The news of Goldman Sachs bowing to public pressure (even though Kenneth Feinberg takes credit for the move) and announcing no cash bonuses for senior executives came as a bit of a shock to me, I must admit. Receiving all your bonus in heavily restricted stock defeats the purpose of a bonus if you ask me, but I'm a notoriously short-term thinker in matters of compensation.
Now a lot of financial journalists are saying that Goldman's decision is the death knell of the cash bonus, period. That banks will increase salaries across the board and that year-end bonuses will no longer represent 60% of the average banker's all-in comp. This article from Business Week takes it a step further and puts forward the idea of reduced salaries and eliminated cash bonuses for bankers, essentially turning a Wall Street banker into just another clock-punching shmoe.
Instead of 60 percent of investment firm pay coming from year-end handouts, more will be in salary. And there may be less of that too, because of the pressure on banks from the government and myriad critics to become sounder institutions by raising capital and taking fewer risks. That will reduce profit and the ability to pay.
So this got me thinking. As miserable as the job is most of the time, what is the minimum all-in annual comp you would accept to do this job? Obviously, I realize different career paths will have different answers. For example, I'd sooner do gay porn than ever go back to work for a bank. But for the right money, I could probably be talked into trading again. Probably.
Here's where the prestige factor comes in. Would you take $36,000 a year all-in to be able to tell people you work for GS/MS/PJ? Be honest, now, because I know there's a few of you out there who would.
Let's make this a serious discussion, because I'm curious. Let's assume a 51-week year at an average of 85 hours per week. That's a total of 4,335 hours. Now if we look at the current average all-in pay for first and second year bankers, it probably falls somewhere around $85,000 (across the board, on average remember). That works out to $19.60 per hour.
I know we don't like to think of things in those terms and admit to ourselves that journeymen plumbers make more than bankers on an hourly basis, but for this exercise it is the easiest way to compare apples to apples and arrive at a baseline we can agree on.
So if today's average first and second year bankers make $20 an hour, give or take, what is the least amount (hourly) that you'd be willing to accept and still work in banking? At what point does that barista job at Starbucks start looking good? And, in all seriousness, would you be willing to work for all salary and no bonus and, if so, what would that salary number have to be?
Go to a privately held bank...
There's a certain lifestyle I want to be able to live that I wouldn't do the job for less than, say, $100k as an analyst (pretax) and if I didn't think I'd be making ~$400-600k within 6-7 years. If you're telling me I'm going to make $80k as an analyst and work for 6-7 years to become a VP and get paid $200k, I don't think I'd do it. Fuck that, I'd either go to law school or do something else completely, like go into politics or screenwriting.
First of all, I think your estimates are slightly off. If BB's pay 70k + 10k signing, + bonus, I would say average all in pay should be about $120k - which makes it $27/hr.
Anyway, I don't think of it as an hourly salary job. Also the analyst job is just a stepping stone to the better jobs in finance with fewer hours and more money, so I think this is kind of a narrow-minded question. That being said, I would not do it for less than 70k all in first year. People at Bloomberg or Google earn around that much and get to do more creative work in laid back environments. But at those jobs, the chances of becoming a millionaire are slim, so in the end it's really about the advancement opportunities.
The chances of becoming a millionaire in IBD aren't exactly enourmous. The hurdles to reach that are not easily surmounted and most are weeded out / leave the industry. Not to mention, there is a good chance that those who work at a place like Google have far more useful skills to put to use in creating something. That combined with a better lifestyle is something to keep in mind.
I'm a 3rd year and if I make less than $120K all in this year (which is possible, people have been warning us that bonuses will be awful), then I will lose my shit. Ideally, bonus would be at least 80% of salary, but I doubt it. If I were a first year, I'd do it for $80K all in, since it's the experience that matters most at that point. Any time thereafter, motherfuckers had better pay up.
Banking profit is relatively low risk (can't lose money like prop trading); so if BBs don't pay a reasonable % to bankers, they can start their own bank or go to a boutique.
I don't think reduced leverage will hurt bankers as much as sales traders (esp m&a advisory; only loss will be inability to use the balance sheet as much for equity/debt offerings).
Dealflow has been pretty good, I think (and certainly hope) that bonuses for analysts will be at least decent. Public pressure shouldn't be too big of a factor for us either, since we're relatively cheap in the grand scheme of things.
