Is the gap between IB pay and "ordinary" corporate jobs getting too narrow to justify the hours?
Everyone knows that the heyday of pre-2008 banking pay is probably dead forever, but it seems that the reputation of how much this job pays has persisted despite the trending evidence to the contrary over time. The perception that bankers (especially at the non-senior level) are living large as they were in the 80s and 00s seems to not completely jive with reality
Don't get me wrong, banking has paid well when compared to the labor market as a whole, but the compact that is agreed to when going into banking (no WLB, it's a "lifestyle" and not just a job) seems to fall apart when the payoff for that sacrifice is only a 20%-30% premium in comp compared to typical corporate jobs that have much better working conditions.
At that point, the main justification is the accelerated timeline to becoming a senior banker (eg. "think about how much money you'll make in 5 years!"), which is enticing but not all that compelling for a lot of people especially when the hours only get marginally better
Is the gap between IB pay and "ordinary" corporate jobs getting too narrow to justify the hours?
Bump
Valid Point. I believe the justification at this point is the pre-requisite to get into other lucrative industries.
Sometimes I wonder for all the talk about automation displacing "high finance" jobs, maybe it's equally possible we enter a new "golden age" of banking/pay from increased productivity/investment/M&A. This is also true of the hours with AI likely reducing them at least partly if not substantially over next several years.
Does anyone else think this is a possibility, and maybe contrary to OP, think banking could be an incredible LT career for this reason?
peak take. high finance too powerful to phase out for a while.
When factory work became automated, did the people left on the floor get paid twice as much? Work half the hours? No. As always, headcount will be reduced and i'll all go to the shareholders.
I don't doubt headcount will be reduced but I disagree that major productivity increases did not/do not lead to an increase in wages/wealth - that is verifiable by simply looking at the enormous amount of wealth accumulated by even the average person in the United States, not just the shareholders.
Bump
Investment banking is basically a normal job now. Used to be the case that when people heard investment banking they thought you were really rich / making more money than everybody else. Now our industry barely pays higher than consulting and literally pays the same or less than tech.
After bonus I'm clearing over $200k this year working about 70-80 hours a week as an analyst 2. I'm happy with it and grateful for the comp but to think it would impress any of my friends, family, or anybody at all is laughable.
My software engineer homie clears $150k working lightly 30-40ish hours a week fully remote. If he wanted to, he could easily work harder at a different company and be clearing $250-300k, but he enjoys his lifestyle too much. A 30% premium for 100% more hours just goes to show that banks have given up trying to attract talent or offer outsized pay. They're phoning it in for now but that can change. Definitely some banks out there (Qatalyst/Centerview) that actually pay impressive amounts to juniors but very few.
You must have grown up with a silver spoon the size of a ladle if $200k at 24 isn't impressive to anyone you know
When I was in analyst in 2001 (when dinosaurs roamed the earth) at what you folks call an "EB" (but no one in the industry does, other than some low rent headhunters), I was paid what I think was top comp on the street of 102.5k. My homie at Microsoft got paid 85k. Markets went south and my comp went up to 130k as a third year analyst (still top of the street) so virtually no upside. Then things turned again and four years later by the time I was a first year VP, I was making 700k (above the street). Then the financial crisis happened and markets stagnated and my career stagnated and my comp stagnated. Of course then, I made MD and then group head, the markets came back and for the past few years, I'm making 5mm+.
so a few observations, first both banking and PE are long games. It was never the case that in the first few years, it pays much better than in other jobs.
Second, there are a lot more junior bankers and MDs than there were pre 2008. In my view, more than the industry needs to serve its clients well. There are just as many MDs making f@ck you money than there were pre 2008, but where people make it is different. The real rainmakers are more often than not at "EBs" and the real money making opportunities are at mid market firms. The average MD at Blair, Piper, Baird, Cantor makes more than a JPM or MS. And the average partner at Evercore a ltot more. Similarly for junior bankers, look at where people are getting paid vs where they are not.
None of this happened. Stop pretending to be a group head making $5mm+/year on an anonymous forum. Get help for your mental issues.
Read the verified bit below
Point is there are very few groups that will ever pay a VP1 $700k now in 2023 even in the best of markets, and we're taking almost 20yrs later after ridiculous CPI and real asset inflation.
I was probably the top ranked guy at one of the top paying groups. Not saying this to boast, I made some career mistakes shortly thereafter and things went sideways / down for 5+ years before picking back up.
But you're right - it's a much rawer deal for VPs and Ds (less so As and As actually) than it was 15 years ago, I think the street has made a conscious decision to pay less for execution, on the other hand the pay for the top guys at EVR, CVP is unthinkably high compared to their BB heydays. Like many things in society, banking has given more wealth to the top 1% and less for everyone else
I'm 24 with 2 yrs of experience and made $210k this year how is that a 20-30% premium to corporate jobs… 85% of my friends probably don't clear $120k. If your benchmarking to SWE, ok, do you have the ability to code?
I'm going into a corporate role that pays 185k TC with 40 hour workweeks (3 YOE). Seeing how analyst bonuses shook out this year, 30% premium TC for being an associate isn't that big of a stretch
just like how IB / PE is relatively selective, if you are selective about what role you try to get into in corporate (and try to stretch your experience past what you actually have), I'm confident that most people at the analyst / associate level are able to snag very competitive corporate roles for the hours worked
I would totally take a 40 hour corporate job with that comp over my banking years (you actually make more than I made both analyst years at a BB) and honestly probably over my MF job
Is it a corp dev role or something else in corporate (corp fin, strategy, etc.) and what type of company (F500, startup, PE portco, etc.)? Would appreciate any advice on how you approached corporate recruiting and what you viewed as "competitive." Also curious how you expect your comp to progression in the medium/long term.
