IBD pay ... really that great?
Hey all,
Just interested in some feedback about my perception of the true value of pursuing IBD post-MBA. Is it mostly for the exit opportunities/resume boost, or are people really motivated by the money (my impression is that the vast majority of lower/mid level bankers do not "love" what they do) ? From my estimation, average all-in comp at the associate level is around 150-200K, but you are working 80 hour weeks. That is the same as making 75-100K at a "normal" job ... which to me, doesn't sound all that special. Am I missing something here? Just curious to see if I am thinking about this the right way, as I will be entering B school at a target for most of the major banks this fall. Thanks in advance for your thoughts.
The hours drop off pretty rapidly as you progress (unless you turn into that VP who decides they love being in the office at 1am on a Friday night). The pay used to escalate pretty rapidly as well. Arguably, still does vs. a lot of other professions.
Depends on shop / group, and there are definitely ones out there where senior associates and VPs are looking at 60 hrs.
MD level is very variable... I've worked with some who are obsessed with detail and consistently put in 80 hours a week. Also worked with a few guys who probably spent 10-15 hours a week in the office and spent the rest of their time golfing and getting wasted with their boarding school buddies who are now corporate CEOs. Sadly, those guys are a dying breed. Shops like Cazenove must have been frigging awesome back in the day...
Banking pays a lot and requires a lot of hours. This is nothing new or surprising. If you can start a business or find a job working 40 hours a week paying $200K or more a year starting out I suggest you take it. For the rest of us unlucky SOB's it is nose to the grindstone to make money.
At least you can be classified under the 200k+ income bracket on the matrimonial websites
Thanks all for the thoughts so far ... I had a feeling this title would generate some quick responses :) And in response to TNA, I definitely don't know of a 40hr 200K job that is easy to get ... but if I find one, I will take it as advised!
A few more questions about IBD in general: Is it common to do a "stint" as an associate post-MBA to eventually launch one's self over to the buy-side, as done by analysts out of undergrad? If so, is it the same 2-year time table, or does it vary more? Do banks ever hire MBAs at a level higher than first-year associate?
Are you talking about BB associates? I only ask because I was under the impression base for associates was 100k. From there bonus can be decently variable so I would say the lower end of your range is pretty low all things considered and I would imagine the higher end is a bit low in your estimation.
These salaries sound good, but once you throw in the fact that its in NYC, it kind of sucks. If you use a cost of living calculator, you will see that a $50k job in a small town is the equivalent of a $100k in NYC. IBD salaries are really only good if you go to a place where the COL is low such as Texas. I know two MDs that are actually married together and living in the city, one is at Credit Suisse, the other at JPM, they have one kid and they still say they have a hard time saving money. They don't live all that luxuriously either.
MDs of what? I have a hard time believing that someone who is reportedly not living a very luxurious life struggles to save money in that situation.
there combined income is deep into 7 figures...even in manhattan they can live and save with one kid. I would say they are just bitching to you. Not to say NYC is cheap, but its not that expensive. And BTW if you ever live in London then you will see NYC as cheap!
It's a relative term.
Yup your right, I'd have a hard time living life with only 2 private jets, a couple of yachts and only 5 cars (1 for the housekeeper). I mean come on, I need at least a separate Island named after myself right? So far I've only been able to save up $200 million and I'm barely scraping by. Yesterday, my ride back home was a Ford. Can you believe that? A FORD. Almost contemplated suicide along the way but took comfort after I threw away all my clothing that came in contact with that filthy thing you actually call a vehicle.
Op, ~$200k for an associate is for the first year. By your third year as an associate you can be making nearly $300k and its only like 3.5-5 years after that to become an MD. If you are someone that enjoys the nature of the business, interacting with clients, working on several deals/pitching at a time (im sure this isn't everyone that stays on as VP-->MD, but still a percentage of people) then the $ will be more than enough. One of the MDs in my office made to ~$2.5m with the lowest producing MD still pulling in ~$850k for that year. So it will lucrative and is just relative to how you spend/invest/where you put your $
why is no one mentioning deferred comp?
Lol... you don't seem to understand the pay structure / hierarchy / real scenario here... Becoming MD 3.5 years after Associate 3? Also, the MD who got paid 2.5 probably crushed it... a lot are making significantly less.
I know you're being facetious but you have no idea what you are talking about. Most bankers are merely living a comfortable lifestyle but it isn't lavish. He is absolutely right about cost of living eroding the shit out of purchasing power. Money, even at the MD level doesn't go nearly as far as you are making it sound in NYC. Lol... 2 private jets... Gtfo of here... My group head couldn't justify one...
As mentioned above, the big payoff comes later in your career at the more senior ranks. However, I don't think it is fair to look at junior level compensation on a strictly hourly basis. Sure, an associate may make the equivalent of $100k on a normalized 40 hour work week, but the two situations are very different. The 40-hour / week guy can't simply choose to work 50 hours and make 25% more money, he is essentially capped out on his earnings potential after 40 hours. He will never be able to afford a big house, fancy cars, etc. by only working that job. Some people want these things and are willing to work longer hours to afford them. At the end of the day, it is just a trade off.
MD: "Hey, all analysts, gather up. I just want everyone here to know that I made $2.5 million last year. Oh, and by the way, you see that other MD over there, he only pulled in $850k. I'm awesome and he sucks. Now, get back to work."
