Why do LO AM pay so little for research associates?
I am currently a senior in college going to work at a well known AM next year and the pay was a bit less than I expected - I'm making about $100K base with an unknown amount for bonus but I've heard that bonuses for RAs tend to be 20-30%. While $120k-130k is definitely more than most of the world's salaries, I thought buyside roles paid higher. My friend who is a RA at another well-known LO AM has a similar pay range. Is it normal for RA programs to pay comparatively lower than BB/EB IB?
Those numbers sound right. If I may ask, what is your location and if the AM is a top-tier (Top 10) fund?
The issue is - why are you comparing yourself to banking? It’s a fundamentally different job. Banking analysts grind and put presentations and analysis together that’s pretty critical to a deal. People do this job because they love investing not because of the pay, also read up the 10 posts on this forum on pressure on fees - it’s a shrinking industry.
The question is why are they paying you that and not $10K or $20K less, what do you bring to the table that another college kid can’t? Are you going to help generate alpha or take time from Analysts who need to train you. I’m just being for real with you my guy - I see so many entitled RAs at my firm and they literally all just do data inputs for model, pull report summaries, and not much other value add. They’ll tell me so and so is a great investment and I ask them to build out a simple model to justify the earnings, and they can’t. These are kids from Harvard, Stanford, etc. smh. You’ll never see that type of behavior from kids at GS TMT or MS M&A…
100%. And if you're good and fortunate enough to climb the ranks within the Analyst role (or even PM), you'll make a ton of money - likely far more than 99% of IBers will ever make. A senior analyst at a good fund can make several million / yr while the PM will make well in to 8 figures. My cousin was one of those and his net worth is over 500M in his early 60s. Was making well in to 8 figures for many many yrs as a PM before he started his own HF. IBers won't touch that.
Don't compare. These are very different jobs in almost different industries. They look at companies from a totally different perspective.
Is your cousin hiring?
Thanks for sharing your insights. I didn't mean to sound ungrateful/entitled I just wanted to figure out what the hype was about on WSO in terms of buy-side vs sell side pay when my expected pay would be the similar to a sell-side research role at a bank. Investing is my passion and is why I'm going to LO AM long-term but I was curious about this discreptancy. I guess the higher compensation comes as you climb the totem pole at your firm.
As for your point for why I shouldn't get paid less, I'm sorry you had shitty RAs but along your logic, why shouldn't GS TMT pay their new analysts $80k? From what I read on WSO, all the new banking analysts do on the onset are menial tasks like moving logos around - something that you can hire someone to do for much less than their present compensation. I'm no Damodaran but I know my way around around the financial statements as well as any of my classmates going to BB IB and can make a decent earnings model (have previous IB internship experience). I expect I'll only be allowed to menial tasks as well from the beginning though, similar to an IB, so the work I'll be doing won't be that much different from your unknowledgeable RAs anyways.
For sure - I think the key thing is to keep the eye on the prize, focus on what you love, and remember that comparison is the thief of joy. I think you'll have a great time as RA and learn a lot. Think about doing the GMAT or CFA before you start work and try to get that out of the way in case you want to do a MBA.
Because moving logos on the sellside is actually valuable (client facing) whereas only real work is valuable on the buy side
hey man, ignore those quasi-philosophical replies...
100% right - same question raised can be raised for any grad job
Short answer why your comp is crap - it's just the industry standard... it's attractive enough that ppl are willing to be slightly poorer and assume there's upside in the long-term... If you decide that upside isn't there for you, time to move to the sell-side (which, of course, most ppl won't...)
Those are some interesting anecdotes there
Aren't the GS and MS banking kids from Harvard, Stanford too? Unless IBD takes on more grounded kids than AM?
AM pay varies highly depending on the firm.
You can have well known AM firms that pay next to nothing VS the top tier AMs (i.e. Fideo, Wellington) that pay well.
It really depends on where you are.
as someone in a similar position and at the risk of sounding like a shill, i justify it by seeing how the amount of value add one can really bring as an average 1st year research associate (do you really think your presence alone is resulting in extra bps of alpha?); sure you could be an absolute beast, but if AMs paid every RA like each one was going to be a on a rockstar track to PM within 5 years, there probably wouldnt be an RA program to begin with.
the way i see it is that i’m being paid to learn, and i’m in a privileged enough position where an extra 10-15k per year isn’t going to materially change my life.
GS TMT / JP M&A / MS M&A analysts are just light years ahead of your typical research associate. They have seen more reps, done more complicated transactions, manage multiple deal processes at the same time, etc. even though the work is probably more interesting as a research associate.
lol at the monkey shits
What's up with all these random college kids spewing blatant misinformation nowadays? This take is so bad I almost can't tell if it's a shitpost.
I think he genuinely doesn't know. Look at all his reasonings - the type of work he's talking about have nothing to do with what a typical RAs would work on at a LO AM lol
Banking pays better early because they pay for your horsepower and brainpower. Long-only only pays for your brainpower.
May be completely wrong as I’m only an incoming intern with no experience in either. I think banking pays more at lower levels as fresh banking analysts tend to have more of a direct impact on bringing in revenue for the bank (?).
For example, the firm I’ll be interning at (a large LO asset manager) and I know that as a grad you’re given a sector to cover 6-12 months into the role, but your stock picks aren’t necessarily going to be stellar and especially not right away, so you’re being paid to show potential if that makes sense. Plus before you’re given all that responsibility your ability to impact Portfolio Managers decision will be quite limited. So, this shows in salary; grad ER with bonus at one of the best AMs in UK is all-in ~20% lower than BB banking analyst base salary.
Whereas the banking analysts will be updating models, PowerPoints and actively adding to a revenue generating process.
Just my two cents and not an eloquent explanation.
Graduated last May and make $200k at a LO after a year of sell-side research. Boutique firm with $50bn AUM, strong inflows this year, and a niche strategy. Honestly, there are so many firms out there it's hard to generalize. I'm sure the analysts and junior PM's here make more than your average Fidelity/State Street head...
That's insane dude, I only made that after 3.5yrs at my LO boutique (similar size)
Yeah I definitely feel fortunate but haven't a clue as to how comp scales or what 2nd, 3rd, and 4th year associates make (couldn't get an answer out of them)
That seems pretty fair to me. Say you make $125, IB A1 makes $165. But you're working ~50 hrs/week and they're working 70+. On an hourly basis, you are getting paid more than them (40% more hours for 32% more comp, excluding the more vacation you almost certainly get). You also get to do more interesting work and have a much more well defined schedule, so this seems like a good deal to me as long as comp ramps adequately over time.
fwiw, there are established RA programs out there that offer $100k total comp your first year (iykyk)
It comes down to what you value more – pay or interesting work / WLB.
please tell so me and others dont waste time applying :)
It's a fact that AM pays less than IBD, it's a fact that IBD is one of the highest paying jobs out of undergrad other than prop trading/ quant, and it's also a fact that AM has better hours and lifestyle than banking so the pay scales according
I think that's comparing apples with oranges. That definition of 'buyside' encompasses PE, HF more, not LO. It's just well known that LO has the best lifestyle out of all the buyside roles (L/S, pod shops for example) and thus less pay
Unrelated but is it still as difficult to move from IB to AM as previous threads on WSO make it out to be?
Brutally hard. You're competing with SS ER / HF (ton of burnt out folks who want to find a chiller gig) / IB folks / other AM associates. And most shops have programs where they take kids out of UG so you're competing w/ that too.
Bear in mind this is magnified by the fact that 75-80% of shops are crappy share donors to the top 20% of shops...so landing a gig at the former is pretty much useless as you're likely to end up churning out of the industry anyway
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