BB vs EB total compensation
Over an entire career in banking (analyst-MD) who makes more? The EB guy or the BB guy (on average)? By how much?
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You make 14.2% more over an entire career at an EB. Absolutely no variables at all in the question, so pretty easy to answer.
Most of the compensation in this hypothetical is dependent on comp during the MD years, which isn't going to be normally distributed either. The question then is does an MD at GS make more than an MD at Evercore or Qatalyst or PJT on the average? Do we include founders of those EBs, some of whom are now billionaires or close to it? Probably not the most helpful way to think of where to do a career.
I'll word it differently: Does an MD make more at a BB or an EB, in general?
My hunch would be that ebs are more lucrative over a career, simply because at junior levels comp is more generous and at senior levels ebs often distribute fee bonuses on an “eat what you kill” basis which is often what lures top deal makers there in the first place. However, as pointed out above, there are really too many variables to consider, vast differences when considering stock/option grants etc. Moral of the story is, get to the MD level first and land some big deals, you’ll do just fine for yourself at either place.
Climbing the greasy pole to MD is a grind. Pick the place you’ll be most likely to thrive. Career earnings will be enormously skewed by deal fees as an MD so at this point your best bet is to pick the one you like best (people, team, culture, industry, etc). If you’re good wealth will follow. If you’re not it won’t matter what bank you’re at.
Leave out MD and An -> Director I think the EB person would earn more assuming same buckets throughout and comparable group performance. MD comp is highly variable. There was an MD AMA about two weeks ago and I asked a couple compensation questions. He gave a pretty decent response so I would recommend looking at that.
Can you link me to this? Thanks
it's harder to get promoted at an EB especially more senior levels
I haven't heard this before. thanks for the info
Most EBs pay 20-30% of deal fees to the originating MDs and most EBs pay all-cash. That said, you have the security blanket of financing to court your clients in BBs while you don't in EBs. So if you're just an average MD who leans a lot on your ability to fork out cheap credit to generate M&A fees...you aren't going to last long at an EB. If you're able to generate deals just by virtue of providing smart advice and being great at sales, an EB would make you significantly more. Think about it; 1.5% fee on a billion dollar M&A is 15 mm and you keep up $3-5mm of that in cash. $3mm is more than what the average BB MD makes all-in, let alone in cash. And that's assuming you close one solitary deal a year at an EB.
Pretty much - a kill what you eat model tends to be high risk/high reward. And working for a public company can suck because of deferred comp. Not to say a non-public company can't, but EBs tend to pay mostly cash.
Im going to focus on senior bankers, because that is where the distinction really starts to show. The short answer is - it depends, and different bankers are suited for different platforms
The promotion path to MD, and the ability to generate revenue is more structured / "easier" at an BB because you have the bank platform and brand name to lean on. You can be an "average" MD and still generate revenue by virtue of legacy institutional relationships or financing arrangements. Companies always require capital and there usually plenty of financing fees to go around. A large part of a BB MD's annual budget may be attributable to ECM, DCM and other random treasury work like hedges or swaps (which can pay very well). Companies often dont hire a banker for an equity raise based on his/her individual talents - it is based on the bank's execution and distribution capabilities.
Unique M&A or structuring ideas are where a banker's talents may start to shine, but financing and global capabilities can also help win M&A work - for example, if your bank is the lead arranger on a company's term loan B , you are likely well suited to win future M&A business. or you may have a great APAC healthcare team which you can show to your client to help you win cross-border mandates. A big part of the BB MD role is showcasing and delivering the bank's global capabilities to your clients. This helps you win and there is less individual pressure on you, but on the flip side, you are sharing those fees with more mouths at the bank. There are plenty of MDs like this who can reasonably expect to earn $1-2 million per year. There are of course some very successful group heads who earn more (e.g. $5-10mm)
At the EBs, it is much more difficult to win business (or get promoted) because a) clients are not hiring the bank, they are hiring the individual(s), and b) you have no financing capabilities to help. But of course, it is direct drive revenue and "you eat what you kill". If a banker is successful on an EB platform its because clients genuinely like them and/or they have great market intel and/or unique transaction or structuring ideas. There are plenty of MDs who move from the BBs (including GS/MS) to EBs and vastly overestimate how much of their previous success was due to the bank name vs. their own capabilities or ideas. Then of course, there are the rainmakers who can crush it on any platform and they are compensated very well on an EB platform. The MD compensation at the EBs is a lot more variable, and there may be years where an MD can earn sub$1mm and then other years where they can earn $10mm+. M&A fees can often be more volatile than financing fees (i.e. a lot of M&A deals dont end up getting to the finish line
To recap, I'd say senior banker comp is higher at the EBs, but there is a lot more variability and the distribution is a lot wider due to a bunch of rainmakers (there are guys who are earning $20mm+) and some MDs who may be new to the EB platform who realize they cant win (=donuts)
The average comp at the BBs is lower, but the distribution is likely a lot tighter
Really good answer, thank you. I'm sorry to ask such a basic question, but what is the average salary for a BB MD? I've looked everywhere, and I've only gotten indirect answers.
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