You could ask their wives or the hot blonde secretaries they're secretly cheating on their wives with
Sooo .... my impression is that the lure of IBD at the associate level is mostly the potential to "make it big" down the road. For example, say one has the option to pursue IBD as an associate or corporate finance as a senior financial analyst (or whatever you would be coming out of MBA) ... maybe the probability to one day make big bucks as an MD in IBD is much greater than it would be for the corporate financial analyst to make it to the executive level?
To be fair, I know how much my boss's boss makes because its public info.
You'd be shocked at how many important internal documents are left perfectly visible around the office. Once I was at an ACG conference with a packet of 1-page marketing materials with an overview of our investment strategy / portfolio. I was flipping through the packet and sitting in the middle of it was a print out of my PE firm's entire P&L for the year.
To be honest, there are many more careers that have better long term payoff compared to the hours put in to start.
You can start a company work banking hours for the 1st 3 to 4 years after it has grown and you have people working for you doing most of the work it turns into 20 hour weeks. If you go into the right industry and grow at a sustainable rate you can look at a 100+ million dollar pay out when it comes time to sell.
right... because the MDs aren't lying to their wives or mistresses about their income... that never happens ever
hahaha this post is full of sour monkey bull shit
I would never lie to my wife (although I'm just a college student)
These threads are endless. Banking pays above average and works you above average. You'd be better served starting a company or inventing something, but not everyone can or wants to do this. If you are going to be a wage slave it is good to be a well paid one.
Also add the intangible benefits. Banking opens doors in other careers and is great for B school.
That's exactly how it happened! Lol no but word does easily get around especially if you're in a lean team. Point taken tho.
I was under the impression that after Associate 3 year is complete, you'll be a VP\Director for 4-5 years before being promoted to an MD. I personally dmt care as I wouldn't stay past my analyst stint anyways, but please correct me if I'm wrong here, I should know what the hierarchal timeline is
Solution: duel incomes in a lower COL city (Texas, Chicago). $250K between 2 people working 40 hrs/wk can absolutely afford someone to have a nice house and nice cars, if they choose. Just don't marry a lazy gold digger and you're all set. I agree that it's a trade off and you'll probably never be private jet rich working a "40-hour week guy job", but you also won't be working 90 hrs/week for 10 years in the hopes of potentially getting anywhere remotely close that level. To each his own...
Depends if people like you, and once you reach VP you actually have to create business not just do the grunt work.
Can anyone talk about exit ops? Is it same as analysts? I hear that since associates are expected to stay in banking more vs analysts, going to buyside is also harder.
This is what everyone wants to do, lol
Starting your own $100MM+ business is easy, yes?
Also interested in this
Do people really think it's easy to start up your own company and after 3-4 years of hard work you can coast into 100MM+? I really hope that nobody here thinks you can just ride the lazy river into a company where your payout is over 100MM+. Just using terms like, "If you go into the right industry(...)" doesn't help explain all the failed companies.
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pls by all means, start a business and become next bill gates and the google guys. why stay in school or go to one for that matter, facebook dude makes it rain everyday
I never said you could sell in after 4 years and make 100mm+. I said you can start a company work your ass off for 3-4 years. Then cut your work down because, lets face it if you are around after 4 years your company is likely to be successful enough where you can hire people to do a lot of the work. Now lets look at valuations, it is common to see start ups having valuations as high or higher than 25:1 for a company in an aggressive growth industy. Now I am not sure if I passed 3rd grade math but that would mean the company would have to have earnings in the 4mm/year range. Not exactly setting goals that would reach the moon there are we? However in more realistic terms you would be looking at selling at 4 or 5:1 earnings if you were selling. If your company was still around after 10 years many non mom and pop retail service/shop could prob reach 20mm a year in sales. Just because a company sells for 100mm does not mean the owner will see every dollar of that in the sale. Most of the time a big chunk of that will go toward settling outstanding debt services.
Actually most start-ups fail. Going to a start-up is not a ticket to riches, more like a lottery ticket. I think Marissa Meyer turned down a job at McKinsey to be employee 13 or so of Google. She is obv. brilliant but she also got lucky a for most people McKinsey would have been a better option
This is not to say that if you go to Goldman and then Warburg Pincus you will be rich as all jobs are pyramid structures where few make it to the top. If you look at corporate development teams/strategy teams, there are usually people who work at top firms and then go and spend 5 years as a senior manager and not get promoted.
Though to be fair if you make it to senior manager at a Fortune 500, you are looking at at least 160K which if you are not in NYC, and have a spouse that makes about the same. You can live very well.
Everyone dreams of being the guy in the next big start-up or the partner at Mckinsey/Silver Lake or MD at CS but few are ever going to make it to that level. Most are going to go work in corporate and few in corporate will make it to senior management.
Just work hard, do your best and hope luck is on your side.
This is absolutely true. But I also think very capable/hardworking people create their own luck to a degree. Even if things didn't work out for Marissa Mayer at Google after turning down McKinsey, I think she would have found a way to be quite successful regardless.
Associates generally have far fewer exit opportunities. After your analyst stint, the competencies of an IB Associate start to diverge from the competencies of a PE Associate. In IB, you're working towards becoming a salesman, whereas in PE you're working towards valuing companies and managing a portfolio of businesses. While post-Analyst exits do happen, they are fairly rare and continue to become rarer as you move up the chain in IB.
If you want a few examples of small companies that had massive growth in the telecom industry look at Centurylink. Less that a decade ago they were a small regional telephone company in the Louisiana area. The guys who started the company are the definition of redneck. Really great people but definitely would rather be out in the woods drinking and hunting but mostly drinking.
