On Wall Street, 2021 will be remembered as the year things got really weird and everyone got crazy rich. Meme stocks like GameStop and AMC entered the lexicon in January, and then there were a record number of companies filing their initial public offerings, the rise and fall and resurrection of SPACs, and the biggest year ever for private equity deals. On Tuesday, Wall Street compensation consulting firm Johnson Associates put out a report confirming that just about everyone who had a hand in this financial free-for-all is going to get rewarded more handsomely than any time since at least the financial crisis. In its report, the company predicts a double-digit increase in bonuses this year practically across the board, with as much as a 35 percent bump for bankers who helped bring new companies to the public markets. For Wall Street’s biggest earners, though, they’re looking at much more than that — as much as three times their biggest bonus, ever, Intelligencer was told. For established bankers, that could mean millions more in their total compensation, just for this year.
These kinds of numbers raise an obvious question: What do these people do with all this money, anyway? Just the words Wall Street bonus conjure up images of Leonardo DiCaprio as Jordan Belfort, ticking off his daily drug consumption as he walks out of his palatial home. Bonuses, for many mid- to upper-echelon bankers, amount to the majority of annual compensation, and getting three or four times a salary that’s already at around $500,000 isn’t unusual. But while bonuses are obsessively tracked — especially by the status-conscious on Wall Street — there isn’t clear data on where the money goes. The New York State comptroller’s office, which does its own annual survey of Wall Street bonuses, doesn’t track how the money is spent, but a spokeswoman pointed to data from the Bureau of Labor Statistics’ Consumer Expenditure Survey that shows the top 20 percent of spenders usually spend the most on things like real estate, charitable giving, and insurance.
But of course, it’s not all prudent investing and planning for the future. For Wall Street’s flashiest, the super-yacht — 160 feet or larger, some with their own helipad and smaller yachts attached — is the item to splurge on. “We’re working with two new clients right now that came up in the last week, that are in finance in New York, and one of them’s looking at around a $20 million purchase. The other ones were around $15 million,” said Michael Tabor, founder of Kitson Yachts, a brokerage for the outsize pleasure crafts. Ram Selvaraju, an equity analyst who covers biomedical companies, considers himself a disciplined investor and seeks out pleasures that will still, ultimately, make him more money. “In terms of splurging, I’m not immune to the allure of luxury watches. I own a few myself,” he said — though he specified that he seeks out those most likely to appreciate in value, like Rolexes. He’s also invested previous bonuses in French wines (“I would not say that I’m an oenophile, but I know enough to be dangerous”) and contemporary artists, like British painter Peregrine Heathcote. Before the pandemic, Selvaraju flew back to Switzerland, where he grew up, every six or eight weeks to attend to his wine cellar. For some, the flashiest junkets were in the past. “Ten years ago, I went out and bought the bigger house,” one securities sales head at a major bank told me. “Then we got a Maserati, and then we got a Ferrari, and then we bought a new boat. Because you’re living your life. And then it was like, Oh, I only have, God willing, ten years left to work. Now it’s all about saving.” For others, the bonus was a right of passage. “I bought an engagement ring,” one banker, now in California, said of a 2007 purchase. “I was a young analyst at a hedge fund and that was probably the most, percentage-wise, of my bonus I ever spent.” Now, he says, he’s more conservative and plans to save and invest his bonus.
Tracking bonus spending is difficult because the highest bonuses aren’t usually paid out all at once, and are instead doled out in cash and stock awards over a period of three or four years. (For younger bankers who make around $100,000 in salary, their bonuses are entirely or largely in cash.) The rules around bonuses have changed drastically since the 2008 financial crisis, with pay structures that would pare back the compensation of top executives for making reckless decisions, though that was weakened somewhat during the Trump administration. But even just deferring a full bonus for a few years can tamp down on the splurging. “This sounds ridiculous, I get it, but if you’re talking about 2 million bucks, that’s not that much. I mean, it is, but it’s not that much money, right? Think about this. Your base is 500 [thousand]. You get a $1.5 million bonus, 40 percent of it goes into deferred comp,” the securities sales head told me. “You’re not going to go out and buy a $275,000 Ferrari with it. You’re probably going to invest most of it. You’re gonna buy a couple of luxury things and go on a really nice vacation.”
Real estate is, by far, the big draw for Wall Street’s elite — and this year, with luxury prices in New York City still far from their 2017 highs, brokers with a flood of money coming in are expected to buy up new condos and buildings. “There’s definitely a relationship between bonus payout and an uptick in real-estate absorption. No question,” Frances Katzen, a broker at Douglas Elliman, said. This year, Katzen expects the outsize bonuses to boost the market throughout the winter, before the usual burst of spring selling. “We’ve seen [clients in] their early 40s. We’re not seeing the 60s. They’re coming into their own now. They’ve done their time. They’re now managing director.”
Selvaraju, 42, is part of that crowd. He knows that he’s going to invest his bonus this year in New York City real estate and is considering a place in Hudson Yards or in One Waterline Square, a Richard Meier & Partners–designed building that overlooks the Hudson River, where condos start at $4.9 million. “I like the modern shimmering lights, the skyscrapers, the white-and-stainless-steel palette tones,” he said. “The Upper West Side just suits me more from a style perspective. I’m not interested in old-school limestone and granite and all that kind of stuff. Dark-wood paneling does not appeal to me.” He currently lives in Jersey City, which doesn’t have the city tax, and though he plans on renting the place out — he has other investment properties in California, Texas, and Florida — it also might be a place he moves into one day. “You work on Wall Street and the ultimate glamour thing, the ultimate trophy statement to make is: ‘I don’t just work in New York, I live in New York.’”
It’s not just Empire State real estate, though. “Traditionally, the first thing they want to do is upgrade the living situation with the second home upstate or in Miami,” said Reid Heidenry, an agent at One Sotheby’s International, who’s licensed in both states. (One hedge-fund manager told me that “because of the lockdown, it’s tough to go and buy trophy properties in Europe.”) And while real estate is generally seen as a good way to invest a bonus, there are ways to overdo it, too. “I’ve seen a lot of my friends, they own a $3 million house, they have a beach house, they have four cars. And all of a sudden they’re like, ‘Dude, I’m broke,’” the banking sales director said. “What do you mean, you’re broke? You make $2 million a year.”