Investment Banking Compensation 2016

We are updating compensation numbers for 2016. Excluded from this overview is investment banking analysts as the variability has not moved much. Simply put an investment banking analyst should make $150, $175K, and $200K in years one, two and three (plus or minus $5-10K depending on how good or bad the bank did). The reason we have excluded the exact break out of base and bonus is two-fold: 1) analyst base salaries are a bit less standardized now with $80-85K being the rough mid-point, 2) the bonus is being adjusted to match the all in compensation numbers of ~$150K, ~$175K, ~$200K. We made similar points last year, the only adjustment really is that most banks have moved to about 80 Base/70 bonus for the good analysts for a first year payout. Perhaps shave off $5K extra to be safe this year given that results were down again.

Budget Setting and Bonuses: As always, bonuses are set in Q4, despite being paid out around February-April, so it is relatively easy to get the Street range, this year bonuses will be down ~10-15%. This is better than the expected down 15-20% given the recent uptick in the equities market (4Q16), improvement in bank valuations (thank you  Donald J. Trump) and improving fund raising markets (IPOs/Follow-Ons).

Not much has changed but a slightly lower bonus and the silver lining here is that the market is coming back a bit which *could* lead to better 2017 numbers. This is certainly far too early to call (2017 numbers) so we’re not going to make any predictions for 2017 since we stick with what will happen once numbers are set.

This year the industry should be down ~10-15% on the bonus line, we’ll take a slightly bullish stance and unless you’re at a struggling bank we assume down 10% or so makes sense.

Basic Overview

Untitled

Generally, the lower level (excluding new hires who have only been around for 6 months), will see less of a hit. Banks view junior employees (anything below Vice President) as fixed costs so they typically don’t take a big hit. As a reminder we’re attempting to build a picture across the Street which includes everything from bulge brackets, elite boutiques and middle market firms (excluding the extremely tiny shops that have minimal deal flow).

Reminder of Wall Street Being Poker: If you look at the numbers, you’ll see that the real money is made at the Vice President (more likely Director) and beyond level. This is because Wall Street is no different than playing in the World Series of Poker. We’ve said this before but it needs repeating. No one is going to get rich working as an associate and you’re only making money at the revenue generating role and more specifically once you close a few deals (Directors typically have brought in some money). In addition, once you reach Director level or even Vice President you’ll quickly realize starting your own company will make you more money than working for someone else (hint, hint, hint, never put all your eggs into Wall Street).

If ~$300K seems like a lot of money, look at the real math. If you live in a major city like NYC, then you can roughly assume you get ~$65K per $100K gross made. This means you’re getting $16.25K per month. Rent alone is going to run around $5K if you’re living in a good part of town and the rest of your living expenses will usually approach $4K a month or $9K in spending per month… Saving $80-100K a year isn’t going to get you anywhere soon. Once you hit $500K or so, then you’ll see an inflection as a single person because you can put away $200K+ and not see much of an impact to your life style.

Reminder that there is No Such Thing as Passive Income… Just Net Worth: No matter what people tell you to market their ideas, passive income is just a fancy word for cash.  If you have to spend time to earn the income then it is *not* passive because you’re using your valuable time. So if you can put away $200K a year or so and assume that you can get 5% off a diversified portfolio, then each year you’ve earned $10K in secure income. Assuming you want to live a normal easy life in a big city as stated above, then you’ll need about ~10 years of savings to get there, where you generate $9K+ without lifting a finger. Of course this will get boring which is why you have to start a business and get out of Wall Street or any type of employment as soon as possible. The bright side is you only have ~10 years to work no matter what in a worse case scenario.

How Do You Calculate Your Bonus as a Revenue Generator? You will get around 10-15% of what you kill. This is the rough math and makes all those occupy Wall Street people scoff and get on their knees. To generate a $1M bonus you’d need to bring in $10M to the top-line at the firm, roughly speaking. This is certainly not an easy task and most people will get stuck in the $300-400K bonus range where they get some small deals, sign up some retainers, some poison pills, some fairness opinions etc… but never really get the big money.