The skillset is different, but the networking skills required are similar - you can definitely still make the jump to PE as an associate, it's fairly common and a lot of PE firms like it if you have more experience. I think it all depends on whether or not you're an associate who had the analyst experience or a post-MBA associate.
So what? A good DJ or club promoter in Miami or Vegas can make a lot more than that while having fun. And please do not tell me it takes extraordinary skills like in the case of professional athletes.
http://www.celebritynetworth.com/articles/entertainment-articles/the-ri…
I am wondering about post-MBA associates with no prior IB experience except maybe internships during MBA. Is the recruiting process still 2-3yrs as associate and then PE as associate? or will it be a lot less structured and most people get in through networking.
An Associate buddy of mine at a BBin their LevFin department is someone as you describe. He told me he is getting the bump to VP this year if he stays and if he wants to pull the trigger on an exit to PE he would have to do it this year since a VP level to PE is even harder than the Associate to PE jump. He is using a recruiter right now with limited success since he is going from east coast to west coast potentially.
I think since he is in LevFin he has a bit of a leg up due to his technical experience.
People on this site who actually think that entry level IB pay is just above poverty line in NYC are delusional. Coming out of college and even making a flat 65 or 70k/year is more than enough money to live on in NYC. I'm not sure what kind of living standards you guys are comparing to, but IB analysts are sure as hell way above the poverty line.
So, what are the exit opps for an IBD associate coming from MBA with no prior IBD experience? And is 31 too old to begin as an associate out of MBA? I am 29 and will be matriculating this fall
No you're fine, there are plenty of associates in their 30s (mine included).
No one is claiming poverty, however the pay does not give you the ability to live the kind of lifestyle that the rest of the world thinks bankers have.
Okay, that is certainly true I guess. You certainly live a lot better than most any other recent grads working in NYC though. And I hope nobody misinterprets me when I say "live".
That's because most people don't think of 22-year old when they think of "bankers".
Calling it "fairly common" is pretty generous, in my experience. It's much closer to "fairly rare". It's certainly possible, but far, far less frequent than analyst to PE. Considering that most (yes, most) BB analysts don't even get PE jobs, you can see how the odds are working against you as an associate. More importantly, you'd be making a lateral move to PE (associate to associate), and likely trimming a couple years off of your promotion schedule. Also, associate roles at PE funds are generally pre-MBA positions, while associates in IB are post-MBA positions. Once you consider all the facets of this switch, it's less simple than it might seem.
I see more of it in the MM funds. Would agree for megafunds.
I would argue it's pretty rare even in the upper-MM funds (think Berkshire, Lindsay Goldberg, etc.), but agree that it's probably slightly more common in the mid- to lower-MM.
But you're also on the inside looking out, which inevitably leads to skewed statistics (i.e. "Look, 1 of the 10 Associates at my MM PE firm was a former IB Associate, 10% isn't that uncommon!" vs. "3 of the 300 Associates at my BB have gone to PE in the last 2 years"). Keep in mind that only ~30-40% of analysts on the street will land in PE gigs after their stint. Those odds already aren't great, leaving the odds for an associate at somewhere around "pretty grim".
I agree, just pointing out that I think because the MM funds are less structured (particularly the lower and mid-middle market shops), it is easier to network your way in there.
I'm thinking of the groups that target $5-$30 million EBITDA (or below).
I get the feeling that we are working under the assumption that 100% of analysts want a PE gig. That in of itself is working under false a pretense.
Totally true, but I guarantee you that the hit rate hovers at ~50% for BB analysts that are shooting for PE.
Nails it again. I've decided that instead of commenting on threads that I will just seek out CompBanker's response and confirm that it mirrors my own thoughts, lol.
While there is something to be said for the hourly pay comparison, as Comp points out, it's misleading. You may be earning money at the same rate, but you aren't earning the same amount.
Hypothetical question might be...would you rather have 4,000 hours a year to spend $25k or 2,000 hours to spend $100k??
Regards
I do know that at some places, in some groups, you can get a good idea because the MD might get a percentage of the fees brought in and the lower level people could get a good idea of what the group's fees would have been.
Regards
How about 8,760 hours a year to spend 5mm+? That seems like a better choice to me.
That what you pulling in these days heister? Good for you man.
Oh yeah. Where's the sign up sheet?!?!
I probably should have been a little more clear, but I was attempting to illustrate the amount of excess income you would have and the amount of free time you would have to spend it given a 40 hr. per week, $100k per year job (assuming you spent $75k on taxes and expenses) vs the 80 hr. per week, $200k per year job...or, as the OP said, 'normal' vs. 'banking'.
Clearly that gets even better it gets much better at the more senior ranks. And I really have no idea how much free time you would realistically have at any given level but I did a round calculation of a couple hours a day and a couple free weekends per month as a banker vs several hours per night and totally open weekends in a typical 9-5 scenario. The numbers are probably very inaccurate.
The point being, working 9-5 isn't as great as many people make it out to be. The problem being, as previously alluded to, the income isn't very linear. In a sense you either work a lot and make a lot or work a little and make a little, with some exceptions in between.
