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Superstar
- Compensation for fixed income, currencies, and commodities groups is expected to grow for the first time in four years, according to a recent survey.
- FICC groups are predicted to see their total compensation increase by more than 9% year-over-year, according to the results of a survey conducted by Options Group, a recruiting and consulting firm for financial firms.
- Even so, some employees of top Wall Street firms may find that their bonuses may be lower than expected given the huge surge in revenues, said Michael Karp, CEO of Options Group.
- Business Insider has the breakdown of the year-over-year change in compensation for all Wall Street divisions.
So-called FICC groups may see total compensation, including base salary and bonus, increase by more than 9% compared to 2019, according to a new survey conducted by Options Group, a recruiting and consulting firm for the financial services industry. That bump would be the first year-over-year increase of the FICC bonus pools since 2016, according to the survey.
The results are part of Options Group's 2020/2021 Global Financial Markets Overview & Compensation Report, part of which was shared with Business Insider. The results were compiled by polling managing partners and product team leaders throughout the US, EMEA, Asia and Latin America from January 1 through November 5.
Innovative tech and new competitors over the years have forced big banks to loosen their grip on FICC markets that previously served as big money makers.
However, a turbulent 2020 proved to be the perfect storm for banks to generate significant revenue via their trading desks, particularly in credit.
Michael Karp, a founder and CEO of Options Group, told Business Insider that fixed-income traders have enjoyed a resurgence this year, and with similar numbers of traders and salespeople on their desks, each person is expected to take home a bigger purse.
"It's not like they have increased the headcount, so the expectations of every individual in fixed income is that the bonus is tracking at a higher level," Karp said.
What's more, "credit has been the shining star within fixed-income businesses this year," he said. Compensation for the credit sector is projected to increase by more than 16%, which would be the biggest increase of all the sectors the survey looks at.
To be sure, it's been a good year across Wall Street. Every division, with the exception of private wealth management, is expected to have more total compensation compared to the previous year. The majority of Wall Street's compensation is paid out in discretionary yearend bonuses, which are tied to that year's performance.
But a larger pot doesn't guarantee higher compensation for everyone. Young, up-and-coming managing directors can expect to get paid well this year, and some may bring home $5 million to $6 million, Karp said.
"Superstars always get paid," he said.
Others may not be so lucky.
"The problem is that the expectations are so high that some of them will be disappointed at the level of increase they will get," he said. "No bank will double your compensation overnight. People in banks aren't on percentage deals, so they won't see tremendous increases."
And then there are those who aren't making the cut. Many top Wall Street bosses vowed earlier this year to abstain from laying off underperformers for the rest of 2020 in light of the chaos unleashed by the coronavirus pandemic. That magnanimity has come with a price.
"As they haven't been able to fire anyone they haven't been able to hire and upgrade either," Karp said. "That's become a problem for some of these institutions."
Some financial firms are taking steps to change that, and they've quietly begun to identify their underperformers, he said.
Wall Street is gearing up to pay out the best bonuses in years. Here's a look at which trading and banking jobs will see the biggest windfall.
