High risk equals low pay in the new age of banking
For decades, the highest earners on Wall Street worked in the most risk-intensive areas, namely trading. That streak ended last year as new regulations and low market volatility closed the purse strings of once highly paid sell-side traders. Comp projections are looking even worse this year.
For the second year in row, low-risk businesses like asset management will take the bonus crown, according to compensation consulting firm Johnson Associates, which estimates that asset managers will see roughly a 10% bump in incentivized pay. M&A bankers are also likely to see a bonus increase of between 5% and 15% as the industry heats up.
Traders, on the other hand, are bracing for a rough year, which comes as no surprise considering Wall Street’s meager first quarter results and warnings from the likes of J.P. Morgan that Q2 is looking no better. Fixed income traders could see a 15% dip in bonuses in 2014, with equities traders facing the potential of a 10% drop in incentivized comp, according to the report.
“This is really a sea change,” founder Alan Johnson told Bloomberg. “It’s been coming and coming and now it’s finally apparent that the largest paychecks don’t come from Wall Street banks.”
Sadly for fixed income traders, mediocre bonuses are not their top worry. Many banks like Barclays and J.P. Morgan are cutting fixed income staffers in droves as revenues fall and banks look to cut more risk from their balance sheets.
Interestingly enough, several others firms including SocGen and Nomura are looking to take advantage of the environment and are hiring in fixed income, despite current market conditions. Click here for a more detailed breakdown of who’s hiring and where.
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Citigroup has fired nearly a dozen employees – including four managing directors – over the alleged accounting fraud that took place within its Mexican subsidiary. Several other employees, “both inside and outside of Mexico,” may also face disciplinary action, according to Citigroup Chief Executive Michael Corbat.
The latest former Lehman Brothers exec to leave Barclays is Brad Whitman, its head of mergers for financial institutions, who is joining Morgan Stanley. The number of high-profile New Yorkers to leave Barclays in the last several weeks is nearing double digits.
Highbridge Capital Management is on a hiring spree, having doubled the size of its London hedge fund unit this year. The firm hired four portfolio managers in the last few weeks alone.
Following significant investor backlash over its executive compensation plan, HSBC has cut the bonus of its chairman by more than half. Judging by the initial reaction, it seems the bank isn’t out of the woods just yet.
Bank of America plans to hire as many as 150 small business bankers in California over the next year.
Buzz Around the Office
A Hong Kong VC firm has elected an algorithm-based artificial intelligence tool to its board of directors. The software tool, which analyzes companies and predicts successful investments, will be treated as an “equal member” of the board.
Quote of the Day: “I become increasingly uncomfortable with the GRE when I hear candidates assert that they are taking the GRE because it is not as difficult as the GMAT. That kind of candidate attitude towards the GRE will keep it as a ‘second class’ factor in the admissions process in my view.” – Wendy Flynn, founder of MBA admissions consulting firm, MBA Admissions Coach