Where is the "big" money now?

Been reading about banking salaries / bonuses shrinking and am wondering: "where is the money now"?

As someone who works outside of finance, I have found roles that require a similar skillset are still paid less thank banking/buy-side firms. Some roles that are considered important in tech for example are back office roles in finance too.

The only roles I see that are highly paid are roles which are purely technical. However, even then, a Google engineer 2-3 years in probably makes the same as a C++ engineer at a bank 6 months in (given what I have seen on job boards, but I could be wrong).

Is it fair to say the big money is still in finance, just the division has changed?

 

Finance is as big as it gets outside of medicine. Both have been declining. Social mobility in this country is probably at an all-time low, but that's a different conversation.

If you know R, matlab, VBA, python and SQL and do a ok job you'll be employed long enough to build a retirement nest egg.

Other than that, it is coming down to network and relationships.

 
Brosef Stalin17:

"Finance is as big as it gets outside of medicine. Both have been declining"

"Big money" leaving medicine? how so?

Salaries are declining on a PPP basis over the past decade or so. Plus unless you come from money, you're going to be paying $2k a month in med school debt until your early 50s. Once you get to that point you're likely making $500k or so (solid specialty, talking 30 years of salary increases down the line) and living a fantastic life.

In finance you can live that same fantastic life in your late 20s.

 
Predilection:

Was there ever big money in medicine? I get that it used to be a solid way into the upper-middle class, but not "big" money

There are ways. Doctors to celebrities make millions and have one patient. There are niche specialties that pay extremely well. The medical space is ripe for disruption by an entrepreneurial doctor that has the connections to get things launched.

Nevermind the $225k salaries you read about are before the kickbacks (which is legal) from pharma companies for prescribing a drug. A member of the family adds another 75k or so to his annual income from those kickbacks, and he isn't a particularly big prescriber. Some of his friends are adding 200k to their annual income.

 

Not sure I completely agree with the idea that IBD comp is declining. Sure it is down since an absolute peak in 2007, but the last couple years have seen base salaries increase substantially, at least for analysts and associates, and bonuses have remained high for those at good firms. First year associates this year are getting 150K+ top bucket on top of $150K base. M&A market has been, and remains robust following the financial recovery.

 
aspiringchimp:

IBD hasn't declined (yet), but S&T and ER have been completely pummeled

Depends how you look at it, also depends on the shop.

GS and MS pay their markets guys very similarly to their bankers.

Most other firms are different in that regard, but the spread isn't that significant after taxes and on an hour-adjusted basis you are making the most in S&T 8.5x out of 10.

 

The highest paid people are the founders of the most successful funds with large AUM.

You won't really see VCs at the top of this list; if you're someone like Accel, Sequoia, or Benchmark (and thus have at least half a dozen partners), even in the deals where you own 20% of a company that exits for $5bn, each partner clears only $1-200 million that year.

Compare that to the PE megafund guys who are managing multi-billion-dollar funds. Schwarzmann earned $690 in 2014. Leon Black earned $331, and William Conway (Carlyle) $343 that year. Schwarzmann earned $734 in 2015.

The best public market guys do way better. Tepper has been raking it in, especially since the crisis. He made $3.5 billion in 2013 alone (returned 42% that year). I haven't heard more recent numbers, but I know he was up 12% net through August last year ... on $18bn AUM.

In summary: you clear the most in roles where you manage money (so banking, consulting, and other advisory functions are out). The largest hedge funds offer the highest upside, but the volatility can mean you get a goose egg. Even Tepper has had three down years: 1998 (-29%), 2002 (-25%), and 2008 (-27%). Megafund PE offers similarly large AUM, and with good performance, steady income. VC is a really hits-driven business. The top firms are nowhere near the size of their PE counterparts though, which means that there's fewer hands in the pie when carry is split.

I am permanently behind on PMs, it's not personal.
 

Correct on PE/HF. Not impossible but very improbable.

As for IB / S&T, it depends. I'd argue that traders have much more upside, but only if you're good. I think there's a lot more downside as well (i.e. you get fired if you suck). In IB, for the first few years, associates are paid in strict bands (high/low bonuses). Of course, certain bankers become real revenue generators with strong client bases and that's where the big payouts come. I think that banking is a lot less volatile in terms of turnover, etc.