Nothing has Really Changed… The number of slots available has continued to shrink on a relative basis. The roles remain unchanged. Analysts and Associates stick to supporting the senior staff and the Associates with sales skills are shoulder tapped to become Vice Presidents if they have the intangible skills necessary to generate revenue. The Vice Presidents either move up quickly or get blown out like Hillary Clinton. The Directors are usually stable and keep angling for ways to become Managing Directors without getting fired for trying to snipe clients from the current MDs… the MDs continue to chase the biggest deals possible and angle for becoming the head of investment banking.

The Buyside is Still Seeing Pressure: For another year, passive investing has outperformed active managers impacting the number of roles on the buyside at hedge funds & mutual funds. Private Equity has seen low rates help their investments (this may change if rates continue to go up) as cheap money has improved the ROIs on investments particularly if the debt is set at a fixed rate.

Short and Sweet but on the plus side we answered wall street related questions in the comments.

Recommendation To Build Wealth

Track Your Finances In One Place: Sign up for Personal Capital, an award-winning and free online financial platform that aggregates all your financial accounts in one place so you can optimize your money, track your net worth, manage your cash flow, and analyze your portfolio for excess fees.

One of their best features is their Retirement Planner, which uses real input costs to spit out realistic cash flow numbers when you plan to retire. There’s no rewind button in life, so it’s important to run realistic scenarios to see whether you are financially on track.

Personal Capital Retirement Planner
Is your retirement on track? Click to run a free analysis

Comments

  1. Far East Gaijin says

    Admired your posts. As an undergrad (last year) with no relevant skills and intern experience in banking/finance, what are the possible actionable steps to break into ibank?

    I could foresee a clear direction but for my current position there is not much I could do.

    P.S. not living in the US

  2. Hillary4Prison says

    Passive investing works great when the market goes up in a straightline (2009 to Today). Come turbulent times and a future imminent crash, HFs will get their shine back.

    What are your thoughts on going HF after being an IB analyst, in regards to pay? If you’re not cutout for VP and up, would 3-5 years at a HF equate to working up ranks in an IB in a shorter amount of time?

  3. VC says

    If you were in undergrad in Canada, would you:

    1. Try to transfer out to a US school to get into IB (costly)

    2. Try to lateral from Canadian IB into the States

    3. Go into Tech sales/ consulting

  4. Jacob says

    Are salaries the same in every city? For example: will an analyst in Moscow earn the same as an analyst in London or New York? If no, how big is the difference?

  5. I Moved On Her... says

    Is there any upside these days in getting into the Street after 35?

    State School + Tech Experience + Top MBA?

    Anyway to parlay that into something worth while or is it better to stick to tech and maybe get an advanced degree there?

  6. Michael says

    Hey guys,

    Have opportunity to work full time at a asset management firm, partners said If I learn the business and perform well I could start bringing in some deals after 2-3 years.

    The job will be looking at their different assets & following up on them (They invest in RE $100-200m in size and some smaller companies)
    -I would also prepare corp finance package on current transactions and information memorandums.

    It’s a smaller, entrepreneurial firm (25 ex-BB senior bankers) Basically a bunch of guys that bring in their own deals, and collaborate when skills overlap. They have grown big enough to hire me on.

    What sort of compensation should I be expecting? I think the position will allow me to quickly take on a lot of responsibility, and I would be working and meeting with a lot of their connections. I just don’t want to go in blind when salary comes up in the interview.

    What would be the best strategies for exit opportunities? I’ve read that people at Asset Management go on to work at Hedge Funds, but I would be open to going back to IB in accordance to your ‘future of wall street post’ Should I be reaching out to BB firms and elite advisory as soon as I get an offer?

    The other thing I have going on is I joined a Fintech startup. I invested a little bit to get a bit of equity since it is very young. It has very high growth potential and I think it could get pretty big. Our target market is small businesses so I’m thinking of using it as a platform for me to get some sales experience since this job at the Asset Manager would only be 9-5 when we aren’t working on a live deal.

    Sorry for the big comment! Any insights into this would be appreciated. I’m 100% going to make $1m before I’m 30, I just want to make sure I will be able to build transferable skills at this AM firm.

    • Wall Street Playboys says

      Far too long, one sentence one answer. If you have no other job options its not even worth discussing to be blunt since it’s not like you have choices… Stick to the basics especially since you don’t have anything in hand no negotiation power.

      Another tough love comment, this seems to be a complete run on post (assume you’re an MBA in that case) which means around $225K all-in compensation, roughly in-line with IBD assuming you have IBD offers otherwise they wont pay that much.

