The Big Question Looming Over Bonuses This Year

Johnson Associates made these projections for year-end incentives across sectors:

• Traditional asset management, up 5%
• Illiquid alternatives, flat to up 5%
• Investment and commercial banking, up 10%
• Wealth management, up 5%
• Family offices, up 5%
• Hedge funds, up 2.5% to 10% or more
• Insurance, flat to up 5%

These projections track closely with observable first-quarter conditions, said William Trout, director of securities and investments at Datos Insights. For example, investment banking's double-digit increase aligns with confirmed deal momentum, including a strong mega-IPO pipeline and an M&A rebound after 2025 volatility, he said.

Johnson Associates' guidance will likely hold through the third quarter, Trout said, but faces a critical inflection in the fourth quarter depending on the macro trajectory.

"The real risk isn't gradual underperformance but binary collapse," he said. "Either momentum persists and bonuses land as projected, or a shock hits and headcount-driven pools evaporate when firms cut staff faster than revenues decline."

The AI Talent Split

Brett Hina, managing partner and private wealth advisor at Cornerstone Private Wealth in Northfield, New Jersey, said stronger equity markets, resilient client asset levels and continued demand for sophisticated planning and advisory services have supported revenue growth in many areas of the business despite elevated geopolitical and economic uncertainty.

However, Hina said he would characterize the outlook as "cautiously optimistic" rather than bullish.

"Many firms are still navigating margin pressure, higher technology costs and client sensitivity around fees," he said. "While headline compensation numbers may rise modestly, I believe firms will continue to differentiate heavily between top producers and average performers, which could further widen compensation disparities within the industry."

To that point, the report also highlighted the issues of "talent bifurcation and AI-driven retooling" in its larger incentive projections. There is now a two-tiered talent market with artificial intelligence-led roles commanding premiums. With AI fluency now a prerequisite for hiring at many leading firms, this has also led to reduced analyst-to-manager ratios, with select entry-level roles being outsourced or offshored.

How much these workforce changes are attributable to AI versus cyclical isn't cleanly separable, said Trout.

"Firms are consolidating teams and attributing all of it to AI adoption," he said. "The honest answer is probably 50/50."

AI speeds up compliance automation, client communication triage and portfolio rebalancing, Trout noted, but firms also use AI as a narrative cover for cuts they would make anyway due to market consolidation.

"If macro deteriorates, the 'efficiency gains' will be exposed as temporary, and firms will cut deeper into muscle while blaming AI for the necessity," he said.