The outlook for fundsters' 2025 bonus pools has just improved dramatically yet again, though expectations are still well shy of pandemic peaks, according to the folks at a New York City-based, financial services-focused compensation consulting firm. Meanwhile, they're worried about future staffing levels across financial services.

The team at Johnson Associates predicts, in their "Financial Services Compensation Third Quarter Trends and Year-End Projections" report released yesterday, that traditional asset managers' incentive compensation (on a "felt impact/same headcount" basis) will rise between 7 and 12 percent this year from 2024 levels, thanks to the rising tide of market appreciation. That's a big jump from the Johnson team's 2025 predictions from Q2 2025 data (when they foresaw a 2.5- to 7.5-percent rise this year) and from Q1 2025 data (when they expected a drop of between 5 and 10 percent).

The Johnson team also still seems to expect that the year will treat traditional asset managers better than other types of financial services companies. They foresee bonus pool improvements of 0 to 10 percent for illiquid alts, 8 to 10 percent for wealth management, 5 to 8 percent for family offices, 2.5 to 10 percent for hedge funds, and 2.5 to 5 percent for insurance.

Yet, despite the improving picture for asset managers, the Johnson folks still expect 2025 fundster bonus pools to lag those of the early pandemic. They predict that incentive compensation this year will be higher than in 2024, 2023, and 2022, but still 8 percent below the 2021 peak.

Despite "active ETF strength," the Johnson team sees index funds capturing the "majority of flows." They also see an acceleration of "scale bifurcation," with a distribution boost for the biggest firms.

Yet there are non-bonus-pool clouds on the horizon. The Johnson folks predict that, after "generally muted" hiring across financial services in 2024 and 2025, the next three to five years will see firms lower headcounts by between 10 and 20 percent (especially in operational and entry-level roles) thanks to AI and other technology, necessitating evolution for fundsters and their firms. They say that even this year, fundster hiring is subdued outside of "select focus areas" like "technology roles" and outsourcing to India. 

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