Let's say by the grace of god, not only did you stick around long enough to make MD. You also had the tenacity and grit to grind the early MD years out and not get fired. You've now had 7 - 10 years of steady deal flow under your belt. The last 5 years have ramped quite considerably, and you find yourself putting in increasingly less effort / hours but, every year, you're doing the most business you've ever done.
You're not Ken Moelis or Blair Effron. You're not even Jimmy Lee or Sage Kelly in their glory days. You're a successful investment banker, pulling in mid- double digit millions in fees per annum. You have a formula that works and, absent a macro pull-back, you know there's only more upside from here. How much are you worth today? How much could you be worth when all is said and done?
I hope this post helps and gives you a perspective about net worth, and maybe even life in general.
A bit about me - I graduated from a top ivy, worked at a top BB, and have recently left to start my own business. I worked in both investment management and investment banking.
Let's take Goldman Sachs as an example. The average tenure of a managing director is thought to be around 11 years. It is possible to accumulate a net worth of $10-15 million during this time, but that is dependent on how your company/rsus have been performing (unfortunate for those at deutsche), your individual performance, and your lifestyle habits. Having all these aspects aligned is less common than one would think. Moreover, most MDs are pushed out after this time frame and are forced into "retirement/semi-retirement." Net worth doesn't grow much more after retirement.
For those few who can reach the partner level, it is possible to hit the low-mid 8 figure range. However, the likelihood is really slim and obviously comes with extreme stress and pressure to perform. Even after reaching this stage, the average tenure is thought to be 8 years.
So the question comes - is it worth it? If you look up the NYTimes article "The Goldman Sachs diaspora," all of the pre-ipo partners have reached 9 figure status. But how many pre ipo opportunities currently exist these days? Maybe in tech, but hardly any in finance.
I had a close friend from college who cursed his father for having to many children (wealth is too "diluted" as there were four siblings total). His father was a well respected partner at a top BB firm and worked countless amount of hours. Unfortunately, he never saw his dad much growing up and has become extremely bitter. Would it still have been worth it if your children felt this way about you, even after achieving an 8 figure net worth?
If you believe you would be happy in finance despite any monetary outcome, I would encourage you to go for it. A very small percentage of analysts going into finance are passionate about it. It is a hard, arduous path, especially these days. Follow your passions and do what you love. The money will come.
To be fair if I had a kid like that I would write their ass out of the will for being an ungrateful little bitch,
IDK... if you never see your kids and have no relationship with them, and the excuse for that is that you were out chasing $$$ all the years of their childhood, it seems like a pretty reasonable reaction for your kid to treat you more like a trust fund and less like a parent. I think that is what @joe419767" was getting at - that destroying your family (or never having a real relationship with them in the first place) isn't always or even usually worth the extra money.
I think you mean "it depends how much your first wife takes in the divorce"
Some of these numbers seem low to me based off what I know from the guys who I interact with.
In your prompt you said "7-10 years of steady deal flow under your belt."
In my experience, if you've made it that long at that title, you're earning your keep. If you weren't, you'd have been managed out (unattractive bonus-to-fee-generation ratio, unfavorable cash-to-RSUs ratio, unacceptable relocation ask, something else...).
If you're earning your keep with a decade into the MD title, you're probably clearing at least $3m annually. This can vary obviously, but assuming you're at a bulge bracket or notable boutique, this shouldn't really dip below $2m and a safe average would be $3-5m.
The variability really shows up in lifestyle. The guy running a DINK lifestyle is racking way more than the guy with three kids between 5-12.
A 'Managing Director' at any reputable place is going to feel a lot of unspoken pressure from the social stratum he is in. He has counterparts on the buy-side, coverage contacts in industry, service providers at major law / accounting / other firms, etc. who he and his wife overlap a lot with.
If you don't have the 'right' answers to "where did you summer?" / "where did your kids get in?" / "where are you going for the January break?" / "what organizations do you support?", you may find yourself experiencing some subtle (sometimes overt) social ostracism ... which then impacts your work ... which then impacts your lifestyle even further.
You could compactly sum this up as "keeping up with the Joneses", but I'm trying to illustrate how the 'golden handcuffs' happen.
This can be $30-50k annually for kids who aren't yet in high school, $40-70k for premiere boarding schools, $250k-1m annually for two to six core philanthropies you or your wife are involved with in some capacity (whether board of directors or steering committee or whatever) ... and you haven't gotten to true lifestyle things like vacations or a second home or anything.
I know a guy who basically owns sponsors for a top boutique whose strength is a lot of the European family offices who have been doing direct deals for three or more decades. Those clients don't want to be at a bulge bracket because they feel the deal process can be noisier than preferred. He prints money. He also spends a lot. He has his two kids at Le Rosey. They have a small (in relative terms) place in Villefranche-sur-Mer. I could go on.
