fall by 20 percent, according to the survey, while incentives for the rest of the financial services industry-including asset management, retail banking and prime brokerage-will be flat or slightly lower or higher than last year.

Recruiter Rich Lipstein of Boyden Global Executive Search in New York tells eFinancialCareers that he is not terribly surprised at the survey results, though the findings are "a little worse than I thought they would be," particularly for investment banking where debt origination and M&A were key market drivers early in the year.

High Net Worth Wealth Management is the Exception

Those who manage very wealthy clients, however, should see compensation gains of up to 5 percent, Alan Johnson, managing director of the firm Johnson told a New York Times' Dealbook reporter.

Lipstein wholeheartedly agrees. "In my search, practice wealth management has continued to hire-it's not hot like when banking was hot, but it also has not experienced the same declines, since that business is much more conservatively managed without the overhiring and overfiring" that's been so prevalent in banking overall, he says.

According to Johnson Associates' survey, some employees in commercial and retail banking may see either a small 5 percent drop in pay, or potentially a 5 percent bump, in part because client deposits are growing, says the new survey. Other areas, like private equity and prime brokerage, are expected to see their compensation stay flat or fall just slightly.

Johnson also believes that Wall Street should expect continued attention focused on compensation, particularly since efforts like Occupy Wall Street show no signs of weakening-even though bonuses for top executives including Lloyd C. Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase are likely to fall sharply too.

"This year started with great promise for a banner year on Wall Street, but hopes for larger bonuses faded over the summer and continue to dim as we approach year end," Johnson said in the firm's announcement.

"The lack of economic recovery, combined with ongoing uncertainty in the world markets, and global and regional regulation are driving most financial services firms to significantly reduce the size of their bonus pools," he said. "As a result, most, but not all, professionals will receive smaller payouts this year."