I've opined on this before but, I think there is something to be said for limited free time. Of course, most people feel differently when they are stuck in the office until 3am but I just know too many people that have 'ok' lives but aren't really living. They go on 'ok' vacations several times a year but they are nothing to write home about. I have a couple of friends back in FL, who are married, that go to a Disney resort and sit by the pool a couple weekends a year and they go on a couple cruises and sit by the pool a few times a year and spend a few weekends a year at the beach sitting by the pool and a bunch of weekends sitting at their parents' houses, sitting by the pool. Sure, sitting by the pool is much better than being in the office on a Sunday, but the vacations and adventures you can experience with the money being made in banking is something they won't do but once in a lifetime, whereas you might do it once or twice a year. To some extent I think the overall experience is just significantly greater, not to mention you value that time more because you have so little free time. I have friends now that sit around for 30 minutes trying to decide what they want to do on any given week night because they are bored. Ultimately, I think I would rather spend $10k or $20k on one epic vacation and one mini vacation per year then spend $4k or $5k on 10 mediocre vacations per year. Also, it's worth pointing out that you also live your day-to-day lives a bit 'better' in banking because you enjoy 'better' food and take part in 'better' events or, at the very least, similar events in 'better' conditions (first class, club level seats/suites, etc.)
At any rate, if you have any extra $5mm job opportunities laying around, let me know, lol.
Regards
^I already said this before, but so what?? A lot of promoters, DJs, or clubs entrepreneurs make way more money than any ibanker and spend time at work around models (not spreadsheets). They are not athletes, and it doesn't take any studying or amazing skill to get there.
LOL @ "a lot"
Almost every sentence in this post is wrong.
Have you actually met anyone who started a company, was able to chill out 3 years after starting it with 20 hour weeks, make $4m of Net Income (you seem to think that's a tiny figure; it's not), then managed to get a 25x multiple and sell it?
it's not a lot. but, yes, i get it. there are better jobs than being an ibanker if you're great at what you do.
Only the absolute best (in terms of skill, luck, and connections) in the jobs you mentioned make any money, though. You might as well just tell someone to become a world-class author, athlete, or entrepreneur. The odds against you becoming a real-deal club promoter or DJ are frightening.
"Guys, going into finance is stupid. Just become the world's next Avicii. It doesn't take any skill or studying to get there."
i always kind of wondered about this issue as well.. i heard that the majority of post mba ibd associates wash out of industry in just 3-4 years, either due to being burned out, or not making the cut to the 'up or out' machine that exists in consulting/ ibanking.
after that, most of these guys would end up doing something like corp dev/ biz dev/ corp finance or something at f500 company, I'd think. while this 'exit' op provides decent money, most ib associates would be taking a big pay cut to go in-house at f500 companies, i.e they aren't making ibanking money after their stint in IB is over. since we know that most of post mba ib associates won't have exit ops to high end PE firms, we can disregard that possibility by large.
so, for the majority of those entering mba in hopes of breaking into IB, I am wondering if it's worth it. to get into a top biz school, you'd need to have a decent job/ career to begin with, and you'd be making at least 80-90k a year by the time you are going to b-school. add 2 years of opportunity cost + 150-200k of b-school tuition + hustling/ networking like crazy just to land at IB and work in the industy for only 3-4 years before washing out... I am not really sure if this is the way to go. or am i missing something here?
btw, from my experience, the richest/ happiest people i've met are people who own small family businesses, make tons of money, buy buildings/ real estate, rent them out, and make loads of money with minimal work. my high school friend's dad owns a 6-men 'real estate' business where they buy a house for real cheap, repair it, and sell it for much higher price. (called 'house flipping') this guy works 30-40 hours a week at most, owns 3 mansions, drives a ferrari, and plays golf 4 times a week. my friend told me that his dad, at one point, made 7 million a year. he used that money to buy a building, and rents the space out to small businesses. basically, even if this guy retires, he has more than enough money to maintain current lifestyle, just based on the current income flow.
i once saw a study that suggested that the overwhelming majority of millionaires in this country are small biz owners. we all dream about becoming the next partner/ MD of an elite firm, but we'd need to compete against the best and the brightest and slave away for a marginal shot at it. the caliber of workforce in IB/ consulting firms are very high, and only the very top few guys of this pool make it to the top. One MD I talked to said something along this: "If you have what it takes to make it to partner level at an I-bank, you've got more than what it takes to be successful in most other fields'. The more I think about it, I think he's right. I am beginning to think that there may be easier ways to make big bucks than IB.
hose flipiong isn't ez, typicaly requires ltos of capital - also if mkts tank like in 07-08, you're screwed and take a big loss (since it's all your ohn equtiy . )
Though in bull mkts, ez retrn - plus if u live in it 4 a wile, no cap gains tax !
Yes, while some of the numbers I gave were slight truth stretchers, i.e. the number of hours you would work after a few years, the point I was trying to make is that there are other paths that allow you to have returns on your work like the upper level bankers have yet have more flexibility with out having to completely sacrifice everything in your personal life to meet the work demands. I personally know a couple of handfuls of people who have started various pharmaceutical, manufacturing, internet companies who have achieved success like I listed and now work around 35 to 40 hours a week while their employees do the heavy lifting.
I think what a lot of ppl here are missing is the execution - it's easy to think of an idea, but difficult to successfully execute w/ an efficient biz plan. plus since most IBD ppl are risk-averse, it makes it that much more difficult.
Personally also know some ppl who have started successful biznesses that pull in quite a bit of money, and they have excellent lifestyles.
Exactly, I think many people are assuming I am saying it is easy.
You know who else makes a lot of money with minimal hours? People who win the lottery! Let's all start shooting for that.
