I'm a little confused about compensation potential in IB. I always planned on going into the field given how much you learn and the exit ops, but as I research more into the pay I'm starting to wonder if it's worth it. As background, I'm an analyst for a long-only equity shop ($1-3B AUM) right out of college in a very low cost of living city (Midwest). I've determined pay for the average analyst here is around $150ish base and bonus of ~100-250k depending on the fund's performance. So, I figure in a low cost of living state I could make around 300k on average working roughly 50 hour weeks (at most). For reference, first year analyst right out of college I'm expecting about $100k cash comp all in (so clearly the progression is painfully slow here, but the starting number is decent).
I'm reading about what bankers working ~80 hours a week make, and I'm starting to wonder if I'm crazy to leave. My issue is that my current firm probably maxes out around $450k on the absolute best years, and I don't like my potential earnings capped around $400k.
My questions are these:
1) Is banking pay comparable to these figures (maybe not associate level, but longer term)? I've looked at the compensation reports, and it doesn't seem much better than these levels, and I know the cost of living is much higher pretty much anywhere outside of where I live.
2) Would it be a bad career choice to leave my current role to go get an MBA and try to get into Banking? I like the fact that the upside to banking seems much higher if you get into f500 management or maybe PE somewhere rather than knowing I'll get ~400k at the peak of my career in my current role. Yes, it's a nice living, but I don't want to limit myself. Although it'll probably be a pay cut when I enter, I'm thinking banking will improve my long term earnings potential... is that somewhat accurate?
I'd appreciate any thoughts. Also, I'm not going to solely make my decision on money, but I feel I should consider it before I leave a cushy job (if it, in fact, is). One more piece of background: I interned in Big4 audit, so I handled 80+ hour weeks for months at a time, so I'm not super concerned about the lifestyle change in banking. And also I saw partners at that firm make probably over $500k, so I kind of feel like I need to get at least that to make up for leaving.
Thanks!
A super star pm will earn more. Don’t be content with being an analyst, go for pm. And if that’s not enough, start your own fund. Hire college grad monkeys (like myself) and take in the money.
Wow stay where you are.
Y'all hiring?
Rough banking comp scheme (for top BBs and EBs with consistently strong dealflow):
1st year analyst - 85k base, bonus pools range a lot but at most bulges it would be between 40-80k. At some of the elite independent advisory firms you're talking more like 100 and some of them start at 95 base (Evercore, Moelis)
1st year associate - Typically 125 base, bonuses are typically between 100-150 so all-in you're talking mid 200s
VP - Varies more, but bases are usually between 150-250 and bonuses are typically at least 100% of base, so 150-300 and an all-in of between 300-500. There are a few rainmaker VPs who can make more, but it almost never happens with the exception of one who originated/did god's work on a huge fee deal.
MD - All-in comp bottoms at 500. Few make 8 figures though. A lot of successful MDs are in the 2-5m range.
MBA hires come in as associates so you'd be making mid 200s if you went that route. Definitely more upside and more comp for sure. But NY is expensive, you'll work double what you're working now, and you may not like it.
I would encourage you to choose what you think you would enjoy doing. I genuinely believe that the money in banking is a red herring, which attracts the best and brightest into the industry. But the reality is that most people don't achieve it and either voluntarily or involuntarily drop out before making MD. For most of them (many of my ex-colleagues), it wasn't at all a matter of will, intellect, or skill. It was because many realized that the money is not worth all of the sacrifices that they would continue to make, especially as they all got older and started families, etc. The people who do make it to MD are the people who genuinely enjoy being a banker, whether it's the money, the prestige, the thrill of doing deals, etc. So that's just something to think about.
If I was you, I would stop worrying about banking period and sit down and re-evaluate your whole life....
If you don't think that you can be happy with $400K per year working 50 hours per week, you really need to sort out what's wrong with you on the inside that makes you feel that way. And look, I'm not against being ambitious, but saying that I won't be happy unless I hit $X dollar amount just sounds really unhealthy.
Go hiking, read some good books, read some spiritual texts, whatever it is that you need to do, but I would get my mind right and my priorities straight before I made any decision on banking versus Asset Management etc.
You're making a huge mistake, but whatever. If you want the chance to have a family, travel, be spiritual, and pursue hobbies, you won't switch into banking.
It's not just the money. Post-college banking at a top BB or EB opens so many doors and sets you up for so many opportunities afterwards. Banking has become the de facto requirement for most cool lucrative jobs in finance.
Banking exit opps (the cool lucrative jobs I assume @Rufus1234" is referring to) are Corp Dev, AM, HF, and PE. You are already in AM, an AM research analyst is more qualified to move to a HF than an IB analyst.... that just leaves PE. You would basically be signing up for garbage hours in a high CoL area in order to move to PE, which this board says is extremely difficult to exit to as an IB associate. This is classic "the grass is greener" mentality. If you quit go ahead and PM me the name of your firm so I can apply. Congrats on finishing level III.
p.s. I forgot Corp Dev, it is even less lucrative than banking and people exit there to get out of the banking lifestyle that you seem to want to jump into
The problem you have is one of self-mastery. Some people call this 'internal regulation' versus 'external regulation'. Psychologically, this is termed 'self-determination theory'.
Everything you write screams loudly an external locus of control. You're concerned about the outcome and the reward, so of all the branches of extrinsic motivation, you're the most extreme: 'externally regulated behavior'.
Giving advice based on who you seem to be and everything you've said so far, I'd say a move to banking is a major career mistake.
First, your projected earnings of $300k a year are dramatically better than what a banking analyst is going to get in either of his first two years. Same goes for those in their third or fourth year out of school in their first PE role but not on the elite route (MF or strong upper MM).
Even further, your low-COL geography makes this point doubly strong. You are right now effectively taking home what people five or six years out of school hope to.
Third, you're working 50 hours a week, not 90. On a time-adjusted basis you're absolutely killing it.
Fourth, you don't have to get an MBA. That would be an $850k ticket for you (two years of foregone income of $300k, $250k in loan value). Dodging this cost is huge.
Separate from all that, let's go back to where we started. You will be a much happier person when you start asking yourself what brings you fulfillment, not where your best earning potential lies.
When people say "Find something you love and you'll never work a day in your life," or "It's not work if you love what you're doing," or "If you make your passion your work you'll end up way wealthier than working an average job," the paragraph of Terms & Conditions they're omitting is the hugely important thing that [after years of reflection and self-study on what you love, where your abilities lie, and what your lifelong areas for growth will be, you now know what makes you get out of bed in the morning and are now willing to dedicate your waking hours to that thing].
You seem to genuinely like stock-picking, at least as evidenced by your lack of a single negative comment about the work you actually do. Maybe that's not your thing. Maybe it is. Regardless, I suggest you find out where the intersection of your interest and ability is and then optimize your life around that.
If for now you're able to mentally commit to equity analysis being better work for who you are than banking, you need to figure out how to improve your career prospects as an equity analyst.
This means work as hard as you can in your current role to get promoted to senior analyst or PM (whatever title they offer there). If there isn't a clear promotion opportunity, find a way to lateral. There is literally always a bigger firm with more money to spend. Performance lets you claim more of the pie.
I met a guy two years ago who is now the CEO of a long-only shop in a Southwestern city with over a billion in AUM. It is a lean team, and off of management fee income alone this guy is printing seven figures in annual comp before we even talk about performance income. He was not the founder, just grew in the business over more than a decade.
If you're okay with not being in New York (and there's a strong case to be made for that to be a better lifestyle when you're out of your 20s), the formula of high comp, low taxes, low COL, clean air, and easy hours is really hard to beat.