Wall Street Bonuses Set to Increase for Second Year

Bonuses for Wall Street employees are set to rise for the second consecutive year. This increase, driven by a rebound in trading and advisory income along with a strong stock market performance, is highlighted in a recent report from compensation consulting firm Johnson Associates.

According to the firm, the biggest beneficiaries will be equity and trading desks, with expectations of bonus increases between 15% and 25% compared to last year. This increase comes as investors adjust their portfolios in response to ongoing global trade tensions associated with President Trump’s tariffs.

Alan Johnson, managing director at Johnson Associates, stated, “Wall Street and most of the financial services industry will feel optimistic when year-end bonuses are distributed.”

Johnson had previously predicted that payments would increase last year as the U.S. economy started recovering from three years of stagnation caused by the coronavirus pandemic and associated debt.

Investment banking and M&A advisory bankers are expected to see bonuses grow by 10% to 15%. Meanwhile, bonuses for asset managers, bond traders, and bond underwriters will likely increase by 12% to 15%, which is significant, albeit smaller.

Johnson commented about the industry’s recovery from a tough first quarter, noting that despite ongoing geopolitical challenges, 2025 is projected to end on a strong note.

His report aligns with projections from New York State Auditor Thomas DiNapoli’s office, which has indicated that Wall Street is on track for record bonuses this year.

The analysis suggests broad gains across almost every sector, contrasting sharply with the modest bonuses observed in previous years. Traditional asset managers are expected to increase incentives by 7% to 12%, buoyed by a resilient stock market and strong inflows into active exchange-traded funds (ETFs).

Wealth management advisors are also likely to see bonuses rise between 8% and 10%, driven by client demand and competitive pressures to attract top talent.

On the other hand, hedge fund staff might experience bonus increases ranging from 2.5% to over 10% as their long-bias strategies outperform others.

In stark contrast, private equity and insurance professionals will see smaller bumps, typically up to 5%. The report also notes that real estate professionals are likely to see stagnant pay this year as deal activity declines and funding costs increase.

Johnson Associates indicated a “realized impact,” showcasing an increase in the incentive pool even with overall flat headcount, driven by efficiency improvements and cautious hiring practices.

While the overall headcount within large financial institutions has grown by 77% since the 2008 financial crisis, it is projected to decrease by 10% to 20% over the next five years as automation and artificial intelligence influence operations.

“AI-driven reductions will significantly impact operational and entry-level roles, but many people and organizations will need to adapt,” the report noted, adding that remaining staff could expect higher pay.

Despite this positive outlook for 2025, Johnson expressed caution about entering 2026 citing signs of a decelerating global economy, rising asset valuations, and increasing credit risks.

He also mentioned that talent demand would remain robust in certain areas, especially personal finance, where top performers continue to earn high salaries. Businesses aiming to expand beyond their core services would need to adopt a tailored yet flexible pay strategy.

The Johnson Associates Quarterly Compensation Survey is a widely respected metric of compensation trends in the financial industry, utilizing both proprietary and publicly available data from major financial institutions.

Although many sectors have seen incentive levels return to or surpass their 2021 highs, total pay still lags behind inflation-adjusted peaks, according to the report.

Interestingly, amidst these projections, far-left New York City mayoral candidate Zoran Mamdani aims to impose taxes on financiers to fund Democratic socialist initiatives like free buses and government-operated grocery stores.

For many on Wall Street, 2025 presents its own challenges. Johnson summarized the sentiment, stating, “It’s not a frenzy; it’s more of a relief and a return to healthy performance.”