I have to agree with macro, analyst are certainly some of the "cheapest" assets at the firm, but over generalization is a killer here. When the public is outraged over bonuses, these attacks are focused on senior executives, so the big question is whether the entire payment model will trickle down to the junior level. Without any feeder individuals to come up, deals with top talent on board would certainly dwindle, there is no question...
Salary per hour for analysts is definitely not great, but going back to what brisbane and Banker88 said, its all just part of career progression to bigger and better things with more pay, more human interaction, and slightly more life.
Investment Banking Compensation and Minimum Wage (Originally Posted: 02/01/2010)
For those of you that are inclined to use the minimum wage analogy for banking hours vs. banking compensation... here's an other, more realistic way of looking at it...
You can sue your employer for unpaid overtime even if you're a salaried employee. What that means is if your total compensation, when allocated hourly is not compensating you for overtime wages, you have a claim against your employer. So lets take the following example:
Using this formula... as an investment banking analyst working on average, an 85 hour week, if you don't make 110K, you have a case against your employer for unpaid overtime wages.
40K(40/40) + 40K1.5(40/40) = 40K2*(5/40) = 110K
Nice. I'll be on my way to Human Resources shortly.
I'm guessing that's not the best way to make top-bucket.
Somebody should try this, though, and let us know how it works out (chuckling under my breath).
Your calcs off. The law is just to be time and a half of minimum wage. Someone working 85 hours a week must be paid at least 40.5k in total annual comp.
First 40 hours every week @ 7.25 + 45 hours of overtime (7.25*1.5) for 52 weeks:
$7.25/hr40hours52weeks + $7.251.5timeandhalf45extrahours*52weeks = $40,527.
Don't think anyone fell below that line.
My math isn't based off of minimum wage, its based off of what someone with a comparable education would be paid for a "regular" job (ie. 40 hr workweek).
I wonder what you think the post-analyst job prospects are worth? Nothing?
Very interesting if this happens to be correct.
The case might be even stronger in Europe, given the labour-friendly regulation.
40k seems a little low for non-banking salaries, especially if they have the same educational credentials.
I know that most engineers will start off between 50-60k while petroleum engineers might average 80k. When I was back in school, a few of the top petroleum/Oil&Gas engineers broke 6 figures with their signing bonus.
aren't there exceptions to overtime rules for white collar workers?
the only exception is if the position is that of a managerial capacity- then there is no overtime whatsoever.
Minimum Wage for IBD (Originally Posted: 06/05/2012)
Curious as to what some of you would take as the bare minimum salary to work in IBD. I've heard a few rumors of some banks (not boutique's either, I'm talking publicly traded firms) reducing incoming first year salaries to 50,000 and I've heard one decreasing it to 45,000.... would anyone take this? I know I sure as hell would rather go find a corporate finance job that pays that amount but I wouldn't have to deal with working past 6 or constantly check my black berry on the weekends.
I'd do my current job for 50k, provided I couldnt find anything else that paid better.
Thats just because my hours arent THAT bad
Including bonus, it would be tough for me to do it for anything below 100K.
I'm a summer analyst at a boutique in NY. I'm doing a 12 week rotation with 6 weeks for M&A, and 6 weeks of Equity Research.
I get paid nothing, but I do get a small bonus at the end. So I'm basically shitting my pants lol
where did you here this? Which firms? Why can't you be specific? It's not like someone will hunt you down for giving more details.
You shouldn't be doing it for the money anyways. It's for the exit opportunities, which eventually brings in the lettuce.
Says the kid who is not working as an IB analyst.
If you were to tell me that I would get a base of $45k and a 100% or less bonus and I would have to work my same hours and live in New York, I absolutely would not do it and I have a strong suspicion that most people who are current analysts would agree that that value proposition is bullshit. I would MAYBE... HUGE MAYBE... stick it out for 1 year or less with only the intent to jump ship after 1 and just use the fuck out of the shop I was at and leave early with no weekends, but other than that it simply isn't worth it... you're talking about ~$10 / hr. You could work in corporate finance somewhere and then transfer to a corporate development group and not deal with all the bullshit and have a phenomenal life for the entirety of your working career.