The point is: IB is a sure-fire way to make a lot of money, being an entrepreneur is a long-shot at making a ton of money but in all likelihood making nothing. Sure, there are plenty of other things you could do and make as much or more, but those are extremely difficult and involve a load of factors that are out of your control.
I wouldn't use sure-fire - rather, it would be "more of a sure-fire way than entrepreneurs"
Try telling this to the macquarie cap analysts who got $10K stubs, or the UBS kids who got cut a week b4 bonuses.
We also have to look as sustainability. I have a few friends that are club promoters and they make decent money and have a blast. Problem is, they have to be out drinking several nights a week and at beach themed parties on the weekend. Of course that sounds great right now, but what about at 35 or 40 or 45 years old? They aren't making enough money to cash out and retire early, so they will have to stick around and live service hours and be out until 5am or 6am Thursday, Friday, Saturday nights plus work Saturday and Sunday at the day parties. Not an easy life by any stretch of the imagination...at least not after 30.
Regards
This is just so silly. You're using the word "sure-fire", then applying it to an example of what happened to
sure-fire is by def 100% , so not too off. also u act liek bein in IB is a guaranted whey to make $$$, when i nreality that is not true at all ; if u tink selling products and having to meet increasing fee figuers every year is ez, think again. Theres big diff between pulling comps/valutation and selling/wine/dine clients
If u've never been in sales u don't know how diff it is to keep clients/not gte poached - it's far from just sitting back on a massive client list - u'r constnly under prezzure to perform and exceed expectations, which sounds ez in a bull mkt but sucks in a bear market where no one wants to pay fees and all firms are overbanked
For most people, I would say 'yeah'.
For many people the real key to success and happiness is controlling your expenses. Outside of the largest cities, the money you make, and hopefully save, will put you on the right track to financial freedom, even if you have to bail on IB after 3 years because you hate it or can't make the cut. You can earn enough to purchase a house or investment property or have cash for other investing activities.
Also consider that many people reach an age where they want to settle down and start a family, so IB hours might not be conducive to how they want to interact with that new family and they might be looking for less time intensive work anyways.
As some of us mentioned before, earnings aren't necessarily linear, so it's hard to find the job that provides the perfect amount of income but only requires the perfect amount of time at work. What you find with corp dev and corp fin roles is that you are generally somewhere in a happy medium with input and output. Maybe $200k or so per year with 50-70 hours a week, likely closer to the lower side than the higher side except when you have a project or investment going on.
$75k is often cited as the amount where the happiness provided by an additional dollar begins to diminish. You figure between a husband and wife, you could bring in $250k pre-tax, have a home (which you bought with your IB associate bonus money) and live very comfortably in virtually any city short of NYC, Chicago, Boston, LA, SF and Miami.
Essentially the path you described affords people the opportunity to 'get ahead', even if they don't stay on that path. The money made over those 3-4 years should cover the cost of your school debt and give you a good bit towards a house, depending on your taste. Those are often the two largest expenses for most people, which you could virtually eliminate...or significantly reduce...which frees up monthly cash flow for fun or investments...or maybe saying 'fun' and 'investments' is redundant to some of the monkeys here.
Lastly, consider that most people entering into IB post MBA did not work in IB or PE before hand, nor did many of them have top notch careers that they loved. Many folks were not making the $90k you mentioned and many of those folks would have no choice but to sit in a stagnant job with capped earnings and little upside if they didn't go the MBA route. From there, the money and appeal of IB and MC grab those students' attention.
At the end of the day, getting an MBA and going the IB route is a gamble but in most MBA student's minds, they must feel that the risk isn't larger than the potential reward and, at the very least, they are making $30k+ more than they did prior to bschool and now they have placed themselves on a better career trajectory.
Regards
mudkipz is right. While your friend's dad is no doubt enjoying life now, you have to bring his whole experience into perspective. Most people here would step in and take that guy's life/success/job/situation, but chances are he didn't start there and, unless very lucky, didn't just cruise into making millions.
Anybody who flips houses knows that it is capital and time intensive, which causes a ton of stress. The benefit your buddy's dad has is that he now had capital, presumably in the form of rent from the building and the money made from a booming market years ago. If he wasn't flipping houses at the right time or in the right place or hadn't purchased that building and didn't have that stream of income, either because he didn't see the value or didn't have the capital at the time, his life might be significantly different right now...primarily significantly more stressful.
I actually love the idea of flipping a house for a living, but the fact is, when you first start out, you are straight gambling with all your dollars. And as real estate guys here probably know, if you don't have your capital at risk, you are not maximizing your return...which often leads the RE guys to put all of their winnings on one project over and over and over until the profits made can sustain more than one project at a time. Granted, this is a bit different with residential real estate, but still not far from the reality of it all.
This same thought also applies to the small businesses that are referenced. I work at the lower end of the middle market and get to see these types of businesses all the time. Just some dude that didn't do well in school, started working for a guy doing whatever and decided he wanted to be his own boss, so he saved up some money bought his own truck/trailer/machine/whatever and started off on his own. Eventually he hired a buddy and then another guy and then some more people and one day he wakes up with a business that is pulling in $3mm-$5mm of EBITDA and the dude never stepped foot onto a college campus.
And, of course, the guy works minimal hours, runs all of his expenses through the business...to include season tickets to the local sports teams, his 'company' vehicle, some travel and dinner, etc. On top of that, he spends a fair amount of every week fishing or hunting or golfing or doing a whole lot of nothing. Again, most people here would love to have THAT gig, but what they don't want or don't realize they don't want is the tough road it took to get there, which might include 20 years of not making hardly any money and then 12 years of growth. Or they don't want the risk of going out on their own, or they don't want to own a pool cleaning business or a landscaping business or whatever.
