Wall Street is losing money and it has nothing to do with the markets.
America's heralded financial institutions are feeling the effects of The Great Quit and are raising year-end bonuses and salaries like never before in a bid to keep their workers. The five largest investment banks paid out $142 billion in compensation for 2021, that's $18 billion more than in 2020. Pay grew twice as fast as revenue last year.
At JPMorgan Chase, compensation for investment bankers and traders jumped 13% last year, almost three times as much as the extra income they produced. Citigroup paid $3 billion more to its employees than in 2020, and Goldman Sachs doled out almost $500 million in special stock bonuses to its partners.
But as finance staffing shortages persist and recruiters get nervous, they are learning that money is no longer the principle when it comes to retaining and hiring employees.
If there were a chart that would plot when an employee's quality of life became more important to them than pay, Alan Johnson, a consultant who helps financial firms design their pay programs, told Fortune: "We're stretching the extremes." Mental health issues and fatigue are catching up with financial workers who have now worked grueling days from their couches during more than two years of the pandemic.
"This is a unique situation," Johnson said. “We've always had compensation that goes up and down based on the job market, but now there's this cumulative fatigue of remote work from COVID. It's all new. Money is not enough, he said, employees are looking for a change of scenery as a way to cure this growing sense of fatigue.
About 65% of employees say the pandemic has made them rethink the place work should have in their lives, research firm Gartner found in a recent survey. Compensation is not the main reason.
Johnson said his more than 800 clients, which include financial institutions such as Credit Suisse, are unclear on how to handle the situation because there is no historical precedent. “Everyone is very nervous about what turnovers are going to look like,” he said.
He predicts it will be high well into 2022.
As employees return to the office and are once again confronted on a daily basis with annoying personalities and the complaints of office life, they too may decide that the money just isn't worth it. Gallup research found that 50% of employees leave their jobs "to get away from their manager and improve their life in general at some point in their career."
"If you're exhausted, you think, 'Do I really want to live in New York or Boston or San Francisco? Do I want to deal with the high prices and high taxes there? Why don't I move to a warmer climate and live a warmer lifestyle?' more relaxed?'" Johnson said. "I think that's more apparent than it would have been two or three years ago."
Silicon Valley's greener pastures, offering good pay, lavish benefits and at least the semblance of a better work-life balance, are also eroding the hiring prospects of the big banks. Some institutions are taking notice.
Goldman Sachs is introducing an unpaid sabbatical year for long-time employees, offering longer bereavement leave and increasing their matching contributions to the retirement fund. The question is whether it is too little, too late.