Forecasts for higher bonuses on Bay Street this year are in the same range as predictions for increases on Wall Street. But the value of individual bonuses for top talent in New York is significantly higher, perhaps as much as 50 percent.

These individual numbers are difficult to confirm, but the New York State controller does keep track of the total pool of bonuses that Wall Street firms pay to their staff. From the record high of US$19.4 billion in 2000, Wall Street’s bonuses tumbled to $12.6 billion in 2001 and $8.6 billion in 2002 before rising to $10.7 billion last year.

This year, Johnson Associates, a pay consultancy firm in New York, predicts bankers on Wall Street can expect bonuses averaging 15 percent, with corporate financiers getting the largest increases (30 percent over last year), and fixed income getting the lowest increase (10 percent over last year).

The highest bonuses on Bay Street this year, or at least the most unpredictable ones, probably will go to those taking the highest odds—the smaller boutique brokers. These firms can take risks a bank-owned brokerage would not be allowed to, and they can attract some of the best talent with compensation packages that can swing wildly—from nothing at all to millions of dollars—along with the risks.

“Some firms don’t give a base salary,” Gardonio says. “You just share the dividends of the profit at the end of the year. Every quarter they have a payment. At the end of the year, they readjust based on the profit they had.”

One problem with bonuses is that they tend to give the recipient a short-term view—to the end of the year, or even the quarter. That’s why the Toronto-Dominion Bank, for example, restructured its compensation packages for executives last December to reduce the use of annual cash incentive payments and emphasize long-term equity awards instead.

The change of focus was to “create enduring value for shareholders by strengthening the long-term performance objectives for which our executives are accountable and aligning their interests with [the bank’s] strategy,” W. Edmund Clark, president and CEO of TD Bank Financial Group, said at that time: “Our approach is founded upon the principle that the long-term interests of shareholders and executives should be aligned in good times and bad.”

Starting sales associates on Bay Street typically earn a base salary of $50,000 to $75,000, with annual bonuses of 50 percent or more for good performance. Bank-owned brokerages are more likely than the boutiques to pay at least a modest bonus, even when times are tough.

“In the early years, people spend it on things like cars and other toys,” said one participant who has since moved to a quieter job away from the trading floor. “They have enough to live on, and everything that’s due to the bonus is pure disposable income.”

 “I’m sure it’s a big part of the marketplace at the high end,” said Jeffrey Wagman, broker for Forest Hill Real Estate Inc. “When the stock market is booming and the bonuses are flying, people are buying expensive homes really quickly.”

Wagman has seen a boom in his real estate market in the past few months—three Forest Hill houses sold for more than $1 million in September alone, all for $150,000 to $300,000 over the asking price.

Jim Hennok, who runs an art gallery and auction house on Queen Street East, has also seen rising prices in the market for fine Canadian art in the past year. “We sell more stuff in December. Whether it’s Christmas presents or bonuses, I don’t know.”

Vincent Ho, the executive at Downtown Porsche, knows exactly why his December sales can fluctuate from year to year. The 1990s and 2000 were boom times for bonuses. Customers would walk into his dealership and “they would be very, very honest with us that this is what the bonus cheque will be.”

After 2000, the brokers were hurt, bonuses were slashed and Ho’s sales got tighter. This year is looking better, though, and more Bay Street faces were checking out their December car purchases during the fall. “I have heard this year is a better year than the past two years, so hopefully we’ll get some activity at the end.”

When the market is doing well, and bonuses are healthy, Ho can sell 20 or 30 more cars in this quarter than he would otherwise. “This year, I’m at 75. If it is really good with the bonus, hopefully I can crack 100.”

If so, Ho plans to invest any surplus sales commission in equities. “It’s like a cycle,” he said. “They make money, they buy cars. I make money, I put it in stocks.”

But even if you don’t work on Bay Street or sell fancy cars, cheer up. The bonus pool is so big and its impact on our economy so powerful that one way or the other, some of it is bound to wind up in the hands of just about everyone in Toronto.

"David Kassie Generates More Buzz than Bonuses These Days" FOR AN ENTERPRISE that won’t even open for business until next month, David Kassie’s new investment bank has managed to generate a lot of buzz and trepidation on Bay Street. Kassie, the high-flying deal maker who was booted from his perch as a vice-chairman of Canadian Imperial Bank of Commerce this year, has signalled his intention to shake things up in the investment community by poaching a bunch of like-minded risk takers from his former employer, among other places. He’s already recruited Calin Rovinescu, a former Air Canada executive and mergers and acquisitions specialist, who has joined the new firm, Genuity Capital Markets, as a senior partner. Daniel Daviau and Philip Evershed—two former CIBC heads—have also joined the team. Genuity is said to be modelling itself after the Wall Street investment banker Bear Stearns, one of the top securities trading, investment banking and brokerage firms in the U.S. Whether that’s true or not, Kassie isn’t saying. But theCanadian market, currently dominated by bank-owned dealers, appears ripe for more boutique firms. Recently, two of the largest independent brokerages, GMP Securities Ltd. and Canaccord Capital Corp., listed their shares publicly. Kassie was involved in some of the CIBC’s most controversial investments. Some, including Livent Inc. and Global Crossings Ltd., eventually collapsed, which did nothing to enhance the bank’s reputation. Kassie, who reaped a $6.5-million cash bonus in 2000, the largest by far on Bay Street, earned hundreds of millions in fees for CIBC during his glory years, and expects to do the same through merchant-banking activities at Genuity. The couple of dozen or so deal makers who join him can expect outsize bonuses in good years. But if Kassie’s track record at CIBC is anything to go by, they’d better be prepared for a lot of turbulence.