It's hard to quantify this but if you were going to take a superstar trader vs. a superstar banker, the trader wins every time.

 
HerSerendipity:
It's hard to quantify this but if you were going to take a superstar trader vs. a superstar banker, the trader wins every time.
Yeah, but on average (assuming median performance)?
That being said, money shouldn't be a reason that you're choosing one over the other. That tells me you know very little about these two areas.
Yes, thats sorta true. But having no financial experience, it doesnt seem like a bad idea to judge jobs based on expected pay ;)

Which is more quantitative. From browsing the forums on WSO, it seems like trading is more quanty, but IB is more sales-y. But how much of "talking" is really in IB? It seems like its more of building financial models, doesnt sound too sales-y to me.

 

What about a sales role on a trading desk? Could you compare their salary to IB and Tradind, or are they on the lower end of the spectrum? What about long term, is there upward mobility?

 

Obviously the higher you go in IBD or Sales, the more facetime you are going to be putting in with clients and making sales pitches, so it depends. My suggestion to you is to get a base of knowledge on the different areas and try to see what you're interested in. I'd be very surprised to find that you were equally interested in both IBD and S&T, since they offer very different environments, lifestyles, and career paths.

 

To answer your question the big money is in building a following or audience and selling it.

Be it via a blog, youtube channel, boutique brew, clothing line, ice cream brand, etc;

You build up a large local following and people will come to you pitching a national expansion and offering money.

 

Can confirm, one of my friends has a client making post MBA, Associate money from his "business".

His business, you ask?

Reading and discussing comic books on YouTube.

 
CPA_89:

Can confirm, one of my friends has a client making post MBA, Associate money from his "business".

His business, you ask?

Reading and discussing comic books on YouTube.

and keep in mind you can monetize merchandise, paid promotions (wear x t-shirt, pocket $1500)... but blogs are more lucrative right now. A strong following (depending on the topic, personal finance, elite niche, pays much more than gaming, which is an upper-mid niche) on a blog can generate $1m a year easy through ads and many are getting acquired for $5m-$7m right now.

 

Somehow I think you're Robert Duvall, but you obv don't want others to know that, hence you keep bitching 'bout him.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."
 
Dingdong08:

Music and movie stars. Plus they get mad pussy. If I could do it all over I'd choose to be a gangsta rapper.

Not me, the probability of getting shot and killed is just too high in the gangsta rap game.

I think the perfect thing would be to get in a time machine and become a rock star just before AIDS became a widely known thing. Those guys could get more ass than a toilet seat at a bad Mexican food festival.

Not to mention the drugs were pretty epic as well. Not sure about the money, but I'm sure it was good enough, especially if you got your fans to pay for your coke and other party supplies.

On the downside, you'd have to wear a lot of make up, but totally worth it when you think about it.

 

Successful startup. The whole startup industry is based on finding needs, and filling those gaps as quick as possible. One of the most impressive things about the whole startup scene is how fast the pace is...what took maybe 10-15 years for a small sized company to achieve, can be done in a couple of years now.

There's no education required, as long as you're really good at doing something useful.

(But keep in mind that the failure rate among startup companies is staggering.)

 
A Fellow Linguist:
If you have to ask, you're not going to be retiring by 40.

Why would you want to retire by 40. I plan on working as long as I'm physically fit to, no matter how rich I get (and I plan on getting rich haha)

 

We do enough illegal stuff in finance as it is, and we get paid pretty damn well to do it. Not a big fan of these kinds of "models and bottles are dead" posts. Yes, models and bottles are dead because the vast majority of us are pretty nerdy, but we can afford quite a few fucking action figures.

I hate victims who respect their executioners
 

Guys:

He's just a college kid. We have all at one point had visions of castles in the sky and big money on wall street. We need to correct his goals rather than troll them, because we were there too.

Kid,

Do what you love and the money will take care of itself.

Check out Deepak Malhotra's recent speech to HBS grads. There are some things in there that I disagree with (like quit early, quit often), but not so much to change my view that every college student should be required to watch it.

It doesn't hurt to have money, but at the end of the day, money doesn't make you happy. Creating genuine value for others does. (Being paid decently for it helps too.)

