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Investment Banking: Salaries

Traders Walking into Credit Suisse, New York
Traders Walking into Eleven Madison, NY
Going into 2013, starting salaries for investment banking positions with a bachelors degree (assistant or junior analyst position) should range from $100,000 to $150,000 after bonus. Most of the major banks in NYC are offering a starting salary of around $75,000 plus a $15,000 to $20,000 signing bonus. Further bonus can range from $20,000 to $40,000 depending on performance. Starting salaries with an MBA degree (associate position) range after bonus from $120,000 to $220,000. These salaries vary with firms and with the region of the country you are in. Bonuses typically would be 10-50% of salary to start and can move to one to three times salary later. Lately, salaries have increasingly included an equity component which may not be liquid for up to nine years, although as an analyst you would typically be sheltered from this.

As we write this in August 2012, banking salaries and bonuses are under pressure as several large banks are reporting poor profits and considering layoffs. The public perception that high banker salaries may have worsened the financial crisis of 2008/9 is not forgotten.

Generic salary advice: Some firms tend to pay less than others because they can get away with it. You might actually be better off taking less. Obviously don't give yourself away but at the entry level, the quality of experience you get and the strength of the people you will work with are far more important than how much you get paid. You are trying to maximize the present value of your future earnings and enjoyment. This may involve taking lower pay now. Or, if you're lucky, it might not.

Salaries are Flat to Down in 2012 but up from the Financial Crisis Bottoms. All-in compensation took a substantial hit in the financial crisis with many firms paying low to zero bonuses (the dreaded "goose egg"). Starting offers in 2012 and many year end bonus numbers for 2011 were up substantially, although typically down from their pre-crisis peak in 2007 (overall, down 10 to 30% from peak, depending on the firm and position). Bonuses being paid at the beginning of 2013 are likely to be flat to down given recurrent weakness. Bulge firm salaries tend to be similar to those at boutiques but are higher than in regional firms. Forecast salary ranges in the 2012 to 2013 period are as follows:

Salaries in Investment Banking (with bonus)

Job Level Salary Range Typical All-in Comp Prerequisite
(degree/yrs experience)
First Year Analyst $100K - 150K $110K Bachelor's
Third Year Analyst $120K - 350K $145K Bachelor's
First Year Associate $150K - 250K $170K MBA
Third Year Associate $260 - 500K $310K MBA
Vice President $250K - 1MM $450K 3-6 years
Director / Principal $400K - 1.5MM $700K 5-10 years
Managing Director / Partner $500K - 20 MM $1.2 MM 7-10 years
Department head $800K - 70MM $2.5MM 10+ years

Note: This table is based upon conversations with banking insiders about yearly bonuses that were paid between December 2011 and February 2012. MM denotes millions. K denotes thousands of US dollars.

We are hearing a lot more diversity in compensation levels than usual. The old rules that implied highest comp at the most prestigious firms no longer apply. This is less true at the analyst level where firms try to harmonize compensation with "The Street". Firms will raise starting offers, more or less, in lock step at this level. However, the situation differs at more senior levels - even mid Associate.

But the big issue today is the lack of cash in comp. Base cash salaries have gone up but the cash part of bonuses was less than $150,000 in most firms and, in some firms, cash bonus comp was capped at $75,000. Well known firms such as JP Morgan, Bank of America ML and Goldman took cash comp down substantially. This has caused an exodus for other more interesting areas.

A related salary trend involves compensation across areas. Obviously, with the new financial reforms, certain areas like prop trading, institutional equity sales and securitization are under pressure. In contrast, other banking areas like health care M&A/financing and private banking are in growth mode and compensation levels have held up.

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Jeff Foxworthy

Find something in life that you love doing. If you make a lot of money, that's a bonus, and if you don't, you still won't hate going to work.

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