Wall Street bonuses are expected to rise for the second year for traders and investment bankers on surging deal volume and market volatility, according to financial compensation consultancy Johnson Associates.
The bonus pool is expected to be the highest since 2021, when deals and profits surged to a record. Equity sales and trading professionals are expected to get the biggest bonus bumps of 15% to 25%, while investment bankers in M&A advisory and equity underwriting will likely get increases of 10% to 15%.
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“Markets are at record valuations and there is a large pipeline of deals that were paralyzed and now are getting released,” said Alan Johnson, managing director of Johnson Associates.
Tariffs introduced by U.S. President Donald Trump this year fueled market volatility, buoying trading desks. As the deal environment improved in the second and third quarters, banks ramped up hiring of senior investment bankers.
Incentives for financial professionals in hedge funds, private credit, insurance, retail and commercial banking are projected to rise by as much as 5% to 10%.
The boom times may fade next year if the economy slows and credit and investment deteriorate, Johnson predicted.
Financial firms are expected to reduce up to 20% of their workforce over the next five years, largely because of artificial intelligence. The headcount reductions will initially reduce the number of entry-level employees, but eventually affect mid-level operational roles.
“Everyone is now trying to understand how this dynamic will affect financial careers,” Johnson said. With a smaller group of junior employees, the pool for promotions will be smaller.
Salary increases are expected to significantly slow this year to an average between 3% and 3.5%, Johnson said.
“Companies are focused on keeping costs down, have slowed hiring and will start cutting headcount due to AI,” posing challenges for employees trying to secure larger pay increases, he said.
EXPECTED CHANGES IN 2025 BONUSES
| Business Area | Percent Change from 2024 |
| Equity Sales & Trading | Up 15% to 25% |
| Firm Management (Equity Underwriting) | Up 10% to 15% |
| Advisory | Up 10% to 15% |
| Wealth Management | Up 8% to 10% |
| Asset Management | Up 7% to 12% |
| Fixed Income Sales & Trading | Up 5% to 15% |
| Investment Banking (Debt Underwriting) | Up 5% to 15% |
| Investment Banking (Equity Underwriting) | Up 5% to 8% |
| Private Credit | Up 5% to 10% |
| Corporate Staff | Up 5% to 8% |
| Hedge Funds | Up 2.5% to 10% |
| Insurance | Up 2.5% to 5% |
| Retail & Commercial Banking | Flat to Up 5% |
| Private Equity | Flat to Up 5% |
| Real Estate | Flat |
Source : Reuters
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