Taking Pay Downgrade from SS ER to LO?
Long-story short, I was casually looking and took a few interviews for small cap/long-only roles and was surprised at compensation expectations.
I have been on the sell-side for around five years now and base salary is $180k-200k range with bonus a moving target (10%-40% historically). In interviews when compensation is inevitably brought up, I'm usually fairly transparent about where I am now since I ideally don't want to be taking a pay cut to to move to the buy-side. However, in the past two processes, I found salary expectations were below where I'm at now. I totally get that I don't have buy-side experience but regardless, I didn't expect to have to take a downgrade in pay. Am I missing something or is this fairly typical with long-only?
at LO you dont work long hours and you dont need to generate alpha and you dont need to answer client calls
at ER you have to do one two of the above
Typical "junior" buyside seat is like 150k-200k base across the board for the most part, with bonuses all across the board (dependent on fee structure of the firm; perf fee? AUM/IP ratio?). Base comp seems to creep higher for the larger firms, also with more years of experience + pedigree (MBA?).
125k-145k base also seems fairly standard for smaller firms or for people who only have 1-2 years out of college.
Are people throwing out really low stuff to you?
Two said expectations were $125K-$150K base, both were small-er long-only. One large long-only said $175K, still below my current range. For background, don't have an MBA but figured would be higher for 5-6 years experience.
The $175k base at the larger shop is not far off. What you are missing is that market bonuses for LO at a decent shop will be 100%+ of base after a couple years if you are decent. It may start out at ~50% for your stub year but should ramp quickly.
Bonus expectations are much more important on the buy-side than sell-side. I would ask about typical bonus numbers assuming good performance from you and the firm to confirm this however. Every firm is different.
Also, I'm talking about a post-MBA analyst seat.
Sounds like you're either interviewing at really small firms or for pre-MBA seats?
Two were small (said $125K-$150K). One was large/well-known ($175K).
Was the role at the larger firm at pre- or post-MBA level (research associate or analyst)?
LO comp following the same trend as active fees...
You must be looking at the wrong shops. I know several ER kids right out of college earning $150k starting + 20% bonus, and quickly see their bases jump to $200k after 2-3 years.
Maybe you’re looking at the wrong types of shops?
SS pays more at the junior level - especially after covid pay bumps. you’ll see this reflected in H1B data as well. only a select few top shops pay better - which often have scale - regardless of strategy. unless you own positions and work without direction (or at a HF but even those salaries can be low/in your stated range) almost everyone takes buyside paycuts (if you don’t leave the SS as an analyst), hopes to make up for it in (often cash) bonuses, or works their way up over time. WLB should be much better right away or over time. it sucks but it’s the reality in public markets for most people. you can kinda get paid without being good on the SS but few get away with that as investors
Super helpful. Totally understand on the L/S / pod side with the bonus offset. Would you say same is true for long-only (i.e., does total comp end up on-par in year one, even if base is lower initially)?
This is accurate. I did something similar to what you’re doing OP. If I were still on the SS I would be a VP by now and likely make a tad more but the lifestyle is easier plus I keep hearing about young SS VPs being let go. I am also actually developing as an investor at my LO which I did not feel was happening on the SS.
just talk to head hunters.
you’ll find that your comp is paid on a risk adjusted basis (base/bonus/workload/hours/stress/risk of getting fired) at any “good” shop regardless of strategy. my advice honestly is to rip the bandaid off before RSUs/equity and high base salary handcuffs you to the sellside.
don’t become a VP in research if you know you want to become an investor and then have to take an insane pay cut if you want to leave/get let go. SS ER can be great pay (if not better) but it’s still client services and will always be a grind even as you rise up the ranks and doesn’t prepare you (well most people) to make investment decisions/be a risk taker. large shops with centralized research models and banks basically are the two places that have outsized pay but everything has its tradeoffs
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