The point is, we often see the good in what people do. We see all the awesome vacations our 10 closest friends take and then convince ourselves we are doing something wrong because we didn't make it to Hong Kong and Vietnam and Argentina and Brazil this year...when in reality none of them did all of those things either. In the same vein, we look at some uneducated redneck and say, 'Dang, I wish I was in his position making a few million bucks a year and not working very many house.' but what we don't see is all the hard work that went into getting to that point.
Anyways, IvyGrad, you are absolutely right. We've managed to get into a field where the deck is stacked against us and sadly it's taken a few years for me to figure this out. In banking, you will always have to put in some decent hours at odd times, here and there, because it's a client service business. This isn't the case with thousands of random business in the manufacturing industry, etc. I've slowly shifted my goals over the years and have looked more and more towards entrepreneurship in these unsexy industries.
My goal at this point is to get my MBA, spend a few more years in finance and then take it from there. Two options at that point will be to continue with finance because I enjoy it and make good/great money or jump ship with my seed capital and work for myself. One entrepreneurial path is purchasing a business, growing it, increasing efficiency and then flipping it. Then do that again and maybe again until you have a company that earns a few million bucks a year in which you can outsource the decisions to management and step away for the most part.
Regards
Agree with pretty much everything you said in the above. I constantly have to remind myself that perspective is everything. I am often envious of my friends' carefree lifestyles, but have to remind myself that they rarely save any of their take home pay and struggle to pay the face value price for tickets to music festivals I often buy a few days before at a 100% premium because "I happened to get the weekend off." I have to remind myself that while there will always be stresses in life, that I am making short term sacrifices to improve my long term happiness... but I still need to make sure that I don't forget to have a little fun in the present when I can.
It's easy to sensationalize what others have... it's similar to the swan on the pond effect. We see the swan gracefully gliding across the water and it looks effortless, but we do not see how intensely their legs are working below the surface. I like it when people say that my life looks easy because I know how hard I've worked for what I am fortunate to have.
thx 4 the vote of confidence cphbravo96 - it's imp to not get sidetracked by prestige, always have your own goals in mind - in reality no one will give two cannoli's in the future what you do or how much u mkae, you only have u r self to live w. .
Personally I feel if you aren't making your money via personal business or real estate you are doing it wrong. But thats just me.
I know many kids making 80-100k a year thinking about going to a top b-school, so that they have a shot at craking IB associate gig. For example, my friend works at Big4 accounting, he's a manager level there, and he already makes over 100k a year. yet, he's still thinking about going to b-school in hopes of scoring an IB job. Also, I know tons of people at 2nd/3rd tier consulting firms wanting to go to top b-school, despite enormous oppotunity cost, to have a shot at MBB or BB IBD.
The piece I find puzzling is that, even if these folks go to top b-school and end up with BB IBD, dollar-wise, they aren't winning in the long-run, since most of them won't last in IB more than 3-4 years and will end up with F500 corp fin/corp dev jobs that pay about the same as their pre-MBA 'old' job/ career, anyway. Plus, factor in 2 years of opportunity cost of B-school + 200k in B-school loans, and you see where I am getting at.
There are too many people both on this site and in real life (esp here in NYC) that go crazy about dropping the name of BB IBD/ MBB and think these careers are sure paths to wealth, but that just isn't the case, when you consider that 80-90% of post MBA IB associates won't last more than 3-4 years in the industry. Either they burn out working 90 hours a week, or they get 'up or out'-ed.
IF you make MD/Director/parter level, then yeah, all this worked out really well for you. However, if you have what it takes to make it to MD level at BB IBD, then you probably had what it takes to make big bucks elsewhere anyway.
They still come out ahead...
Fair points. I guess I see a lot of folks that might be at the $100k mark pre-MBA but there are many others that aren't as close, so they see a clear(er) benefit in going back to school.
I also think there are tons of people in slightly different scenarios and they all have different personalities, thus different things motivate them. For some, going back to school might be an adventure, others want the knowledge, some people see the value in the networking opportunity, some people hate their current field/industry and 'have' to change, some folks just don't like sitting in one place too long...so there are many different reasons, some that seem more reasonable than others given our own personalities.
Ultimately, and I'm no expert, I think the post-MBA corp dev guy, especially if he spent 3 or 4 years in IB, will be making a fair amount more than the accounting manager that stayed in place...not even counting the sizable bonuses he would have pulled down over that time. Of course, you would have to make the assumption that the accounting guy had the opportunity and was able to continue up the ladder, which might not always be the case. In a sense, we are taking a downside IB scenario and comparing it to the upside accounting scenario. Then you have to consider that the person might hate their current job and that bschool is a way to re-brand themselves and get access to jobs they didn't know existed when they were coming out of undergrad.