      • Michael says

        Thanks, I’m in my senior year of undergrad. Non-target school.

        My main question would then be: Who should I really be targeting for my networking after I get the offer? I’m interested in tech, but if the AM does not do a lot in tech, should I focus all my energy on Contacting as many people in the top M&A advisory firms and BB?

  7. JD says

    23, IB analyst at a boutique. How do I best use my time at firm so I can eventually start my own company? I’m a generalist and love learning about different business models of the companies we work with.

    My hours are fairly volatile being a boutique, so some weeks I have a decent amount of downtime where I could tinker with a side gig. Researching and testing ideas for that now. Thanks

  8. DidSomeoneSayREITs? says

    WSPBs,
    Apologies to keep asking this question, but how can I get around FINRA’s outside business activities rule starting out in affiliate marketing? 1st year MM IBD analyst.

    Also would be interested in WSPBs answer to JD’s question. We’re in the same boat.

  9. YM says

    Thanks for accepting some questions!

    If someone exited banking after year 2 for an industry role making $100-$110K, working 9-5 and zero stress work, but wants to make more – would you recommend trying to break back into the sell-side, break into the buyside, or go all-in and work 5am-7:30am, 7pm-11pm on a business? I have solid transactions on my resume.

    Still 25 in NYC. Feeling like its a gamble in any of these situations, but my gut points to bet on myself in 2017.

    In the meantime working the 9-5, I’m doing web design work for money – if you’re good and can sell over the phone, you can sell a $5-10k website and do it in a week. Would try paid traffic but not enough cash to just throw out yet (got screwed on bonus at smaller firm in banking).

    PS – Yes, I know the move to industry may have not been the best decision, but I started and failed (break-even) across 2 businesses in the meantime and learned a ton.

    • Anonymous says

      Don’t jump ship unless you have a worthwhile asset to push. The problem I keep seeing with “it’s all about sales” is that you have to sell a product, and if you’re running your own business you’d hope for that product to be yours. In your position, I would work on finding a partner / outsourcer who’ll do the actual work, and you can sell the product. Only when you’re 100% sure you can sit down at some desk and make continuous calls / emails / connections without having to worry about the backoffice will you be successful. Tech needs engineer and salesman; you cannot be both.

    • pinchharmonic says

      What kind web design work are you doing? Simple WordPress stuff or actually creating a web application to implement someone’s idea? Seems crazy that someone would pay $5k-$10k for a WordPress marketplace or whatever.

  10. MasterMind says

    you guys are awesome thanks for posting all this stuff for free

    found out what copywriting was from your posts & now I’m raking in $$ online

    (not relevant to your post but who cares)

  11. High Quality Questions says

    Props on the blog, followed & applied for a year & have seen positive traction.

    Received 2 job offers (sales of course)

    1. Relatively new well performing company e.g. Salesforce,Netsuite/start up type

    2. Old and well established company that is not as relevant e.g. Oracle,SAP type.

    Is it best to go with the new? (clear positive trajectory higher YOY growth)

    or the old? Proven track record & training with higher cash reserves

    Base and Bonus is pretty much the same.

    Thanks,

    • Anonymous says

      Is the new co a guaranteed unicorn? If it’s burning VC cash they’ll want to pay you with stock – refuse unless they’re going public in 2 yrs. Young co’s that succeed are generally ones which have a direct path to market and mediocre product. You need to be sure you have a co that’s going to be around in 5 / 10 years. Even so wouldn’t recommend Oracle / SAP both stagnant.

  12. WR says

    Assuming one is already working in a front office role, we should stash the bonus? What would be the first investable cash-cow asset you would purchase after several bonus periods?

    1. Rental property?
    2. Small brick-and-mortar business that runs itself?
    etc…?

    Or would one just leave it in a brokerage account and let it accumulate 7% a year?

  13. Anonymous says

    Seems like everything at the top is sales.

    Numbers in sales are similar.

    You usually start off lower 50-100k 1st year. Except there are fewer politics within the company (as long as you are producing) and you don’t have to grind out the first few years.

    Selling can be learned. I have seen so many idiots make $XXXk in sales that you’re extremely average Joe you are probably better off going into sales and not being a top performer and making somewhere in the six figures.

