Pay consultancy Johnson Associates expects year-end bonuses at major banks and investment firms to rise again after a year marked by significant IPO activity, AI-related financings, and brisk markets. The firm’s annual bonus report is widely read across the financial industry, and it warns that this strong year may represent a high point for some time.
What’s driving higher payouts
Johnson Associates attributes the projected bonus growth to a blockbuster slate of IPOs, financings tied to artificial intelligence initiatives, and generally active markets. Those factors helped boost revenue and incentive pools at many firms, creating room for larger discretionary awards.
Emerging risks
The consultancy also highlights several headwinds that could make future years tougher: the AI trade is starting to sour, interest rates are rising, and recent political developments may complicate the outlook. Johnson Associates specifically notes that last week’s Democratic gains could darken the backdrop for 2027.
Rewards will be concentrated at the top
This year’s larger bonus pool is unlikely to be spread evenly. Alan Johnson told Semafor that firms are increasingly tilting compensation toward their highest performers rather than distributing pay ‘‘peanut-butter-like’’ across divisions and ranks. “Firms now value the best people more than they ever have, and value the average person less,” he said, adding that firms are less tolerant of underperformance: ‘‘Nobody is going to wring their hands if an average performer is complaining — ‘don’t let the door hit you on the way out.’’’
A lesson from 2021
Johnson Associates and industry observers point to 2021 as a cautionary example. That year, many institutions handed out special, one-time bonuses after a banner period; those payments later became embedded in expectations and contributed to significant backlash in 2022. The consultancy urges firms to avoid repeating that mistake.
In sum, Johnson Associates sees a favorable environment for bonuses this year driven by IPOs and AI financings, but it warns that uneven distribution and looming macroeconomic and political risks could limit future upside.
