Would you take a step down in comp to go from SS to LO?
Hi all. I'm in a bit of a mind pickle. I am in year 6/7 at a bank in the US as a VP with my own coverage. I essentially operate entirely as an independent lead analyst at this point and would expect to make $325-400k this year (all in). The ultimate goal is to move to a LO, but I'm fine with being patient for the right opportunity. I currently have the chance to jump to a smaller LO (sub-$10bn) and directly contribute ideas to the actively managed funds, but the all in comp would maybe get me to the low-end of my expected range at my current job.
This raises a few questions I'm hoping you monkeys can help me with. Is it normal to have to take a step down in comp when going from several years in SS ER to a LO? Do you think this step down is worth passing on the opportunity (yes I know this is subjective)? If the end goal is to end up at one of the mega LOs (capital, wellington, fidelity, etc), are my chances better remaining in a high-visibility position on the SS or building experience in a smaller less well known LO seat?
Any feedback is appreciated. Thanks!
It's normal for pay cut when you are a SS VP. Something I have talked about here: https://dicktoad.substack.com/p/advice-for-equity-research-associates-9…
If you are clear about working in LO, you should be willing to take the pay cut. LO spots don't open up often. If you like the people, think they invest the right way that aligns with you and you think you can add value for many years to come, you should take the opportunity. The problem with SS is you just don't know when is the next LO train that is going to take you.
Setting goal at mega LOs without a valid reason is not the right way to think about it IMHO. There are plenty of smaller LOs that put up way better performance than Fido / Wellington / Cap Group, so you need to ask yourself why you are dead set on the mega LOs. I get mega LOs have a prestige aura (not a good reason to be enamored by them), but they are bureaucratic / political and more likely to be asset gatherers. While smaller LOs need to prove they can put up returns, which is a better place for you to learn how to create value via performance rather than having strong distribution channels. Smaller LOs also probably are more agile and less bureaucratic where you have more direct access to managing members. Comp probably is slightly less, but how different are we really talking about between Fido and a smaller LO on base pay and even on bonus? (not rhetorical, I just wonder myself).
All fair comments, thank you for the thoughts. I also wonder about the comp question. The smaller LOs seem to pay below VP SS comp, as I noted in my post, but how does that compare to what the mega LOs pay? Open to other commenters!
These are good point on the megas. Another thing, at least on the fixed income side, is the work can be a lot more boring than at a smaller manager. So much capital harder to be tactical, not necessarily trying to be the best, just be at maybe above the index. Whereas smaller managers can have more aggressive hurdles, have less bureaucracy, be open to more opportunities and not being forced into more plain vanilla stuff. A single example in fixed income would be that you might cover everything from IG to HY at a mega, vs working at just a HY manger. Not sure if there are similar dynamics in equities but I'd imagine so. Of course these is a laundry list of reasons why the mega firms are good as well but just pointing out some of the reasons why they might not be as fun.
Can I ask, out of curiousity, why just focussing on HY is of more interest than coverage of everything from IG to HY? Is it more of a case of personal preference, i.e. rather focus on fundamental credit analysis versus trading on a curve in IG, or is it a case of too many names under coverage in IG + HY relative to just HY itself, thereby diluting the experience? Asking this question in the context of trying to also understand whether there's something inherent (i.e. more bureaucracy) as a result of the focus on a wider universe that I'm not perceiving at face level.
Somewhat playing devil's advocate, but in my experience, a big brand >>> no name for a junior person in finance. I am newer to public equities so won't comment here, but that has definitely been my experience in investment banking and private equity. For example, working at Goldman vs a small boutique: Pros are opens a ton of doors for future opportunities, surrounded by the best and brightest so I'd argue you learn more, you get an unbelievable network, are paid better, have more access / resources at your disposal, and can always pivot down market whereas the other way around is much harder.