And clearly none of this is hard science, there's a lot of art involved in the decision making process...which is where individual personalities come into play. For me, going back to school makes sense because of my personality and my view of my particular situation. I find value in the knowledge I'll get from the classes because I may want to run my own business one day. I also find value in getting the traditional college experience, which is something I missed out on in undergrad because I was a military veteran, 4 years older than my classmates, lived off-campus and commuted to school. Admittedly, those are only small factors in my decision, but factors nonetheless. I also see a tremendous value in diversifying my professional network outside of private equity/finance. Lastly, and most importantly, I'm in an odd position with my current gig. I am paid less than market because I'm at a smaller fund in a regional market and was hired out of undergrad during the recession. We are also nearing the last year of the investment life of our fund, which means there's lots of uncertainty on the horizon. With 3 years of experience, I could sit tight and spend another year doing the same exact stuff that I've done since day 1 or I can find new opportunities and experiences. Given the market, fund raising could be an issue, which means my current fund could end and the new fund not get up and running for any given period of time. Then, even if we do raise a new fund, there is no telling how large it will be or whether there will be room for me, etc. Essentially there is no guarantee, so bschool is a nice, albeit expensive, hedge.
When I think about it I say, hey, I can leave now, spend the next two years in school and, by then, the new fund will be raised, hopefully, and I could have the opportunity to come back...BUT...I'll have more education and a larger network. Since both of those things are of value in PE, I will be in a better position to negotiate market compensation and equity upside (how you build wealth in PE) than I was coming out of a no-name undergrad with virtually no experience. Not to mention I will have the opportunity to intern somewhere else if I want and have access to other job opportunities. Additionally, as I mentioned above, I went to a no-name school and work at a small fund, which really hurts when recruiting for new opportunities. At least coming out of school I will have access to IB jobs and potentially larger PE funds that might give me greater consideration given my MBA...maybe, lol.
Other things to consider is that the debt load might not be as large as you think. Most places I've looked, students graduate with an average debt load near $100k, not $200k, which is still nothing to sneeze at, but certainly makes a difference from a numerical analysis/opportunity cost standpoint. $200k is generally closer to the total cost of attendance, which includes food, utilities, rent, car, etc...all things you have to pay for regardless of whether you're in school or not. You also can pay down some of the tuition/debt with proceeds from your summer internship. But, your point is taken. It's not an easy decision and not one that people should make flippantly.
Regards
I agree with this sentiment. I think most people are condition, from a young age, to avoid risk...which isn't always a good thing. You see this in families where the mom and/or dad are entrepreneurs. How much more likely is it that the kid(s) will also be entrepreneurs? Probably significantly.
For many people, you are taught to go to school, get good grades and become a doctor/attorney/banker/accountant, likely dependent on the industry your parents work in.
Anyways, I think working for yourself is the most efficient way to make money but feeling comfortable with that risk or knowing how to go about it can be difficult. At this point, I'm slowly easing myself into the shallow end, lol.
My ultimate goal is to make my children, if I have any, aware of both paths in life, not just aware of the different jobs available down one of the paths.
Regards
Yes - being an entrepreneur doesn't necessarily mean you have to give up everything and dedicate all your efforts into the business or idea; sometimes this can backfire - what's more important is the right state of mind, management, and setting achievable goals.
You need to jump in cannon ball style. If you loose a couple thousand dollars big deal, the experience you gained will be worth far more to you and your career than the money spent. People who pay money to get their MBA most likely would be better served spending that money and trying to start a business. School doesn't know jack about the real world.
To that I would say 'yes and no'. I think working in and around a business is a great way to learn about that business. For someone like myself, who is currently 30, I don't have 10 or 15 years to spend learning the ins and outs and working my way up. Instead, I hope to efficiently use my acquired skillet, finance, and make some seed capital to get myself behind the wheel of a functioning entity, one that I can apply that book knowledge to in an effort to grow the top and bottom line.
Also, I don't have $100k that I'm spending on school, I'm borrowing it...so directing it towards business opportunities isn't a reality.
Lastly, I'm not an overly creative person, so drumming up a business idea that you can start for a couple grand isn't really in my wheelhouse. I mean, I do have a few novelty ideas that could net a few thousand bucks per year if I can get a product produced for a fair sum and get a website up and running but, by itself, it won't pay the bills much less allow me to retire.
With that said, I will also say that I think entrepreneurship is mostly a mindset. You will see someone start with a random, small idea and then do something else then something else, etc. until they have a worthwhile business.
My thought is that I'm not trying to reinvent the wheel, since I see it as an uphill battle. I want to earn some money, potentially take on some leverage, acquire a business that works and that will provide a/an (relatively) indefinite stream of income.
Regards
Having the required capital is not your biggest concern, having the knowledge base, technical skills, communication skills, sales skills and guts are your biggest issues. The money situation can be solved rather easily with a solid business plan and connections. I read on average one or two business plans a week from people seeking money for their start ups. 90% of them have no shot in succeeding due the the quality of their business plans. But there are some that based upon reading their plans I would consider providing loans or taking on equity to help the project move forward. Money is easy to find if you can prove you have your head on your shoulders right and have a plan to go forward.
I think the mods should c&p this response to every single thread like this made ever again.
Thanks for the thoughts, everyone. This is the kind of info I was looking for. Agree that it is what it is and the debate can end. With that, I will not be pursing IBD Associate roles post MBA.