Figure out what your overall worldview is and then what your economic worldview is. Use them along with some pragmatism to help guide your career.

 

What do you want 10s of millions for? Money is a medium of exchange. That's all. It has no inherent value.

Sample goals:

- Enjoy the company of beautiful young women (or guys): You're at university. You're young and stupid (by definition). You're closer to the action than most of us. If you wait until you are in your late 20s, you will be less tolerant of the idiocy of young women (or men if applicable) even though you know better how to get them and want them the same.

- Travel / see the world: You have the time to travel and can do so on a budget smaller than what your 35 year old self will spend annually on trying to get to your current weight. Once you are in your 30s you will find it difficult to take time off to travel and will need to be pampered / stay in good hotels and won't be able to risk going off the beaten path because you only have a handful of weeks off per annum. (money rich, time poor)

- Expand your intellectual, spiritual and emotional horizons: You're young and impressionable. You're not yet experienced enough to know that most knowledge is BS, and hopefully you're not yet jaded enough to think that everyone is trying to screw you over. Most importantly, you have the opportunity to be exposed to a lot more different types of people than most finance folks in their late 20s / early 30s (and later). After a certain stage you get locked into your social / economic circle and a lot of your social life is actually business related. It takes more effort to meet different kinds of people. You're a college kid. You can call pretty much anyone on the pretext of having a coffee to learn a bit more about them, their business / ideas / work / achievements or whatever. You can meet whomever and get involved with whomever.

I can go on... There are not that many things that you need 10s of millions for... but to answer your questions, see below...

 
Relinquis:
If you wait until you are in your late 20s, you will be less tolerant of the idiocy of young women (or men if applicable) even though you know better how to get them and want them the same.

Sooooooooooo true.

By the way - anyone else ever walk away from a chick right in the middle of a conversation because she exhibited a level of retardation consistent with that of a 3 month old golden retriever?

I hate victims who respect their executioners
 

If you want to make 10s of millions for yourself some type of entrepreneurship is still possible within finance, but first you need to slog away and build both a client list / target market as well as relevant expertise that you can use. Most of the hedge fund / PE guys who were pulling in that kind of money were part owners of their firms.

You're unlikely to be able to plan this now, or even after a few years in the industry. It will likely be an area that you stumble on during work (if that) or be well positioned for due to changes within the industry. That's if it happens at all. Schwarzman (Blackstone) wouldn't be where he is today if the junk bond market hadn't been born when it was, or if he was 7 years younger he would have joined the industry with a very different competitive landscape. He's probably still have made MD at a young age in investment banking and made a lot of money, but it wouldn't be the same.

Making $10 of millions (in today's money) is an outlier event. It takes more than hard work to get there. So you should focus on real goals and enjoying the process as well as the outcomes of pursuing them.

 

Even some of the BB's CEO salaries only clear $10 million. The reason they're so rich is because they have stock options. Being an MD or top portfolio manager at an HF is the only way to make in excess of $1MM+ a year. Being an entrepreneur is the only other way or trading on your own.

 

Shit snares, Randy. Shit snares. All this time, trying to stop the boys from breaking the law when I should've been encouraging it. The liquor makes me see it clearly, Randy. Julian's the leader. All he needs to do is be pointed in a direction, he'll go there. He'll go right into my shit snare, Randy.

I AM THE LIQUOR
 

Tech is going through what Wall Street did in the 80's. I live in the SF bay area and practically all the people I know who work in tech and are in the 28-35 age range make between $500k-$1mm annually in total comp. This is typically in the form of a 200k salary and a 2-5m stock award vesting over 2-5 years.

Banking still pays better, but banks themselves have become cheap to employees. This is just my opinion.

 

I think people tend to underestimate how easy it is to make comfortable money just by being competent on a traditional corporate track. F500 directors make ~$300k in all kinds of functions and industries. It's relatively straightforward to make director 5-6 years out of a top MBA, when you're in your mid-30s.

No 80 hour weeks in IBD or coding talent required.

 

Exactly. With less effort than what is considered table stakes for IB you can get on the fast track to VP and above. Very comfortable lifestyle and the compensation is definitely there.

 

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"That was basically college for me, just ya know, fuckin' tourin' with Widespread Panic over the USA."
 

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