We are updating the total Investment Banking compensation numbers for 2017. Excluded from this overview is investment banking analysts as the variability has not moved much. Simply put an investment banking analyst should make $155, $180K, and $205K 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 $85K being the rough mid-point, 2) the bonus is being adjusted to match the all in compensation numbers of ~$155K, ~$180K, ~$205K. We made similar points last year, the only adjustment really is that most banks have moved to about 85 Base/ 70 bonus for the good analysts for a first year payout (as usual 100% of base as bonus is reserved for the top-tier performers). Perhaps add an extra $5K to be safe this year given that results were up slightly.
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 up ~6-12%. This is better than expected with results actually going up relative to poorer results last year.
Not much has changed in terms of base salaries (we’re adding a small amount to gross up the average) and bonuses were up decently this year. This year the industry should be up ~6-12% on the bonus line, we’ll take a slightly bullish stance and unless you’re at a struggling bank we assume up 10% would be more than reasonable.
Overview: Generally, the lower level (excluding new hires who have only been around for 6 months), will see less volatility. Banks view junior employees (anything below Vice President) as fixed costs so they typically don’t see much volatility. 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 tiny shops that have limited deal flow).
If you look at the numbers, you’ll see that the real money is made when you’re generating revenue (Vice President, Director, Managing Director). 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.
Before the Outrage Hits: We realize the numbers here seem high for those that are not used to Wall Street. We have a few important points: 1) the stress is significantly higher as you’re on call 24/7, 2) while the hours are higher… no you don’t work 80 hours a week as a revenue generator… not even close, 3) the fund raising market will see significant pressure due to crypto currencies and ICOs in the future and 4) always remember that cost of living matters quite a bit when looking at these income figures.
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 Directors are usually stable and keep angling for ways to become Managing Directors without getting fired for trying to steal clients from the current MDs… the MDs continue to chase the biggest deals possible and angle for becoming the head of investment banking. Oh and we are going to reiterate. Remember to follow the rules in Efficiency if you’re going into banking. If you go into the wrong group you won’t make much money and will be unemployed sooner than later.
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. Interestingly, just now the Fed increased the interest rates making the math harder to make sense.
Key Way to Avoid Confusion: If you’re looking for one line, just assume you’ll be up 10% at least on a “like for like basis”. Given all the base salary changes we adjusted them throughout all levels to reflect the evolving environment. This means some of the totals look better than the other ones depending on *when* the base salary was moved up for the group. Also, remember that getting a promotion usually leads to bigger jumps and if you were simply going from associate 1 to associate 2, not much happens and that would be reflective of a “10% like for like” jump (IE: an A1 to A2 associate last year made about 10% less than this year).
For the newer readers… if you’re interested in learning more about making money, staying in shape and doing so without choking off your personality… You’ll probably like Efficiency, Get Rich Without Giving Up Your Life. The benefits include: 1) How to get into the top 10% physically with one hour a day of exercise; 2) How to eat correctly to be in the top 10%; 3) How to figure out what type of intelligence you have; 4) How to use this type of intelligence to choose a career and the *right* company: Wall Street, Technology or Sales; 5) How to start an online business and sell (the basics and all you need to start); 6) Clear outline of how to create and start an online product business with correct copywriting; 7) How to go into affiliate marketing if someone wants to take a stab at the competitive space; 8) Overview of how affiliate marketing operates and how to do it, 9) How to do all of this and maintain a normal social life (avoid choking off your personality.
Can confirm on the analyst 3 all-in. Would be interesting to hear what type of comp MM PE associates hit.
Thanks for the info!
PE varies way too much depending on deals, what type of carry you get, how they performed and so on.
Generally over a 15 year career the banker and PE guy make the same. But. The top 5% PE out earn top 5% banker unless the banker starts a new company.
1st year associates (straight out of banking) in top PE shops are at ~$250-300k all-in, with perhaps a 15-20% increase each year until you get to VP. Agreed that it can vary significantly with returns, carry, etc but at the top shops, this is the standard based on what I hear from friends at various firms. It has been a great time to be in PE, though rising interest rates are starting to calm the party.
Sounds about right and in-line with the banking progression.
