February 24, 2024

KT Business

The Business Servicess On for You

Salaries and bonuses in finance, 2023 vs 2022

2 min read

We’ve spoken a lot about what bankers are expecting from their employers this bonus season, and which bankers are most optimistic (young, male, ethnic minorities as well as those in Europe).

But what do those (expected) numbers look like next to better known salary and bonus numbers? What sort of picture do they paint? A mixed one, truth be told.

 

We also asked our respondents how much they were earning in salary and bonus, and used this to derive total compensation expectations for this year compared to last. Data points in the table above have been smoothed to take into consideration the varied distribution of respondents by seniority across our sectors.

When total compensation (salary plus bonus) is taken into consideration, the most lucrative place to work in financial services in 2023 is expected to be at the same place it was in 2022: a hedge fund. By comparison, the least lucrative is in a bank’s compliance team, the same place it was least-paying to be in 2022.

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Why? Well, the answer is straightforward. Hedge funds pay a lot of money because they make a lot of money. The people that earn that money take a lot of extremely informed risks, but risks, nonetheless. They have a lot riding on them, and that means that they’re rewarded when those risks pay off. Banks have these people too – they’re called traders no matter where they work – but they earn a lot more money at hedge funds. Bank traders can expect to pocket around 5% of their generated profit as a bonus, but hedge fund traders (usually portfolio managers) can earn many multiples of this.

Compliance personnel on the other hand, despite having an extremely important role to play in fulfilling a bank’s legal obligations and fiduciary duty, have a job – and their performances have no impact on the profit the bank derives at the end of the day (although their failings can cost the bank hundred of millions of dollars). The same logic applies to other middle- and backoffice teams such as risk, finance, and technology teams, who all earn significantly less than, for instance, sales & trading teams.

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