So I'd say someone a decade into being a Managing Director is on average probably just across the eight-figure threshold, although a lot of it is probably illiquid thanks to real estate and RSUs.
Illustratively, it could've been $1 / $1.5 / $2 / $2 / $3 / $3 / $4 / $5 / $7 / $7. Factor in taxes and non-asset expenditures and you can see the math.
Candidly, if you aren't someone who produces on the basis to support numbers like that, you are going to feel some pressure (as referenced above in terms of being managed out).
I know you said 'average' and asked to exclude the rainmakers, but it's worth pointing out that there's a healthy number of guys who get eight figures a year. Every ten- or eleven-figure deal that happens has bankers on it. Those guys then enjoy something of a self-fulfilling phenomenon. Once you have the hot hand, more comes your way. A banker known for successfully handling a billion-dollar transaction will get more billion-dollar transactions.
It was interesting to see the other comments from people who spoke to seniors in their group. Thanks @mrb87" and @The Invisible Hand" and Mee Eff.
Curious to hear your thoughts on the timing of production, specifically as it relates to being "managed out". As a mid-level banker, although there is implicit support for marketing and beginning to try and build a franchise, there is obviously little time and frequently any marketing activities are cancelled to deal with existing client issues.
I'm outgoing at times and enjoy client and prospect interactions, as well as those with buyers or potential buyers (PE, C-Suite Strategics, Corp Dev, etc.), so my hope is that if I gain as much knowledge as possible during the execution stage of the career, I may be able to more effectively leverage that into deals.
But, even for the most extrovertive of us, there is going to be a ramp period required at Director and MD (which I suppose your illustrative $ example demonstrates going from $1 to $7 million).
Is there a specific time during Directorship where you know you are not going to make it to MD?
I'll be candid and say that I have not progressed up the ranks at a bank so I can't speak with any firsthand knowledge.
Most of the guys I've spoken to for advice on career progression have been guys who rose through the ranks of private equity, not banking.
One strong indicator is how you're progressing relative to your peers. A bank offers one advantage on this relative to private equity firms: the class of people who earned your title at the same time as you is always larger.
(Speaking in the context of the bulge brackets and notable boutiques) An investment bank promotes usually a couple dozen at a time. Every group probably has at least three associates becoming VPs at the same time. A private equity firm may have three associates total, all of whom may be on different schedules for Principal or Vice President or whatever the firm calls its pre-partner role. Check https://www.wallstreetoasis.com/comment/1634299#comment-1634299</a">this comment for more I wrote on how it goes in private equity.)
Again, I never pursued these titles in banking, but I think watching some simple metrics like volume of pitches you originate, volume of deals you don't originate that you're staffed on, exposure to senior internal people you receive, volume of directly attributable fees generated, etc. and evaluating how you stack up relative to your peers ought to be a helpful indicator.
(It's important to recognize that this can all be lumpy: you may spend the first eight months of the year at conferences meeting people before starting three live deals all in the back half of the year that generate revenue. You shouldn't be discouraged if it's inconsistent, it'll take time to get stood up.)
The goal is not necessarily to be demolishing all your peers. It would be absurd to expect that. The goal is to avoid being dead last. Make sure you're in the middle of the pack at worst, and you're probably safe from getting managed out while you ramp up.
The classic joke holds true here: you don't have to be faster than the grizzly bear, you just have to be faster than the guy you're hiking with.
I don't think there's a single specific time you can take a pulse check (e.g. three years after becoming a Director). My thought is that you constantly have to do a depth check the way a leadsman on old sailing ships would repeatedly plunk the sounding line into the water while the ship navigated its course.
If you notice you're lagging behind others, that's when you should be concerned. And know that people understand things don't always go perfectly. One bad year as a VP or Director doesn't get you fired. I think it's probably reasonable to know that three consecutive zero years would be enough of a basis. Trajectory matters: one weak one, one okay one, and another weak one is probably okay ... if the next one is okay or strong.
I hope this is helpful. I am not nor did I ever want to be a senior banker, you're already farther on that path than I ever was. Good luck.
I'd look at it like this:
One should hope to have about $1,000,000 saved up by the time they get the MD promotion (age 33-36 in this case, I'll use 35 for simplicity).
Data from the Pinpoint IB Salary Report shows that the average MD has a base of $700k and a bonus of $1.8M.
Assume said MD tries to live off his base and bank most of his bonus. After tax, that bonus is about $900k. Now, assume he saves about 75% post tax, or about $675k.
Finally, assume his total savings and investments return about 6.5% per year. If he retires at the age of 55, he's investing $675k per year, for 20 years, at a rate of 6.5%.
After those 20 years, said MD will have just under $30,000,000.