Do second year IB analysts on their way out get screwed on bonus?

ambition56's picture
Rank: Gorilla | 725

As a second year analyst on my way out for PE, I am concerned that I will get screwed on my second year bonus. Me and my fellow second years have already turned down our third year offers, and we are gauging how much to check out. How badly will our second year bonuses be discounted because we are leaving?

Comments (31)

Sep 9, 2014

I think you misunderstand the purpose of bonus payments. While the bonus pool may be calculated from last year's earnings, the purpose - hence size - of bonus payments to individuals is all about retention.

If you're leaving, what retention upside do they get from paying you a big bonus?

The retention calculation is about meeting/disappointing your expectations. To that extent, how much bonus you think you've earned in the previous year are relevant to your bonus, but largely in as far as "given the revenue he's brought in, he'll feel hard done by if he's not paid a good bonus; so we better pay him a decent bonus if we want to retain him".

If you didn't factor the impact of this entirely rational thinking into your exit plans and management of your employer's expectations around your exit plans, I'd be concerned about what sort of PE deal you'd put together.

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Sep 10, 2014
SSits:

I think you misunderstand the purpose of bonus payments. While the bonus pool may be calculated from last year's earnings, the purpose - hence size - of bonus payments to individuals is all about retention.

If you're leaving, what retention upside do they get from paying you a big bonus?

The retention calculation is about meeting/disappointing your expectations. To that extent, how much bonus you think you've earned in the previous year are relevant to your bonus, but largely in as far as "given the revenue he's brought in, he'll feel hard done by if he's not paid a good bonus; so we better pay him a decent bonus if we want to retain him".

If you didn't factor the impact of this entirely rational thinking into your exit plans and management of your employer's expectations around your exit plans, I'd be concerned about what sort of PE deal you'd put together.

you're correct but he/she is just a 2nd year coming from IBD - maybe try and cut him/her some slack, everyone would be concerned

speed boost blaze

Sep 15, 2014

he/she and him/her? dude chill out

Sep 10, 2014

Haha, this made me chuckle. Great response.

Best Response
Sep 9, 2014

Yes, but it's also a mini game theory problem. If they screw the second years who are leaving, and the first years get wind of this (and they will of course), the first years will get their buyside offers and first year bonuses and then completely check out. They may not compensate you as well as a second year who is staying for year 3, but they shouldn't completely shaft you either. I just want to see if this is actually the case in practice.

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Sep 12, 2014
ambition56:

Yes, but it's also a mini game theory problem. If they screw the second years who are leaving, and the first years get wind of this (and they will of course), the first years will get their buyside offers and first year bonuses and then completely check out. They may not compensate you as well as a second year who is staying for year 3, but they shouldn't completely shaft you either. I just want to see if this is actually the case in practice.

your tag says S&T?

Sep 9, 2014

I have a fairly small sample size, but asking around second years who have left, while one or two got bad bonuses, more people got justly compensated.

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Sep 10, 2014

do you really care that much about the additional 15k$ gross ? Just do your work, no need to be overzealous.
Not like it is a life-changer.
In 10years if you are still around it will look like a rounding error.

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Sep 13, 2014

Lol 15k? Do you work in IT or something? My 2nd year banking bonus was 85k.

OP: just be glad they didn't give you the axe when they found out you're gonna bounce.

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Sep 13, 2014
BTbanker:

Lol 15k? Do you work in IT or something? My 2nd year banking bonus was 85k.

OP: just be glad they didn't give you the axe when they found out you're gonna bounce.

Pretty sure they were referring to the difference between getting screwed on the way out and getting what they felt they deserve, not the total bonus.

Sep 16, 2014

Not only is your reading comprehension incredibly poor, you're also bragging about your bonus on an anonymous internet forum, all without adding anything to the original conversation. Keep on winning bro.

To the OP: you are leaving for PE given that you think the opportunities - and pay - it affords you will be significantly better than your current role. I'd worry less about taking a small haircut on your bonus and focus more on succeeding in your next role. The increase in your bonus YOY between what you would earn in your 3rd year in your current role vs your first year in your new role will probably far outweigh the $5-10k difference you may miss out on this year because they don't have as much incentive to pay you. Congrats on the new gig.

I would agree with you, but then we'd both be wrong.

Sep 17, 2014

What i mean is additional 15k compared to middle/bottom bracket or something.

Sep 10, 2014

A lot of histrionics for a yes/no question

Mar 6, 2015
LongandShortofit:

A lot of histrionics for a yes/no question

Voice of Reason

Sep 10, 2014

I have seen about a $10k haircut

Sep 11, 2014

Another factor is if literally everyone in your group is leaving, you are at less of a relative disadvantage. Also, if the first years get wind that second year bonuses are horrible, they have much less incentive to stay the course for the 2 year program. Analysts leaving early really disrupt the flow of incoming analysts/leaving analysts.

Sep 11, 2014

In addition to everyone's comments, this is an opportunity for your team to make a good impression on you. If you are joining a fund, there is a chance the bonus is used as a selling point to maintain a good working relationship with you. If the senior members anticipate a lot of business from the fund, they want as many touchpoints as they can. A second-tier second year bonus would be cheap to keep them on your good side.

Sep 12, 2014

I think brokencirlce brings up a valid point. I had a friend who recently left her group to join a client. She communicated her intent to leave the group and managed the whole process pretty well which allowed her to leave on good terms. Before she left, she received the top bucket bonus. Obviously, she is much more likely to help out her old group in multiple capacities. Not everyone on Wallstreet is looking to screw you out of a bonus and risk their reputation.

Sep 13, 2014

I only have the data points from my year, and we were all paid surprisingly well on the way out.

Sep 15, 2014

Ouch lol

Sep 16, 2014

What's the best way to avoid this? Should you act super excited about going into 3rd year banking and then be like "peace out homie" after the bonus is deposited? Serious question.

Mar 6, 2015
Black Knight:

What's the best way to avoid this? Should you act super excited about going into 3rd year banking and then be like "peace out homie" after the bonus is deposited? Serious question.

Bump. Also interested if you should do the above if youre a second year analyst

Float like a butterfly, sting like the bee.

Mar 7, 2015

Jesus christ no this is a horrible idea. Not only is this just poor form, but you would be burning a ton of bridges. There isn't any upside, unless your group is 100% anti buy-side recruiting/leaving after your third year.

You should leave your group on good terms, and this is not the way to do it. The Investment Banking/PE/HF world is very tight-knit believe it or not, and souring relationships, especially after a positive 2 year stint in banking, will only hurt you down the road.

Mar 7, 2015

this is kinda random, but would you guys recommend doing your personal banking with your employer? I.e. if you work for Citi having Citi deposit your bonuses into your bank? Or is that just a bad idea.

Mar 7, 2015

The incentive to pay a bonus is that there is a repeated game. If they want to incentivize future associates to work hard in their second year, they need to pay bonuses after the second year.

Mar 7, 2015

Also fear of litigation. Wall street bonuses aren't really "bonuses" they are more like deferred compensation for overtime work. And to expand what dontbugme said, they would quickly gain a reputation for not paying bonuses and no one would want to work there.

Mar 7, 2015
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Mar 7, 2015
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