As usual once generating revenue is when the real change happens
Come to tech, you can make that much your 1st year out of undergrad…
WSPs- I love what you guys post first off, and I get a lot of value from it. One major reason is the entrepreneurial and sales aspect you give. Mostly because it’s all about the grind and hard work and I frankly love that shit. However I feel like you all are very bias towards investment banking when it comes to finance which baffles me you never mention wealth management. It’s pure entrepreneurship and sales to the max. Your selling yourself and trust and frankly getting someone to give you their life savings is not an easy sell. BUT the rewards financially and freedom of time way outweigh investment banking and it’s all what you make it. My MD makes over 5M a year after grids. Would love to hear your thoughts on that part of finance as it’s pure performance driven which seems to be what y’all are all about. If you have no thoughts or ideas on it fair enough. Keep up the good work!
Not sure what you mean. If he pulls in $5M that means he generates a ton.
We used the median/average for everything so it’s possible. VP and above is 10-15% revs for total comp
We use banking because it is standard as always. Anyone who thinks we are pro banking and against starting a company hasn’t read any of our posts… we bolted years ago GC!!!
As we explained every single year… if we do buyside stuff there is no average. If your fund is up you get paid a ton if you are down you get damn near nothing! So averages don’t make sense. You either have a good book of business in WM or you don’t so what’s the point?
[edit: maybe your point is “how to build a book in WM” to which we don’t know so we can’t post on it]
Imagine he is likely generating about 10Mish gross after a 50%ish payout depending on the firm/grid levels. Healthy figures.
I know these numbers are strictly for investment banking, assuming base is similar for s&t but bonuses are approximately a third lower (probably a lower base too as you climb up the seniority ladder)
Banking bonuses are significantly higher than S&T, unless you’re an outlier. “Like for like” it’s 100% base as bonus for juniors then above 100% if a revenue generator (successful one) otherwise could get a terrible bonus.
Thanks for these posts and everything you’ve written. Working my way through Efficiency. To say your site and the book have opened my eyes is a gross understatement. At age 40, I’m well behind the power curve and need to make up lost ground quickly.
Would disagree with the spending estimates. 5k a mo is a one bedroom in a full lux building in Chelsea or West Village (i.e. as expensive as possible). Doorman is important and living in a decent looking building is good for game, but the additional full lux amenities are not worth it. I live in a top building w/ a balcony in my apt, gym, sauna, 42nd floor observatory, etc. None of them are useful. My $200/mo equinox is exponentially better than the building amenities, and this is true of even the 7k/mo buildings (I toured then).
Also, a studio is generally enough for one person. Extra space in a one BR kinda useless aside from storage space for random things.
2-2.5k a month should be sufficient for a doorman studio in midtown, maybe 2.5-3k for downtown.
As for living expenses, wonder if you’ll have time to drop 4k/mo working banking hours…
Hey there Wall Street Playboys,
I’m commenting here since this is your most recent post. Your blog has been recommended to me and I’m truly fascinated with it. I have 2 questions:
1) If I buy the book “Efficiency”, does it summarize the blog posts? Does reading the book Efficiency contain all the info you want to give to your readers, or there are some additional blog posts to read alongside the book? If there are, please link them in the response.
2) I’m 20 (almost 21). I’m going out at least once a week and am improving my game. I also exercise and I’m healthy. In the post where you talked about income you said that the best thing to get girls at college is to join a sports team. I see sports as a waste of time, since I do strength training and I believe it’s much more focused then sports training in general. Also, there aren’t sports clubs per se where I go to college. What should I focus on in college (besides working my ass off) to get girls while I’m 21-23?
Thanks in advance!
This is not a Q&A, about 15-20% of the content is from the blog (due to organization) about 80-85% is specific to the book. thx!
From a physical point of view and your experience, is a 5’7″ height considered a deal breaker when going the Investment Banking / Sales route? Most of the people I interacted with are in the “tall” category which definitely gives them an “edge” in perception.
All the other criteria are met for the 1st 4 second rule: sharp as tack, 2/3 piece suit, knowing your industry
Thank you.
P.S. I’ve read the book (match my IP), and I’m structuring it into actionable daily pieces (mostly the bits of information related to finance)
This is not a Q&A
LOL
Good to see the MD total comp is still at $1 million. Has the lifestyle gotten any better over the past 12 months due to competition from tech?
I have to say, making MD money as a blogger might be the best scenario! No bosses. No schedules. No meetings. No restrictions.
Sam