Is banking the safest path to becoming modestly rich ($10mm-$20mm)?
Howdy y'all,
I have been thinking about this question for a while - is climbing the hierarchy in a banking group (traditional M&A / capital raising) the surest way to reach a net worth in the eight digits? Of course, the number of bankers who have breached nine figures and above can be counted on one hand, but I have heard many claim that banking still offers the best risk-adjusted return out of any occupation.
I've been thinking about this a lot, especially in the context of weighing A2A versus recruiting for the buyside, so I would appreciate any thoughts on the long-term career implications of that decision as well. I remember a Q&A thread with a banking MD, who claimed that out of all the analysts of his class year, the ones who stuck with banking had achieved the most in their careers. I don't mean to imply that money and career success are the same thing, but it does seem like sticking around in banking offers the surest path to both.
10-20 MM modestly rich lol
Lol. Seems reasonable for the typical successful MD (i.e., not Ken Moelis).
Maybe for a single, fiscally conservative MD at a BB/EB who is 50. I bet you most 40 year old MDs don't have 10 MM saved/in assets, regardless of lifestyle or location. Most of the rainmakers blow money and live in NYC / LA, which really adds up. Factor in all the costs of marriage, children, etc., and suddenly your net worth is probably between 2 - 4 MM. Curious as to what more knowledgeable users have to say
This thread gave me cancer.
Use your modest 8 figure savings to pay for healthcare
I know the information is old but if you read the official court documents for Lehman Brothers it should give you a healthy indication of what pre-recession compensation looked like at the MD level. Compensation may not be quite the same today but the overall structure is mostly the same, the main differences are how surviving banks have moved away from certain LOB and how new regulations shaped their businesses since 2008.
https://jenner.com/lehman/docs/LARRY%20WIESENECK/LW%2000893-00927.pdf
Yeah, what happened to Lehman stock? RSUs became worthless.....
Comp is nowhere near these numbers these days. Take a look at code staff compensation at GS to get an idea of what compensation is like these days.
https://news.efinancialcareers.com/us-en/159654/salaries-and-bonuses-go…
I read a very interesting article the other day. It described the characteristics and occupations of the 0.01 percent and the 1 percent in the United States
http://review.chicagobooth.edu/economics/2017/article/never-mind-1-perc…
In the 80s, medicine, wholesale trade and manufacturing were in the "top 0.1 percent" in income. In the late 2000/early 2010s, it was consulting and banking. Today? Probably tech. Every industry will have its ups and downs (and some are starting to disappear altogether like wholesale trade).
I am a small business owner and I know many individuals who are worth 10m-20m from my parents generation, a few worth 100-200m. Many of these small business owners made their money during the 80s and 90s in industries such as wholesale trade and manufacturing. How did they achieve such a large net worth? They all invested wisely and diligently in real estate and stocks over a 30-50 period! In fact, many did not have a college degree. Many worth 10-20 million haven't cleared 250k in a single year! But they all lived below their means. They drove old cars, lived in average houses, and never felt pressured to prove anything to anyone.
Can the same occur today? Sure, but it will be much more difficult in industries that are on a structural decline. In the small business world, tomorrow's wealthy will probably be compromised "e-commerce" entrepreneurs, blue-collar businesses, etc. . In the corporate world? Probably the tech guys. We also lived in a society that promotes conspicuous consumption (Instagram, etc.). Millennials are saving less than ever before in combination with high student debt.
The safest path to becoming rich is to do what you love and to invest wisely/live frugally. There will always be large old economy conglomerates that will need a CEO. Some of the large bulge brackets will always exist and need a group head for their FIG group. Its much harder to get rich in these industries than before, but still possible if you are the best and the brightest. Try to also think about the longevity of your career. Live a miserable life for 33 years to hit 10 mill by 55 and subsequently retire, or do a job that you enjoy and love (although lower paying) to hit 10 mill by 65.
https://www.businesswire.com/news/home/20180110005313/en/Discover-Study…
I'm reading this right? Most of the bonus was in stock? Yikes
The full report was almost 300 pages, not everyone may see it as relevant but it is an interesting look at how things used to be. I only linked the equity payout charts and depending on your idea of "most", yikes indeed.
Consulting is the safest bet. You'll earn less than in banking pre-partner/MD, but making partner at MBB is much easier, than making MD at GS/MS/JPM. Why?
Firstly, there is a lot of scarcity in consulting in terms of talent. For instance, if you choose to focus on digital at an MBB and you're a top performing consultant, it's pretty much a given that you will make partner.
Secondly, MBB is much more flexible in terms of location. A lot of high growth offices are really struggling to capture talent, which means that it will be even easier to make partner there.
Thirdly, MBB is much more patient with consultants, i.e., if you were a performing well and suddenly hit a slump, people will actually make an effort to help you - it's less of a cutthroat culture.
Not the career I chose, but if you want to be rich with very low risk, just go for MBB, preferably in the UAE - probably the best paying gig out there.
I recall an old saying that goes "hedge funds were set up to make 1 guy a billionaire whereas banks were set up to make a lot of people millionaires." Buy-side comp is not as great as many people think and you only get real upside when you get linkage to P&L or you become a partner in a fund. You also run the risk of getting pushed out if the fund does poorly or if you stop generating money making ideas.
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