Is the gap between IB pay and "ordinary" corporate jobs getting too narrow to justify the hours?

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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?

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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.

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?

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!

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. 

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.

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. 

Average household income at middle age is 75k in NYC ( or something similar give or take )

IB analyst makes 180k first year, and 500k+ 5 years later. It’s not the top game, the top game has always being prop traders and will continue to be. but it’s still way way way way way above average.

Stop living in the high-income club and look at the earth

Not aware of any corporate jobs that pay someone w/ 4 years experience w/in 20-30% of low-mid $300s

a lot of this comes down to background. i went to a very average high school in the midwest (flyover state), where the highest earning students from my high school class will make, at max, $70k working at the regional office of an F500 company. My parents didn't touch a COMBINED income of $200k until they were in their mid-to-late 30's, so yeah, making $550k as a 30 year old IB VP is an insane opportunity for me and most others.

I work in corporate and depending on where you are the gap is much bigger than 20-30%. 

I make like 50% of what I used to and live in a dirt cheap place, but still it bothers me a lot 

As someone who works in a corporate job, I think you have a wild misconception of what they pay (outside of SWE in Tech).  Even software engineers tend to cap out at a lower level - it's much harder to make $2MM a year as a SWE than as a banker.   For those who work in non-tech industries, you won't hit ASO3 comp (~$400k) until you're in your mid to late 30s at best, and often not until your early 40s.  The gap is way, way bigger than 20-30%.  

Idk what the fuck yall are talkin' about, truly. 

My parents are each 60+ and I grew up in one of the richest areas in the U.S. (Buckhead, Greenwhich, Orange County, etc.), where I was lower-middle class by the neighborhoods standards but still easily upper middle-class by any non-rich person standards. 

My father JUST got promoted to VP of a mid-size company, previously making something like $135K as a Director as a 50+ year old man. Now, he still probably only clears like $175K. My mother is a Director in a government role, also has worked her entire 60 year life and makes under $100K. 

I have been out of school for 3 years and make more than both of my 60 year old, upper middle class parents do combined. If yall wanna benchmark to other Top 1% type of positions like Prop Trading or being a PM at Apple, that's cool, but understand that all that shit is still super unachievable for most people. 

I don’t know what corporate jobs you are talking about because IB has very quick promos and comp almost doubles between each level.

Besides big tech where else is some 30 year old clearing $500k? Most VPs in F500 companies are closer to 40 years old and probably make like $200-250k all in. So I think there still is a big gap.

This is a great question - OP you are overestimating how much people in corporate get paid. An average 2nd year associate in IB makes ~$350k, which is more than most directors make in corporate.

To clear $500k in corporate (what VPs make in banking), you need to 1) reach VP/c-suite/etc or 2) get an equity stake in a high performing company.

If you want to cruise and make $200-300k as a manager or director in corporate with limited upside, that’s great. I’d venture to say that’s not the audience you’ll see on WSO, though.

With all due respect, I think a lot of you are incredibly misguided about how much corporate pay is (corporate development / strategy) - also, I've noticed in general on this forum there is a tendency for the people making the most money to post on here and the ones making less to not talk about it.... 

I know people at ~5 different companies and they all make less than $150 after 2-3 years of banking... It DOES happen at some though for example Chenier randomly pays corporate development like $180K, but that is <5% of roles that are like that.... Just putting that out there. 

Given the boom or bust nature of banking I think this is a function of timing the market bad (not your fault M&A went down and you got paid less when you got the job as a sophomore) but overall the fact that your pay scales so fast and you have great job security (across both your firm, the industry, and the overall corporate world) should be weighed more.

I left IB / PE for the corporate world with 3+ YoEs for a job with ~$160k TC and 40 hours a week, which is great, but wouldn't have gotten there without my years in finance. Folks at the company who started at the company and have similar YoEs to me make a lot less than I do now. Generally have a higher title as well.