Gr8 keep us upd8ted!
i agree the "nyc is unlivable" complaint that is constant here is way overblown for analysts and all single people generally. When i was just out of college i lived on 45k/year in manhattan and was fine...it wasnt even really that hard. Where manhattan is a problem is for married people who have single income households and want kids...if u r making less then 500k/year and your wife doesnt work you really dont want to live in NYC with kids.
right. what i am saying is that the high pay in IB is not long-term, but rather short-term deal for 80% of IB associates post MBA. hence, if the big paycheck in IB is the only reason you are pursuing IB, you are doing it wrong.
like i said, the vast majority of post mba IB associates last only 3-4 years in IB, and they either burn out due to ridiculous hours on the job, or they get asked to leave due to 'up or out' policy.
many of ex-bankers take a huge paycut to go in-house, doing corp dev or corp strat, and these jobs don't pay much more than many of the "typical" pre-mba jobs/ careers, such as 2nd/3rd tier consulting, big4 accounting, engineering, other finance, etc.
what i am saying is that people who are already making over 100k a year before mba, doing whatever job, maybe making a mistake going for a top MBA, incurring huge debt, so that they have a shot at an IB job. IB pays nice, but you are essentially working two 'normal' jobs (in terms of hours and workload), and most people don't last very long in this job. for example, i work at a consulting firm and while i make no where close to IB associate salary, i make close to 100k and work 40-45 hours a week. I think i would rather make 100k working less, rather than make 250k working 80-90 hours a week. this aspect of reality, imo, is something that deserves more attention amongst people in general.
I really don't think you have any idea what you're talking about.
There are tons of other careers where you make just as much as IB.. Go into IB if you love finance and deals, not because of the money
Can you realistically expect to get to MD level 3.5-5 years after you become associate? I was under the impression it only happened in very few cases.
IB money Really?? (Originally Posted: 05/01/2015)
Now the real question is HOW MUCH would I really make at IB and HF realistically and in how much time?
Major in Health Care management and Real estate, work with family
do that, youll make much moar
"prospective Wharton undergrad student"
Definitely go with healthcare. The world will need it since this post gives anyone who reads it cancer.
I'm a prospective billionaire. Would you recommend maxing out my credit card this weekend to buy a front-row seat at MayPac, followed by going balls deep at Tao afterwards?
I came on this post just for the responses, thank you CRE and broadstbully Where as for the troll who posted this drivel go wank some more, that's what the internet was invented for.
not a troll post at all why is every one thinking that? Seriously....
In all seriousness, go work with your family. If you recruited for IB, nobody would hire you regardless of your pedigree. And if someone let you in the door, you'd be out pretty fast soon anyway. You'll make much more with daddy.
Troll
IB pay in 9-5 terms (Originally Posted: 09/26/2006)
So I was bored, so I calculated the hourly wage from the compnesation database, and then multipled that by 1920(9-5 hours in a year)
1st year analyst $43,142 lower-middle range bonuses(30K bonus + 10K sign on bonus): $38,860 2nd year analyst $52,473
of course the numbers become a little better later on 3rd year analyst $73,843 associate $88,204 (note for this I used 90 hour work weeks)
So hourly IBers really aren't paid that well.
I mainly looked up these numbers due to the compensation thread.
yes, but you also have to include things like free dinners, cell plans paid for, free transportation home, etc.
yes...but if you work 9 to 5: free dinners? you'd be actually home for dinner cell phone/blackberry plan? is for the boss to keep his tabs on you to give you more work to do free transportation? you get it at 2 in the morning, if you work 9 to 5 there is no need for that
i mean lets not fool each other guys, hourly wise the analyst's time is not more important than someone getting a 45K a year starting job out of college.
and lets say we don't even count the bonuses, so 60K+10k sign on = $14.96 per hour, which would be a measely $28,723 at a 9 to 5 job. You could probably make more delivering pizza or waitering.
So I would say bonuses are very important in keeping the analyst pay competitive with the rest of the entry level industry. I mean you can pretty much get 45K with a business major(-marketing) in 90% of entry level jobs.
So in order for the Analyst wage to be competitive to that, considering how many hours analysts work, your first year you should be earning at LEAST $21.63 per hour, and I'm not even counting the monetary compensation for your health, and for having to be on call 24/7, and for having to lead the life style of $2000 dollar suits etc.
So to match a 45K 9 to 5 job, an analyst has to bring in at least 60K + 10K sign on + at LEAST a $37,000 bonus
And then you have to consider...whats the monetary amount you'd put on not having a life, not having relationships, and having to be on call 24/7
No, my point was this:
An analyst making 70k a year (no bonus and a 90hr work week) comes out to $14.96/hour while a 45k job for 40 hours comes out to $21.63/hour.
BUT, you also need to include some job benefits: -Cell Phone Plan paid for: ~60 bucks a month as a source of income -Free Transporation: ~10 bucks a night -Free Dinner: ~25 bucks a night
All those "benefits" are something the 45k worker doesn't get and would consequently pay out of pocket for so you have to add those in as "income" to make things more comparable.
Plus, a $25k puts you in comparable per hours terms.
Like the above posters, everyone knows ibanking isn't that hot on a per hour basis. But five years down the road, it is possible for you to have tripled your salary (from 100k-300k) while your counterpart will be lucky to have gotten a 50% raise.
but also what's the monetary amount you'd put on the experience, network, and skills you develop that will make you in demand to future employers (that will pay more for fewer hours)?
You are correct, hourly analyst pay sucks, the life style sucks, its bad for your health, ect.
However its all about paying your dues, playing frosh/soph before varsity, being a pledge in a frat, crawling before you can walk, get the picture.
What you get is way better exit ops than the 9-5 jobs. Also while you friends are at best get 5% raises maybe hitting a whopping 60-70k after 4 or 5 years, your wages are going through the roof. If your a real stud you'll be making 200k after your analyst stint, or if you don't care about the "best" post analyst jobs you can probably be pulling over 100k but with similar hours to your friends.
Banking for an analyst is a marathon not a sprint.
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