  14. Lance says

    Asset mgt since college. Now 40ish. Net approaching 10. Have dependents. How to make the leap to something more interesting when scaling anything from scratch now seems so small compared to current CF/NW? debt zero. Highly liquid but cash heavy b/c of career/portfolio diversification (bad call last few years on that).

  15. Bob says

    The recurring theme is sales/starting a buis and specifically WSP recommends an online business.

    Given low barriers to entry, everyone and their mother can start an internet business (online marketing, affiliate sales, ecommerce, consulting & some combo of these).

    There’s enough “financial independence” through online biz info products out there, where do you recommend one starts – to learn & execute on high quality (true) info rather than played like a fool, losing capital & time

    Love the content gentlemen hope to see more in 2017, all the best.
    B

  16. says

    Could you please write an article about military to business transition (or have a contact with exp guest write)?

    Any comments here appreciated too. Acknowledge no babysteppin cookbook recipe, interested in being better/more efficient.

    Really would appreciate any of following with specific lessons learned/after action to:

    1. Military to start own business (esp from a mil specific skillsets–> infantry, staff work, jumping from planes, etc.)
    2. Military to sales/online copywrite/ SEO/ affiliate marketing…
    3. How to deal with headhunters as military guy/gal (my phone is filling up)

    Also, any mindset help would be really appreciated. Slowly breaking the wall in self-discipline vs. external (kind of like Cernovitch’s mindset slavery insights). Am working on journal, fitness, and diet, but need to leverage time. Already feel drive slipping from 5-7 years ago.

    You guys are kickass. Already used many steps here to better my life. Thank you and Merry Christmas

  17. evader says

    What’re your guys’ thoughts on Equity Research? Obviously many more people do i-banking, but are these numbers about the same in ER, as well as the career trajectories to get to a 1M+ net worth range? From what I know, ER analysts can make anywhere from a good chunk to a shit ton of money(unlike IB, analyst is the opposite of entry level in ER), and the main struggle is to even make analyst in the first place. And second, does equity research have a future in the next 15 years, or are the good old days of the 90s for ER a thing of the past?

    Btw this is the most alpha, truthful blog on the internet. Every one of your posts has “winner” written all over it, plain and simple.

    • Wall Street Playboys says

      1) pay is less across the board
      2) opportunities are less across the board unless in a hot sector you may get lucky
      3) research not great because tied to volumes and slots are consolidating
      4) sure if you make it you can get about 75% of the numbers above across the board $200 associate, $400 VP and so on
      5) would avoid at all costs read our post on future of Wall Street it will continue to see secular declines unless there is a dramatic change

      90s era is dead and will never ever come back unless an immense change occurs put chances below 0.01%

  18. NB says

    I have received multiple IBD summer analysts offers based on the advice on this site, and really wanted to thank you guys. I have also received an offer from a well known hedge fund (like Paulson, Och-Ziff, Fortress etc…). My question is whether or not to get 2 years of banking under my belt first or go straight to the buyside, knowing thats what I want to do long term.

  19. a says

    A lot of comments about secular decline.

    How’s real estate faring in regards to Wall Street?

    Decline? Less decline than others? No change?

  20. Tom says

    Hello Wall Street Playboys,

    I am a 17-year-old high school student who has been making 30K a month from an online business for the last few months. I have been thinking about skipping college and continuing to scale up my business. The only problem with this is that if my business fails, I will find it hard to get a high paying job without a college degree.

    What are your thoughts on this issue?

    Kind regards.

    Finn

    • Anonymous says

      Dude if you’re making $30k PM even if you fuck it up totally and get it down to $300/mo, you’ll be able to scrape a living in some hellhole. You don’t need a degree and should never consider getting a job if you have those sort of results, most people won’t want to hire you (I’ve tried).

      Ignore college and invest everything into transitioning from “online” to real world clients. Once this occurs – and you have a footing in a good location (NYC / London / etc), you’ll have a company that will weather larger storms. This is where real money will come from and you’ll do well. You’ll also have to network with real folks.

  21. sedulouslyconfusedboy says

    I’m a high school graduate considering studying psychology in a decent University.

    Do you guys know if/how a psychology degree can be useful in a sales career?

    I’ve narrowed it down to either psychology or engineering(software or civil)

    I know there is generally more money in engineering but I have a bigger interest (and skill) in people than equations.

