Bonuses are likely to disappoint for most people on the trading floor. For the U.S., Options Group projects fixed income, currencies and commodities (FICC) professionals' (not just traders') average change in total compensation to decrease by -7% year-over-year, with equities (cash, equity derivatives and prime) comp also sinking by -7%. Johnson Associates projects equities incentive funding to be flat to down by -5% and fixed income to sink by -5% to -10% year-over-year.
If you're in advisory, you might have better luck. Equity and debt underwriting investment bankers can look forward to bigger bonuses than they got last year. Recruitment firm Options Group forecasts investment banking bonuses to increase 9% year-over-year in the U.S. Johnson Associates projects PE incentive funding to rise 10% to 15% year-over-year and IB underwriting to go up 15% to 20% or more.
“Generally this is quite a positive year for financial services, and most bonuses will go up,” says Alan Johnson, the founder and CEO of compensation consultancy Johnson Associates. “It was a much better year than we were all expecting six months ago because the market went up so nicely and there’s been no disaster, which was a pleasant surprise.
If your bonus leaves you flat, here's what you should do.
The first thing to do if your bonus is underwhelming and lower than other years is to determine whether it was about you or the performance of your desk or group, according to Janet Raiffa, an investment banking career coach, the former head of campus recruiting at Goldman Sachs and a former associate director in the Career Management Center at Columbia Business School.
“If it isn't about individual performance and rather about the group or firm should you start looking anyway?” she says. “This might be a good time to get your resume ready to start looking for opportunities in the new year,” she says.
You may have to face up to the fact that your own lackluster performance is to blame for your bad bonus. In that case, start looking for a new job.
“If you’re a Wall Street trader, either fixed income or equities, your bonus probably went down a moderate amount, because results continue to be disappointing and so the bonus pool smaller general trend – if you’re down, then you shouldn’t take it too personally," Johnson says. “Other areas are up 5% to 10% or more, so this is a year, if you’re not a Wall Street trader or a niche thing that didn’t do well, or sitting on a desk or in a group didn’t do well at your own firm, then it should be a wakeup call [if you get a bad bonus].”
If you work in an area that is known to be struggling across the board, then your employer is less likely to blame individuals for a desk or group’s disappointing performance. Still, just because it’s not your fault, that doesn’t mean your job is safe.
Brandon Garber, a senior recruitment consultant in the sales and trading practice at Selby Jennings, offers the following advice for traders who get bad bonuses: If it is a secular trend, then it is important to take a step back and look at the business as a whole.
“Is there a different aspect of the business or asset classes that have a more promising outlook?” Garber says. “The industry is ever-changing, and with the electronic business growing and new regulations being imposed, it is important to continue to learn and grow to allow yourself to pivot into areas of the business where the future is bright.”
Hedge funds and asset management firms are expected to increase bonuses for their employees by an average of 7% this year, but many also plan to cut senior, expensive personnel in favor of tech-savvy junior employees as they prepare for a new era of data analytics and quantitative finance amid pressure on fees and a need to aggressively cut costs. Prepare yourself for that reality.
If your bonus is disappointing and you're getting a strong message that it's not performance-based, Raiffa suggests considering whether there are other perks that you might bring up with your boss that would make you feel better.
“In other industries not known for extremely high bonuses, appreciation is shown through things like an extra week of salary or a budget for family holiday celebrations,” Raiffa says. “Can you raise an idea for something monetary that would reinforce your value?
If your bonus is smaller this year, then maybe you were overpaid the prior year, Johnson suggests. It could be as simple as that.
“Maybe you made 120% of what you should have last year – maybe you were happier than you should have been,” Johnson says. “If you were overpaid last year, maybe this is pay-back – your bonus has realigned and is catching up a bit [to what you’re really worth].”
It could be that those around you who are making discretionary comp decisions do not have enough information about the job you’re doing, or they’re seeing certain things and they’re not connecting it to your work. There are times that you have a bad project, whether it’s your fault or due to colleagues’ mistakes or lackluster effort.
Good managers know how to motivate their team to correct missteps and do better next time. Other times, you may find yourself working for a manager that is a complete jerk, and the ripple effect of that is very significant.
If you have a gut feeling that your bad bonus signals that the writing is on the wall, then you might consider moving to a city with a cost of living that is more affordable than that of New York or San Francisco. Many financial firms are hiring in – and relocating existing employees to – such cities. The Republican tax bill could hasten that trend.
“The impact of getting rid of the deduction of state and local taxes is a tipping point for New York, Boston and California as people look at where to create jobs and put people,” Johnson says. “The exodus of people [from expensive cities in states with high taxes] will accelerate, and that’s going to have a big impact on financial services.”
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