Wall Street bonuses have been under pressure since the onset of the "great recession" as the demand for massively overpriced, Ivy League egos suddenly dipped well below supply. Unfortunately, the supply overhang still seems to be weighing on banker bonuses, a fact we've pointed out a couple of times this year.
While previous reports suggested that asset managers would fair better than trading and advisory bankers, an update from the Wall Street Journal indicates that might be changing in 2017. For the first time in a decade, Morgan Stanley has announced plans to raise their "Pay Grid" thresholds by 10%.
Changes in Morgan Stanley's basic pay formula for its financial advisers next year will oblige many of them to do more business--or risk getting paid a lower percentage of the revenue they generate.
Morgan Stanley Wealth Management, the largest brokerage by headcount with more than 16,500 advisers, told its ranks this week that it is increasing some key thresholds in its so-called pay grid by 10%. Advisers are paid on the basis of fees and commissions they bring in each year, with higher producers keeping a higher percentage of revenue. The pay grid sets thresholds for moving up from one production category to another.
For example, to qualify for a 41% payout, advisers must generate at least $440,000 in fees and commissions in 2014, compared with at least $400,000 this year. To move up to a 42% payout, they will need to produce at least $660,000 next year, compared with $600,000 this year.
While the move won't mean much for those sitting comfortably between pay tiers, it cut mean big bonus cuts for those right on the cusp. Of course, this is just more unwelcome news for NYC real estate that is "peaking."
Meanwhile, as we previously noted back in May, Wall Street bonuses are expected to decline by as much as 20 percent this year according to estimates from compensation consultant Johnson Associates Inc.
While bonuses are predicted to fall across the board, the firm noted that fixed income trading and investment bank underwriting would be hardest hit, estimating that bonuses for those roles will fall as much as 15 percent to 20 percent from last year.
We noted that on average, Wall Street bonuses in 2015 fell to the lowest level since 2012, and we also showed that layoffs are increasing as of late on Wall Street as firms try to make up for weaker revenues. In the face of the recent layoffs and the slowing economy, we suspect that those still lucky enough to be gainfully employed by the end of the year will be happy with any bonus that is received.
And besides, Wall Street has had a good run relative to Main Street for a few years...