Why finance people care Bonus so much

I’m new to this industry. I’ve noticed many finance people (on the internet) express extreme disappointment on the bonus if they don’t get a huge number at the end of the year. Some even acting like they’ve completely lost hope in life, drinking all day and packing up to leave but somehow decide to stay for the next year. Can someone enlighten me why finance people always be like this given that they already have a very competitive base salary. I think it’s not rare to see ppl working more than 70 hours and getting half paid of IBD in a number of other industries.
I mean it’s certainly understandable to see the dissatisfaction, but isn’t it too much?

 

base salary is not that much for nyc area(especially at analyst and jr associate levels) (particularly if you want to save up for a down payment on a house/apartment)

most analysts cannot afford to live on their own.....

in fact, IB base is not THAT different than other industries like HR  / accounting etc.  I knew several HR girls earning about 120k base a year or two out of school

If the bonus does not completely obliterate other industry's bonuses than IB IS NOT WORTH IT.  especially when average VPs in late 90s early 2000s would routinely clear 800k to 1 million (thats not adjusted for inflation)

juniors in IB earn less than their peers did in 2005 (not adjusted for inflation either).

of course people are gonna be mad if they get low bonuses taking all that into account

 

I think he’s more so referring to analysts/associates complaining about 25-35% bonuses relative to other banks paying out 45-55% bonuses.

Comparing to the golden days is a lost cause as those will never be back due to fee compression. Come to think of it, big law should be due for some fee compression but seems to have somehow actually increased fees over the same time span.

 

it’s less about fee compression and more about employee bloat. my group had like 5 first year analysts in 2006-2008 and now has 12-15 doing the same amount of deals. Assuming similar bloat at senior levels, we could definitely get the golden days of banking back if we cut the people just doing useless tasks. heavy hitting senior at my bank agreed. Why do you think places like dyal and ducera can pay multiples of BB/EBs?

 

Is this true?  Can a 24-year old HR employee be making $120,000?  I presume they are working 40 hours or less each week.  Can anyone else authenticate this claim?  That would be an amazing job.  Some 24-year old, 2nd-year analysts at investment banks are only making a salary of $115,000.

 

ngl think 120k is the rarity but could be right for a big company in NYC. My sister is in HR, shes 26 works completely remote and has unlimited PTO and salary is around 90k before bonus so a little under 100k TC. So I imagine HR at a F500 could get you 120k

 
Controversial

100%, all of us love it. If I could do IB without the pay, I would!!!!

 

Ngl I actually didn’t realize this was OP and kept scrolling laughing to myself thinking it was just a troll.

side note, one could argue that its not even about the money but the doors that are opened (PE/HF/PC). Think about all the non-targets (me) that would work for free just to get the opportunity to actually make some real money down the road.

 

Imagine you had a job that paid $100 a year with expectations of bonus around $80 if you do well in the job.

You entered the job, worked hard all year (basically giving up your life), with the expectation that you'd be rewarded for that hard work. Then the payday comes and I go "actually sorry, you worked hard but because of things outside your control, you're getting $20, enjoy". Would you not also feel like you've just wasted a bunch of hard work and your life?

This is an extremely naive question that you've asked with about 0 critical thought.

 

It’s not true that only IBD ppl are working hard all year, suffering from pressure, and giving up their life for something they dedicate to. A simple example, junior researchers in academia are paid, let’s say 60$ using your number, with no expectation to bonus at all, while sitting in the labs from morning to next morning and suffering from pressure of all kinds. Of course they also complain but I hardly see them complaining as cringe as some of the IBD folks on the internet. That’s what really confuses me: why ppl only in this industry so obsessed with money.

 

Might be a bad analogy, but you are kind of asking "Why is water wet?"

IB is a lucrative career and for most of us money is a big consideration going into/recruiting for the job. I wouldn’t use the word “obsessed”, but IB folk is likely to value compensation/prestige above other things (as we are sacrificing mental/social/physical well-being in exchange).

I won’t argue if a researcher works just as much as an IB analyst or not, BUT to explain the disappointment:

People working in IB have an expectation for a sizeable bonus at the end of the year, which essentially makes the other half of your compensation and is the reason you are sacrificing so much in other aspects of life beyond your career. That expectation is what makes it more crushing in the end when you learn your bonus is nothing in comparison to your expectations – the sacrifice was for nothing/not worth for that bonus.

 

Are you incapable of understanding the concept of expectations?

IBers do not go into the role expecting to make 100k. They go into the role expecting to make 100k + a sizeable bonus. They work with that expectation. They try with that expectation.

A researcher does not expect a bonus... If no bonus comes, why tf would they be disappointed. They never expected, or were led to expect one anyway. There is no history of their peers receiving bonuses. They work with the agreement they get paid $60 or whatever.

Idk how you can not understand this concept. You just seem to want to put bankers down for caring about money. Welcome to the real world, people like money and they don't like when they get less money than they thought they would.

 

And to explain more to the nut189 guy, I myself come from a science researcher background and now in finance as a quantitative lol. Back in academia we value our research impact and publication the most, and then the compensation. It is ultimately the achievement of our research that makes us feel proud. But here in IB I’m quite surprised to see that ppl seem to only value one thing, that is the salary. Therefore, it gives me a feeling that you’re claiming “my work has 0 value, except that it allows me to get paid well”. It’s like denying your own work or even this industry by saying it brings no good to the world except good salary to its ppl.

