Lower incentives expected again in money management – Pensions & Investments

Money management employees can expect lower incentive payments in 2020 compared to last year, said a report released from compensation consultant Johnson Associates released Thursday.

The firm’s analysis of third-quarter compensation trends showed that overall year-end incentives (combined cash bonuses and equity awards) generally will decline for the second consecutive year. In 2019, Johnson said bonuses overall generally were down 5% or flat.

“The pandemic is wreaking havoc on many parts of the U.S. economy this year, and the financial services industry is no exception,” said Alan Johnson, managing director of Johnson Associates, in the report.

“While many industry segments have bounced back, the majority of professionals at traditional and alternative asset firms … will see smaller bonuses,” he added.

By category, Johnson Associates predicts the following incentive pay declines in 2020 by category:

  • Employees of large private equity firms, traditional asset managers and high-net-worth shops can expect bonuses 5% lower than in 2019.
  • Hedge fund employee incentive awards will decline 5% to 10% compared to the previous year.
  • Executives of small private equity firms will see 10% declines in bonuses.
  • Those working in firm management/staff roles likely will see a decline of 10% to 15% in their bonuses.

Johnson Associates’ early outlook for the money management’s incentive pay in 2021 is not particularly optimistic.

“As compared to many sectors of the economy, select areas of financial services have rebounded, Unfortunately, as we look to 2021, even with an optimistic vaccine path, the pandemic will continue to negatively influence businesses, but perhaps to a lesser degree than in 2020,” Mr. Johnson said in the report.

“Headcount reductions will continue in the first half (of 2021) as companies transform and adapt. For 2021, we expect some stabilization with early projections for modest salary increases and flat to slightly increased incentives,” he added.

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