In 2021, all eyes were on tech, cryptocurrencies and NFTs. Under the radar, Wall Street had a banner year. Trading, initial public offerings, SPACs, deal making, mergers and acquisition and wealth management did extraordinarily well during the pandemic.
Some of the top-tier investment banks, including Goldman Sachs, JPMorgan, Citigroup, Morgan Stanley and Bank of America, paid out around $142 billion to its workers in 2021. This amount doesn’t include the many other financial services firms. If you add in all of the other banks, private equity firms, hedge funds and other entities in the securities industry ecosystem, the amount is substantially larger.
It appears that the big banks are not immune to the same trends as frontline workers. They need to pay up for talent or risk losing their best and brightest to the competition. In this hot job market, Wall Street leaders recognize that their bankers, brokers, traders and compliance professionals have an array of choices outside of their organizations. To stem attrition and attract top performers, along with keeping up with rising inflation, management needed to ratchet up their pay packages.
The Wall Street Journal reported, “Goldman Sachs Group Inc. gave about half a billion dollars in special stock bonuses to its roughly 400 partners, people familiar with the matter said.” Goldman doled out $4.4 billion in compensation in 2021, sending the bank to its only quarterly profit drop of the year. JPMorgan spent an additional $3.6 billion on compensation in 2021, and Citigroup allocated an additional $2.9 billion, bringing down its Q4 profit, similar to Goldman.
The average Goldman Sachs employee took home just over $400,000 in 2021, up 22.8% from 2020, according to Financial Times. An average, however, needs to be taken into context. There are some big investment bankers that rake in million-dollar paydays, while some rank and file workers make modest—by Wall Street standards—$90,000 or so salaries.
Goldman CEO David Solomon, who earned a $35 million pay package for 2021, said the pressures on pay were warranted to both bankers being compensated for a banner year, along with keeping up with “wage inflation” within the securities industry.
Jamie Dimon, JPMorgan chief executive, who took home $34.5 million last year, said, “We will be competitive on pay.” Dimon added, “If that squeezes margins a little bit for shareholders, so be it. There’s a lot more compensation for top bankers and traders and managers who I should say did an extraordinary job in the last couple years.”
While no one is going to hold a pity party for the bankers, the lucrative pay—a large percentage in bonuses—came at a cost. In 2020, a group of young analysts complained about being forced to work over 100-hour workweeks. Other young bankers shared their concerns over being forced to work so many hours that they weren’t able to lead a normal life outside of the office. To pacify the junior bankers, they were given raises in the neighborhood of around $150k in total compensation.
Banks started one-upping each other by giving lavish salary increases, bonuses, days off and Peloton bikes to Gen-Z bankers. Bank Of America, Barclays and other banks offered five-figure raises, time off and other incentives to make the junior bankers happier. Private equity giant Apollo Global Management doled out six-figure, retention-type bonuses. In a hot market, Apollo plans to make about $100,000 to $200,000 awards, predicated upon the recipients remaining with the private equity firm for a specified time period.
Goldman Sachs plans to offer new employee benefits, in an effort to attract and retain its employees. Goldman is offering paid leave for pregnancy loss, expanding the amount of time employees can take for bereavement leave, introducing an unpaid sabbatical for longtime employees, increasing its retirement fund matching contributions for U.S. employees and eliminating the one-year waiting period before matching employee contributions.
Goldman head of human resources Bentley de Beyer said about the program, “We wanted to offer a compelling value proposition to current and prospective employees, and wanted to make sure we’re leading, not just competing.”
According to the New York Times, “Wall Street is in revolt.” The Times reported that banks are begrudgingly loosening up on their demands for people to be in an office setting. “Across the financial industry, at firms big and small, workers are slow-walking their return to the office. Bankers, for whom working from home was once unfathomable, now can’t imagine going back to the office full time. Parents remain worried about transmitting the coronavirus to their children. Suburban dwellers are chafing at the thought of resuming long commutes. And many younger employees prefer to work remotely,” wrote the Times.
Wall Street firms recognized that having a storied history isn’t enough to attract, recruit and retain the best and brightest as they face intense competition.
Even the mighty Wall Street titans need to show empathy to their employees, offer work-style choices, better benefits and competitive pay—or risk losing the best and brightest to other top companies.
Source: Forbes