Which corporate role?
Lawyers make more money than us. Let me say that again, lawyers make more money than us. That is not a sign of a healthy society - us lusty men of commerce should be paid top wages!
This is a bad argument IMO. If you're referencing the WSJ article on banker vs. lawyer pay, there are plenty of other threads pointing out the major flaws in that article (primarily that it is comparing top equity partners to average MDs, especially an issue because it is increasingly difficult to make equity partner and you're seeing a whole new class of non-equity partners who make far less)
As an AN1 at an EB this year, I cleared $220k, compared to $235K for 1st year biglaw associates (https://www.biglawinvestor.com/biglaw-salary-scale/), and didn't have to pay for 3 years of law school or sacrifice 3 years of income. This also doesn't consider the optionality that IB gives you to pursue even higher earning careers, like PE or HFs.
I recruited for MF PE and was guided towards $325-$350k all in as an Assoc 1, which is comparable to an Associate 4 in biglaw (which will be 3 years out of UG vs. 7 for biglaw). Associate 1s at my EB are clearing at least $300k all in. Unless you're a SWE (where career earnings are arguably lower because fewer clear senior roles) or at a top HF out of UG (where there is obviously much more risk), then you'd be hard pressed to find anything that pays close to IB, especially considering risk adjusted career earning potential. Lastly, my friends in MBB consulting are making $110k base with $10k signing and top bucket bonuses of $20-30k for an all-in comp of at most $150k. There are plenty of issues with IB and it is far from a perfect job, but I'm still extremely grateful I chose IB and would still recommend it for students looking to maximize career earning potential.
Market pay for SWEs with 2-3 YOE of a high caliber are also around 320k +- 30k for normal tech jobs.
It's much higher at reputable quantitative hedge funds.
FWIW I think people should just pick careers based on what interests them.
The issue here is how much analyst comp varies by bank. I see your point with making $220k as an A1 and completely agree that that's great and worth it. I only made $150k as an A1 (~$50k bonus, salary was only bumped up partway through year) at a BB in NYC. So at that comp level it was definitely not worth it and OP's argument is more relevant.
one of my mds said it super super normal for a VP to make 700 to 800k in the early 2000s..20 years ago. adjusted for inflation its well over 1 million in todays dollars.
the pay is really bad now especially with the 30k bonuses people are getting. all in comp of 130 to 190 k is actually pretty bad relatively to the hours. theres lots of corporate jobs paying that much that are attainable for a recent grad with 1-2 years experience (srs)
associate and vP is helped by the higher 200k+ base salaries, but the bonuses again are pretty bad in comparison to 20 years ago and depending on the bank, mirror what people in corp dev get. I know this is a bad year, but the bonuses I see posted here are horrendous. even last year and 2021 had some pretty parred back bonuses that were not that impressive and frankly, not worthy of the 100 hours weeks people did during covid.
add in the fact a lot of the bonuses now are deferred and yes I agree. its getting close. plus the quality of recruits is starting to reach "normal corporate" recruits as well.
I agree at the junior level its possible to make lets say 120-150k in a regular corporate job vs maybe 160-220k in analyst years in IB and that's not a great tradeoff for incremental pay to hours. However, irrespective of what a VP made 20 years ago, a 27 year old A2A VP making 5-600k is far above what a 27 year old corporate guy is gonna make. Not sure if you've seen differently, but I don't see corp dev/finance guys at 27 (likely a manager title in corporate) making anywhere near even 300k.
I want everyone on this forum to work in the coal mines for at least two weeks before they open their mouths again.
What an idiotic comment. Many people in here have worked undesirable jobs.
Doesn't mean they are wrong for fighting for what they are worth especially when the comp gap is closing relative to other fields/verticals.
How much more would a AN1 at EB make than their BB counterparts? 50k?
agreed. it's not super narrow given the bonuses last year and this year.
it's reached "not worth it" for me already and i'm looking to lateral or exit.
Where are you coming up with the 20-30% gap to corporate jobs? That can't be true. Furthermore, each year you're in the industry the gaps widens. You don't do IB as an analyst/associate for the comp per se but for either 1) massively higher long term earnings within finance, or 2) accelerated access to corporate jobs that typically require IB/consulting.
The gap may have shrunk a bit, but so has the sacrifices. Hours are marginally better than they used to be, and "culture" has softened too.
I'm not some big IB advocate, I left at VP level.
But I would generally choose IB over corporate because it's a little more under your control, you're a bit less of a cog. If you're dedicated to constant improvement and willing to work hard, the odds are in your favor. I'm not as confident that corporates can say that. Internal politics seem to loom large over everything.
Some great insights, expected nothing less of Dr. Ram My Dick in my Ass
Completely agree with the point of this post and looking back I would have taken a discounted corporate job with signifigantly better WLB over IB.
It's also important to point out that IB analyst comp varies greatly; I made ~$150k A1 and ~$160k A2 (BB NYC, left after 2nd year) which is pretty shitty comp and barely above consulting salaries. Now if I had been at an EB and cleared $200k both years, then maybe I would have felt otherwise.
Yes, absolutely! It's why I chose corporate finance (big tech company) over IB. Your point about there being a "20%-30% premium in comp" for IB is misleading at best and completely wrong at worst IMO, since it depends on what you value/consider as comp. My "comp" is not as high as any of my friends or people I know working in BB IB as a number amount, HOWEVER, it is I who actually has the higher PER HOUR salary (40-55 hours per week), which is what matters more to me.
If I were to leave my current company (quite unlikely), my exit opps are also much better than you'd (and even I when I first joined) think. I've had quite a few colleagues go to top PE, VC, and consulting firms.
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