 
Most Helpful

Hi OP - as someone with ten years of IB/PE experience, respectfully I think you're missing a few things here. Firstly as others have rightly said above, without the substantial variable component of your comp i.e. the bonus, it really isn't worth working in IB/PE these days unless you really love finance and can't imagine doing anything else. Yes of course the base salaries are much higher than the average American earns - but getting into IB in the first place is very competitive, so you aren't talking about people with average academics/qualifications. Not saying IB/PE is rocket science (it certainly isn't) but suffice to say people who get into IB would have other career options available to them.

For instance a number of my college friends work in various F500 corporate roles (accounting, project management, marketing etc) and after a few years most of them were earning $150k with maybe a 10% bonus on top. In MM PE my base salary until recently was under $200k (admittedly I'm probably paid slightly below market) - so is an extra $50k before taxes annually really worth all the extra stress/hours? Most people I've encountered in corporate roles e.g. during my IB days generally worked 9:30-5 (whilst taking their full 1hr lunch break) and had maybe logged in at the weekend once or twice during their whole career so far. I don't mean this as a slight against F500 workers (I'm sure most of them wouldn't want to swap places with me even with the extra comp) but it's a very different world to IB/PE. Lol even cushy roles in the federal government are paying well over $100k+ after a few years (not talking about the FBI or US Attorney but some random mid-level managerial job).

This brings me on to my next point - I think in the media/general public there is a huge misunderstanding over what the bonus in IB is. In F500 roles it seems like a 10% end-of-year bonus is almost a mandatory thing which everyone gets unless the company has a bad year, almost regardless of individual performance. I'm sure HR do nominally link the bonuses to personal performance but the range is probably very small, e.g. a mediocre person might get 8% whilst a superstar would receive a 15% bonus (obviously talking about mid-level people here not C-suite etc). So I think when most people hear about IB guys getting 100% bonuses, they get outraged and think that's like their bonus which is essentially a nice gesture from the company to take a holiday/make a downpayment on a car, and isn't really driven by performance.

Whereas in IB the bonus is essentially "deferred overtime" - i.e. even a bottom-bucket analyst is expected to work late into the night and at weekends, and except for extreme cases isn't able to say "sorry I'm done for the day/have plans" and log off at 7pm during the week (whereas in corporate jobs most people complain if they have to work past 5:30). As important as it is to try to get some semblance of work-life balance especially as you get more senior in IB/PE, in reality in this career your job will always be an enormous part of your life and consume a huge amount of your thoughts/head space in your personal time/weekends, even when you don't have any work to do. So honestly what person with a good academic pedigree would sign up for that long-term for just the base salary, when there are far better alternative career choices for almost the same money? I know not everyone can be lawyers or SWEs (despite the relentless posts on here asking "IB or tech" as if the two careers are interchangeable) - but big law salaries are way higher than the IB analyst base, albeit without the bonuses (understandably as big law hours are similar to IB if not worse). And SWEs also probably earn more than IB base whilst doing substantially less hours.

Just to reiterate, I'm not one of those "prestige" hardos saying that IB/PE is for geniuses only - it really isn't. And of course there are jobs where highly qualified/intelligent people might work just as hard for less money e.g. a crusading underpaid DA or a dedicated employee in the federal government - but that's either as a stepping stone to greater things or because they're personally super-passionate about it. And yes people with average/below average qualifications probably work in much worse conditions (e.g. industrial cleaning) for far less pay, but those people don't have the option of going into IB anyway. But someone who has the option of going into IB isn't going to stay there long-term making big lifestyle sacrifices when they can earn the same elsewhere basically doing a 9-5.

 

Once you get ramped up and into the intensity of an investment Bank, and also perform i.e get top bucket marks, you realize how exhausting it is and hope you get comped accordingly.

I can tell you anecdotally, one year my boss and MD both said to expect my bonus of a certain range at my mid year review - some Bs happened to the overall pool and I got ~65% of what they said I would.

They put down on paper that I was top bucket at both mid year, and year end review. I physically burnt out the following year even though I wanted to try and keep grinding for top bucket again for at least the paper trail, but knowing I had friends in tech and corporate that worked 9-5 without a truly significant haircut to my all in comp all things considered just kind of checked me out. 

 

Easy. Private schooling is $50k per kid, wife is doing fundraisers and buys tables for $10k minimum on much lower side, country club is $225k to join with $2k month minimum dues, first house is easily $15k/m or more, you see where this goes?

 

Bonus is what people sign up for. It’s like a reward that’s not written in offer but you know you’ll get it. And imagine it turns out you didn’t get that unspoken reward, you’ll feel deceived as if you were manipulated into signing that offer. However I have to point out: bonus is proportional to deal-flows. When bonus is low, likely deal-flow is also slow and bankers are probably just coasting for 60 hours and doing 30 hours of real work, which isn’t that much different from a 9-5 corporate job. But bankers are whining about the low bonus and that is spoiled.

 

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