I can't emphasize enough how important I think the signaling is - interviewing people is hard, so if you went to big brand name schools and worked at big brand name shops they will have a clear bias towards you as they'll assume you're de-risked. Same works for recruiting - when you go and look at whether a no name shop is legit, one of the first things you do is look at the team's bios and judge them based on the brands on their resume. You know it's true!Now to be clear I think this calculus becomes much less obvious when you're senior
This is a rather young mf/am (been around for ~5-6 years and has $3-4bn of aum) and doesnt have much of a reputation outside of Europe at the moment. How would you weigh this as opposed to staying on the SS with more exposure and waiting for a bigger opportunity? Do you think my odds at landing a gig at one of the larger LOs/tier 1s would be better at this small under the radar LO or sticking it out on the SS?
As stated earlier, what is your inherent bias towards the larger shops? You’re 6-7years into your career so ‘prestige’ really shouldn’t be much of a factor to you and i’m pretty sure a lot of the boutique shops pay competitively also. Waiting for a seat to open up at a larger shop will be very time consuming and no guarantee you will get it anyways over an internal promote (as AMs tend to promote a lot from within) or someone who maybe interviewed better on the day. Honestly as stated earlier, if you are working on the riskier parts of the capital stack, regardless of what firm you’re at, i’ll jump at that opportunity personally. Being at a Fido or Cap Group isn’t going to provide any material benefit to you in my personal opinion.
Not in FI, but was in LO, can say that if you're established and know can generate alpha, you're better off going to a boutique. Way less red tape and can spend time working on what matters. Broader coverage too typically so won't get stuck covering European utilities or something similarly morbid.
Hey I'm at 4 years of experience but got offered 120k base + 40 bonus by the rowe...that's much less than I make on the sell side. Is that worth it? Are the hours better or is LO equity just bad now?
Can I ask if you’re going in as an analyst or as an associate? Feel like that might make a big difference
That T Rowe offer sounds low. Worth or not is a personal decision.
But if you want work life balance, I suggest corporate exits.
Hours are "better" on a LO for sure, but I think every buy-sider wants to become a great investor which requires putting in the work either during work hour or on their own. If you want to work 40 hours a week on the buy-side, that's fine. Either your career will be stagnant (unless you are a prodigy) or you will be out of the industry after the grace period is over. flaco said it best on this subject, I turned his words into a picture in my article:
I wouldn't turn it down for comp/WLB reasons
120k base is market -- many people don't realize just how low LO pays compared to SS. Also keep in mind that T Rowe is based in a lower COL city
40k bonus is on the low side for sure, but should scale significantly with seniority
Hours are obviously team dependant, but I can say nobody in my network works more than 50/week
I recently completed a similar move myself. Won't answer for you but will give you the key questions 1) how much do you truly want LO over SS and why explicitly? 2) how much responsibility you'll be getting from day 1, 3) how much future responsibility you'll have in 3-5 years, and 4) potential comp trajectory. I assume you'll be supporting a sector head / sr. analyst / partner day 1 and/or will be part of a broader sector team. I so, will you be truly comfortable taking what could feel like a seemingly step backwards in terms of responsibilities day 1? You likely aren't starting as a true idea generator if they already have a fully invested book. Then more importantly, will there be a medium term oppty for you to take on lead coverage of a sector ie. is it a internal promotion culture? I would talk to as many current or former employees to get a sense on pay, culture, promotion, sentiment etc.
Also I would not limit yourself to a "mega" LO. There are plenty of quality to mid-sized boutiques that should check the box for you if you get a good impression of mgmt.
All fair questions. Can i ask how you feel about your decision in hindsight? The structure is quite flat, so I would be contributing ideas directly to the funds. It's been difficult to talk to formers because the firm is so young and seems to have had limited turnover (probably a good sign). But good advice nonetheless.
Regarding your last point, as someone junior, what are the main criteria you would say to look up when determining “quality” of a potential employer/shop?
Feels a lot less obvious to determine, which is why I think a lot of folk defer to Mega shops as their eventual goal
Yes, I agree with this sentiment. I would also be curious to hear your (others) thoughts.
Comp seems low.
Long only mid-senior level range should be solidly $500-$600k all in cash.
I keep seeing massive numbers thrown around on this forum, but most fresh analysts I know (6-8 yrs exp, often with MBA) only make ~300k
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