So if the question is out of school is the premium still worth it, then on average the answer is yes; this year was just a tough one and that happens. Happened to me to as an analyst 1 as my group had a bad year. I still clear more than most of my friends excluding the ones still in IB / PE, so again I don't think it's that simple to get a high paying job or scale as fast in your career without the years in finance.

Most MDs are bringing in 1-2mm /year. It is difficult to think of many other career paths outside of finance where you are bringing in even 500k+. IB MDs probably work 60ish hours a week, which is probably 1.5x what most other jobs would work. I would take 1.5x more hours for 4 or more times the salary any day.

At the junior levels on an hour by hour basis it’s a bit less clear, but probably still worth it for the career progression.

Corporate salaries usually grow inline with inflation. Unusually high inflation the past 2 years have led to fast rising corporate salaries the past year or two. That generally doesn't happen.

2022 was not a great year and this year is shaping up worse. No doubt IB bonuses will be down materially. Again, this generally doesn't happen for 2-3 years in a row. Markets will turn as it always does. Fed won't be able to keep rates at 5-6%, when GDP is growing at ~2-3%. There is a lot of money waiting on the sidelines.

You are comparing peak cycle corporate earnings to low cycle IB earnings, and generalizing to make long term life decisions?

I agree with the general sentiment of the post. I have been working in investment banking now for 6+ years, with very good knowledge of comp at different firms and levels (my firm pays ~median) as well as decently good insight into comp in other fields. A few things that seem to be missed by the "my mother worked 40 years and only makes $50k crowd":

• Banking requires considerably more hours / checking your phone constantly / in-person / sacrifice / travel / job uncertainty than most of the jobs being compared to. We all know this but it doesn't get any better as you advance into more "lucrative" levels of your career. In reality, your tolerance for this sacrifice becomes less as you progress and the incremental dollars oftentimes don't feel like they offset this
  • Banking pay levels have only roughly kept pace with inflation while other fields have seen more substantial increases
  • Progressive tax bracket starts to offset a significant amount of take home pay difference between careers. Being tied to a high cost of living area while paying ~50% marginal tax rate erodes a lot of the benefit you get from incremental earnings over your career
  • Deferred equity becomes a substantial portion of your pay at most (not all) firms at the VP level and above - worse at MD level. Speaking generally, 30-40% of your bonus is deferred and vests over a 3-4 year period. Cash pay starts to cap out around late associate level until deferred comp starts vesting (at firms where there isn't deferral at the associate level); in bad years like last year, cash comp was lower at most firms
  • When combining the higher tax bracket you are in + deferral, you are taking home 30-35 cents on each dollar of bonus
• In comparison, I have a friend making ~$175-200k with a fully remote job doing consulting-type work working 15 hours a week. He went to a mediocre school, got mediocre grates and put in middle-of-the-road to low effort throughout his life. We are late 20s / early 30s for reference
• Also in comparison I know people in non-engineering tech jobs making $300-400k similar age as myself

So yes, banking does offer incremental earnings and quicker pay progression compared to many fields. It also offers outdated hierarchical cultures, psychopathic bosses, a ton of office politics, and a grind. Each person needs to determine what tradeoff makes sense for themselves, but I'm not sure the incremental pay is worth the tradeoffs in the same way it may have been 15-20 years ago. In the post-COVID world we live in with millennial / gen z work styles people care more about flexibility / remote work / etc than in the past and it doesn't feel like banking is paying more for offering the opposite

FWIW I am a highly motivated person who always did well in school, grew up not well off and plan to stay in banking because where I am at in my career offers the best earnings potential. However, I am not deluded enough into convincing everyone they should be grateful for having a banking job and that it's a better role than tech / other fields by comparing to government jobs and the local fast food worker. Maybe 15-20 years ago banking offered a lot better relative pay compared to most jobs so people were willing to put up with all the ridiculousness of the industry, but today banking pay in my view is not high enough to offset this