You would be hard pressed to stay afloat in Manhattan on $10 / hr take home.
You would probably be going into debt at those salary levels in Manhattan (maybe even after bonus). I am not going to lose money, in addition to 2 years of my life, for exit opportunities. I would do something else.
Really, who is talking about doing this? There would be a fucking mutiny.
well that was certainly ms worthy...asshole
Don't want to be too specific on the places, but both the 50k and 45k banks are MM shops not headquartered in NYC. Also, friend who works there says they current first years aren't even expecting 30k as a bonus and looking at between 10-20k... I certainly would not be working there if all of my friends were getting more than me in just their base salaries and people in BO and MO at BBs made more than me. Are salaries going to trend down in the industry? Should I be looking to get into something else upon graduation?
Wells Fargo?
Wells Fargo paid better than most BBs last year and their base is the same
Nah, they're headquartered in the US... just not in New York.
Not IB but my first year in ER at a boutique, I made 60k with a 10k bonus. Was frustrating but I managed to breakeven on 70k all in and move on to a BB where my all in doubled. So could be worth the gamble.
Are internships supposed to be minimum wage? (Originally Posted: 01/15/2013)
This is kind of ranty (sorry):
I recently completed an IB internship at a prominent MM IB... While money wasn't an issue, it was a fast hiring process and they basically hired us with the premise of an ambiguously "paid" position. We assumed that it would be, at the very least, slightly below market rate of what summer MBA offers are. Then a week into the job, they told us what it was...somewhere in the ballpark of what I made in the 10th grade. At that point, all of the interns already made an commitment to be there and none of us wanted to leave for the sake of propriety.
To make things worse, we were paid hourly and had an archaic check-in/check-out system where we were docked in 15 min increments (IE: If you come in at 8:16, you might as well have come in at 8:30). If we worked over 8 hours, we wouldn't earn anything. If we checked in at night, we wouldn't earn anything. So factoring in all the late night phone calls and late stays, I would've been better off joining the Babysitters Club.
Then, some of our class started getting flack for our check-ins and check-outs for going to get food or grabbing a coffee and someone had to verify our check-ins to make sure we were there since they thought they were being cheated out of an 11 hour workday.
There is something about this situation that makes me feel very disrespected. Our class was all from top 5 schools who previously made salaries at least 4-5x what they were offering us. As a student, I previously turned down a consulting offer for 6x this. The lack of transparency in the hiring process as well as the distrust in how we spend our time makes me very uncomfortable.
At the same time, I also understand my role as an intern. I think we were all too complicit in trying to not seem like we care about how much we were paid that they were able to give us less. I completely get that we don't have too much IB experience and we may have just done this for free.
So which is right/wrong? Are interns just supposed to take it?
I think it depends on the quality of the internship. I interned and was paid a pro-rated full-time Analyst salary. I turned down another internship that paid more than that as well as overtime hours at 1.5x the normal rate.
I have friends that were paid minimum wage, and others that are doing unpaid internships. It really depends on the firm and the caliber of the internship.
I know of multiple internships in Philly paying between 15-22 an hour, and Ive even heard of a few that pay for housing for the summer
That honestly sounds pretty ridiculous, especially for an MBA intern. But leaving would clearly be a bad call and frankly there's not much you can do, imo.
Just take what you got man. Get as much experience out of it as possible and then GTFO
this is why you NEED to ask about wages before you start working! If not mentioned to me during interview...I always ask once I am offered the job.
I participated in a competitive (100 people applying for every 1 person taken on) unpaid internship with a harvard MBA student, an mit mfin grad, an mit mba grad, a bu mba grad, 2 babson mba grads, a bentley mba student and students from top undergrad schools. Seems to me you could've done worse.
work for a year in banking for minimum wage (Originally Posted: 06/29/2013)
would you work at a small-boutique for a year for minimum wage just to break into the industry?
I might have this option and I am not sure if it is worth it. As it stands i don't have any other banking options.
what would you do? keep in mind i am non-target so its difficult.
Edit: I would use this to carry me to MBA school (i have other work exp), but how well would I be positioned for associate recruiting from top MBA if I was to go this route of working for practically nothing. I would expect to be competitive for BB.
If this is what you really want, then it should be a no brainer. But, will you be getting legitimate experience? Or will it be admin type stuff?
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