In the “gimme a break” category, according to a recent Bloomberg Markets Global Poll, and Emolument.com apparently most financial professionals feel they are underpaid. In a mid-April survey of 1280 traders, analysts, money managers and company execs who are Bloomberg customers, 48% of respondents said their current compensation is less or much less than they had hoped for. Perhaps most surprisingly, a mere 14% responded that their pay exceeds expectations. Close to a third say their current compensation is relatively close to what they were expecting.
Wall Street bankers pay shrinking
The employee compensation trends at Goldman Sachs are exemplary of Wall Street in general. GS paid out $12.7 billion for compensation last year, around 36.8% of revenue. That percentage is the lowest ever paid out except for 36% in 2009.
At this year's SALT New York conference, Jean Hynes, the CEO of Wellington Management, took to the stage to discuss the role of active management in today's investment environment. Hynes succeeded Brendan Swords as the CEO of Wellington at the end of June after nearly 30 years at the firm. Wellington is one of the Read More
That said, it’s a bit difficult to feel sorry for these Wall Street bankers, as the 2014 figure at GS averages out to $373,265 per employee (although down from $504,750 per in 2007).
Moreover, compensation on Wall Street over the next decade looks unlikely to grow a lot. Forty-three percent of respondents say pay will shrink as regulation erodes business, while 18% say compensation will likely collapse in another crisis. Only 7% of financial professionals expect to see continued growth and higher profits.
In addition, according to recent data from salary benchmarking site Emolument.com, more than 73% of UK bankers are dissatisfied or unsure about their latest bonus. One of bankers biggest complaints is that they are unsure how their annual bonuses compare to others because of the extreme secrecy around compensation in the UK banking industry. They say that not knowing what kind of bonuses colleagues are getting paid makes it almost impossible to know if they are being paid fairly or not. Emolument argues that greater transparency surrounding bonuses would improve morale and productivity in the UK financial sector.
Statement from head of executive search firm
“They’re still making decent money, but it’s nothing like 2007,” botes Jeanne Branthover, head of the financial services division at Boyden Global Executive Search. “It’s harder to get a big bonus because there are more metrics that come into play, including how well the whole firm does.”
Pay for buy-side employees on the other hand, is holding up fine, Branthover says. “Areas of finance like wealth management, asset management, which didn’t suffer too much during the crisis, are still doing well,” she points out.
Megabanks still too big to fail
Even though banks are shrinking, most respondents to the survey believe that banks are still too big to fail. A solid 71% of those polled say that banks are still too complex or because regulators are focusing on the wrong things. Just 21% replied that too big to fail has been fixed through decreased leverage and/or regulatory plans for winding down failing firms.
Thomas Hoenig, vice chairman of the U.S. Federal Deposit Insurance Corp., says the problem with too big to fail banks is self-created. “They’re just too big and complex to manage,” he argues. “Every time they turn around, they break a rule, violate some sanction. That’s why there is continuing pressure to break them up. The market will force the biggest banks to shrink, divest, or even break up.”