Greed Among Investment Banks
Given bonus compensation is not what it used to be, banks can now pay 50% bonuses while they used to pay 75-100% or more years ago while still recording record profits. When is enough is enough? When do people just start saying fuck this…
This also goes to the tech firms too, no more severance for employees getting fired, comp getting reduced while everyone is recording record profits.
Based on the most helpful WSO content, the sentiment you're expressing is echoed by many in the industry. Over the years, compensation trends in investment banking have shifted significantly. Bonuses, which used to be a major incentive, have become less generous despite record profits. As highlighted in discussions, this is partly due to structural changes in how compensation is managed. For instance, firms have moved towards smoothing out cash flows with higher base salaries, but the overall compensation ratio has been declining.
The frustration is palpable, especially at the junior levels, where bonuses are often seen as the reward for grueling hours. Analysts and associates, in particular, feel the sting when expectations are not met, as seen in cases like Morgan Stanley analysts reportedly walking out after receiving low bonuses. This dissatisfaction is compounded by the broader post-COVID shift in how people view work-life balance and the value of their time.
As for tech firms, the parallels are clear. Reduced severance and compensation cuts, even during periods of record profitability, reflect a broader trend of companies prioritizing cost management over employee satisfaction. The question of "when is enough, enough?" is becoming more common, and as noted in WSO threads, this could lead to higher attrition rates as people reassess their priorities and seek better opportunities elsewhere.
For those in the industry, it’s a tough balancing act between staying for the prestige and pay versus seeking a more fulfilling and balanced career path.
Sources: 2015-2016 salary & bonus discussion, BB S&T Bonus Progession, Bonus Season - Comps, Morgan Stanley Analysts Reportedly Walk Out After Receiving Low Bonuses, https://www.wallstreetoasis.com/forum/investment-banking/bonus-season-comps?customgpt=1
If it weren’t for egos, 90% of junior jobs would of been outsourced to India a decade ago.
I’m just a sophomore who’s currently recruiting for IB, who’s a bit skeptical of the stage of capitalism America is in, but here’s what I think.
IB in my own view is supposed to be the closest practical example of the american dream. You don’t have to be smart to do it, but you do have to have grit.
Nowadays this path along with most traditional venues of guaranteed forms of wealth have been going out, due to
1) Moving away from the gold standard (money printer is a massive bitch, to everyone, but the people who own assets)
2) Unchecked corporatism (Ik that this isn’t what it means, but bare with me), which means that one random country and corporations are able to effectively buy their way to the top. This is fundamentally against the principle of competition that drives innovation.
This will at some point during or post Trump collapse on itself as the world (Europe, SEA, and Eastern Europeans) will look for other partners. Keep in mind that for China and Russia this is like striking Gold, since in a multipolar world they are the big dick swingers.
I know that this isn’t close to the investment banking part, but IB becoming uninteresting in terms of wealth is a symptom of a cancer that will erode the greatest currency as well as country in the history of Earth.
Investment banking at the junior level is becoming increasingly commoditized, and banks are adjusting compensation accordingly. Given how much people are willing to sacrifice to break into IBD, firms know they can underpay juniors without much risk of losing a supply of talent. At the same time, BBs are under pressure to offer competitive senior pay to retain MDs, as they now have to compete with EB salaries. However, unlike EBs, BBs also carry significant costs from other products and large MO/BO teams. To stay competitive, they need to cut costs somewhere—and that typically falls on juniors, who are easily replaceable
For anyone considering a long-term career in IB, the key question isn’t just whether you want to stay in the industry: it’s whether you have the ability to become a true rainmaker or at least a strong MD. If you do, your earning potential will only increase. If not, you may find yourself stuck at the VP level, making less over time when adjusted for inflation. The gap between top performers and everyone else is only going to widen
Regarding your first paragraph - I agree but hasn’t that always been true? For every open junior slot there are a million candidates willing to snatch it up - hasn’t it always been like this? Hasn’t IB at the junior levels always been relatively commoditized, why has junior pay eroded so quickly?
I personally think as industries mature, the rich naturally get richer at the expense of the poor. It happened in automotive/manufacturing before, it’s happening to finance now, and will happen to tech in the future. There just isn’t as much growth and opportunity as there previously was and the industry is becoming more mature, which increases competition and reduces profits. The negative effects of this will not be burdened by the seniors who are making the rules, so they pass along these costs to the juniors in the form of lower pay.
Great write up
How are you supposed to figure out if you are able / have a path to becoming a rainmaker as an analyst when there are other opportunities out there? What are some signs that you will be able to source your own transactions and generate revenue down the line? It's difficult to see so far into the future when you're making pitchbooks at 3am lol
if you were the CEO of BofA and you could save tons of money on compensation knowing that you have a laundry list of people willing to join your platform even if the existing employees (yes, you're just another employee to them) feel underappreciated and quit, then you would do the same thing. it's baffling that finance professionals can't figure out simple labor economics
It's the same with management consultants. They lecture other people in other industries about supply and demand but fail applying the same concepts to their own jobs
BAML is a honey pot for DEI Beckies
This industry is no longer what it once was.
And the people running it are greedier than ever.
It's honestly, borderline, not worth it anymore.
I don’t disagree with you, but it’s not just this industry. Disparity between c suite comp and avg worker wage has been growing for decades. CEO pay up 1085%+ vs avg worker gain of 24% since 1978.
Source: https://www.epi.org/publication/ceo-pay-in-2023/
I swear some of y’all think just because you got “Investment Banking” in your title you’ve made it.
Might be a hard pill for some folks to swallow here, but probability is most of us won’t make it to the c suite… might as well come grab a pitchfork with the rest of us (/s but only slightly)
Time to bring trade unions to IB... ☭☭☭☭☭
Del
Every industry undergoes growth, peak and decline. Not a difficult concept to understand...
The sooner one realizes that the sooner one can pivot to other / new careers
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