      • Anonymous says

        Study engineering. You have a ton more options after graduating.

        Do sales right after graduating.

        Unless you want a super easy college experience (which I don’t blame you) engineering will be a nice addition if you ever want to do technical sales. Plus you’ll meet better connections versus your typical philosophy friends.

    • sedulouslyconfusedboy says

      Thanks for the advice everyone, I greatly appreciate it 🙂

      I’ll stick with engineering, maybe sit a few psychology courses or just study it in my free time.

      • Ricky Bobby says

        Definitely major in something that facilitates a lucrative career path. You can definitely minor in psych, though.

  22. roaring-thirties says

    Great post. Looking for confirmation on the following:

    – IB valid option if right out of college or only a few years down (meaning either undergrad or MBA).
    – People with different careers (lets say mid thirties; from foreign country) should maximize their time for building a business using their job as an hedge in the meantime?

  23. Liberal Slayer says

    Updated 2017 projections for liberals

    Unemployed: 100%
    2016: 100%
    YoY Change: 0%

    On Welfare: 100%
    2016: 100%
    YoY Change: 0%

    Think America should give the land back to the Natives: 100%
    2016: 100%
    YoY Change: 0%

    Diversified portfolio consisting of Creed albums, 48 pack of Dunkaroos from Costco, and underwater mortgage: 100%
    2016: 100%
    YoY Change: 0%

  24. MB says

    Glad you guys don’t normally allow questions around here, the comments on this article gave me retinal cancer.

    Reminds me of something I’ve noticed – at conferences, events etc the successful people in the room get leeched by value takers. It must be laborious.

    I was dropping by to see if you had posted another knowledge bomb NY article – the one from last year has stuck with me, and is the reason I am sticking in tonight working on a software side-project for fun. Going skiing in a week, so can have all my fun then, don’t need to arbitrarily celebrate a random night because a constructed calendar tells society it needs to party…

    Best wishes for the New Year

    • ReasonFromFirstPrinciples says

      “To all of you young ambitious guys. You *think* you don’t have friends. But really you’re just surrounded by retards and losers for now…” (http://wallstreetplayboys.com/is-making-money-psychological/#comment-50966)

      Good to know I am not alone. I am staying in to work on my business as well.

      I will pass on the opportunity to stand in a room with a bunch of soft 6’s & *regular* guys bragging about their paltry end-of-year bonuses and B.S. “new years resolutions” (inspired by some emotionally stimulating fitness YouTuber) that will not materialize because of a lack of willingness to put in the effort.

      I learned a lot about myself and my business this past year. I am looking forward to putting out even harder next year and learning more. I am not financially free yet. But. I am so hungry for it. I WILL get there. When…? I don’t know. But I WILL.

      What I most look forward to is to finally be surrounded by like minded winners rather than wage slaves. I am grateful that this forum serves as evidence that such future friends exist.

  25. Natural Gas Analyst - Houston says

    A little off topic here but timing is good, might we get a 2017 blog outlook post and book recommendations once again? Always value your insight on these types of posts.

    Happy 2017 brothers.

  26. Jacob Johnson says

    I’m so glad that I found this forum. I’m just a high school student hopefully going to turn into a college student next school year. I’ve been very interested in IB for the past year and a half due to the amount of money investment bankers are receiving. So it’s obverse that people come into IB for the money but what else does it have to offer? Is there any way that I can get in touch with a admin or someone who has experience in IB so that I can plan a route for myself to become a investment banker or possibly go into private equity or hedge funds? I’ve visited many websites and have done plenty of reading but it doesn’t hurt to talk to someone who has the experience in the field? All inquiries all welcome thank you.

    • Anonymous says

      No one is going to welcome you in with open arms to be an investment banker (unlike being a social worker).

      To get into IB you have to bang down doors that are closed. Get a high GPA at a really good school clawing past everyone else who wants it just as bad or more than you.

  27. JK Simmons says

    Odd question, but does IB teach analysts anything about the legal aspects of starting a corporation? Techie here interested in making a startup and it’d be nice if I could cofound with a person that handles both legal aspects and business-focused aspects (branding, pitches, non-core market research etc). Figured it’d be worth looking into given the large number of Wall Street people that are looking to do tech these days.

Leave a Reply

Your email address will not be published.