Law to MBA to Banking - Comp Worth it?

Hey guys,

I'm a corporate lawyer right now. Been thinking about getting my MBA and going into banking lately, but not sure it works out financially. Would probably have to take on a little bit of debt. Looking for some advice.

The year I would graduate from B-School, my all-in comp as a lawyer would be about $320k. I've heard/read all-in comp for first year banking associates is like $170k to $250k depending on the bank/your performance. It seems like I'd be sacrificing a bit there, but I know banking comp goes up at a faster rate than law.

Junior partners (age like 35) at my firm start at $1M. Comp can go up a ton after that, but that's just so long from now I don't wanna think about it.

Any advice from people who have had this same dilemna would be much appreciated. I know I'm focusing a lot on comp here instead of substance of work, but that's just how I am. I think I would like banking more for what it's worth.

Thanks.

Comments (49)

Feb 15, 2015

What tier firm. V5? Chance of making partner? Assuming by your comp estimate you must be around 4th or 5th year now, but that pay stills seems high.

Yes, you'll probably take a pay cut for a year or so but then you will out earn the law path in multiples. And that is at a BB - if you go EB no pay cut, or not noticeable.

Let me know of specific questions. Good luck.

Feb 15, 2015

Thanks for the response, CountryUnderdog.

I'm a second year now at a V5 in private M&A. If I went to B-Schol, I'd graduate in 2018, which is when I'd start my 5th year as lawyer. The market comp for fifth year lawyers in NYC is about 320k (could be more if your firm doesn't do lockstep).

So for me, the issue is having a good size savings and $320k income in 2018 vs. having some debt and being a first-year in banking.

Making partner is tough obviously, but so is going up the ladder at a bank--so I figure that aspect kind of cancels itself out. I just want to know that the compensation in banking really is that much better than law before I take a risk like getting an MBA. Were you a lawyer?

Also what do you mean "EB?" Sorry this site has so many acronyms it's hard to keep track. I'm assuming going to a bulge bracket bank would be the most likely route because getting a job in PE would be very hard for me without prior banking/PE experience, even though I do work in private M&A now.

Thanks again.

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Feb 15, 2015

Cool. EB is short for elite boutique, so firms like Lazard, Evercore, etc. they only do m&a and pay more than the bulge brackets. Pros and cons obviously.

PM me and I can give you my story and answer any questions.

Feb 15, 2015

EB = Elite Boutique (firms like Centerview, Evercore, PWP, Moelis, etc.). These firms are notorious for higher base, and all cash bonuses that some BBs like to defer.

One of my best friends is a 1st year M&A associate at a V5 law firm so I've heard about this year's bump in bonus given the market is piping hot right now (mostly impacting A4's and up). Question for OP - do you expect the bumps in bonus and potentially base (base bumps are overdue) in law to keep going or is that unclear? Law salaries could be on a significant uptick, and also, given that you're in M&A aren't you best positioned to make the transition to IB without an MBA?

Feb 16, 2015
CountryUnderdog:

What tier firm. V5? Chance of making partner? Assuming by your comp estimate you must be around 4th or 5th year now, but that pay stills seems high.

Yes, you'll probably take a pay cut for a year or so but then you will out earn the law path in multiples. And that is at a BB - if you go EB no pay cut, or not noticeable.

Let me know of specific questions. Good luck.

I assume OP is 30. He will be 32-33 out of b-school and make VP around 35. In what world would he 'out earn the law path in multiples'? Truly doubt there is such a significant pay gap between MDs and law firm partners, and Sr Associates and VPs, respectively.

There is definitely a case to be made to switch from law to banking, but the difference in pay between Big Law and IBD is not one of them.

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Feb 16, 2015

At a V5 or similar, I agree with you. But lower tier law firm partners aren't rolling in it by any means.

Feb 16, 2015

LiamNeeson- thanks for your feedback. How much would you say a VP at an average BB makes all-in? The odds of making MD and partner are pretty slim, but senior associate and VP are at least reasonably attainable. Again, thanks for the help.

Feb 27, 2015

Agree with this, OP is already making 320k a year. OP where did you go to law school? Do you have any opportunities to either 1. Make Partner or go to a more prestigious firm? 2. Work in M&A law and get closer to the banking side of things to satisfy your appetite for Finance?

In my opinion, going back for an MBA to switch careers to IBD would be a huge waste. You're sacrificing a lot of time and money to basically start fresh as an associate. You'll be older than lots of the guys and you'll be worked hard for a few years until you make VP or higher.

I also don't agree with CountryUnderdog that you'll out earn your law career by multiples. Yes, if you somehow make it to PE/HF/ an elite boutique then maybe you'll be looking at a few million, but that could be 10+ years away and would require a lot of things to go right. You're opportunity cost to go is also easily a million plus so make sure to think about that as well.

More likely, if you go back to an M7, you could end up at a BB and do pretty well, but I'm sure you could get to a similar level of compensation if you make Partner at a decent law firm.

With all of that being said, if Finance is your passion and you really want to go back to B school then go for it. I've heard great things about B school and I'm sure you'll have a fantastic time. If you want to change careers and don't have any real dependents(no family) then go for it. Personally, I would take a long vacation, recharge, look for an M&A law job, or hell even just looking for a job in finance without the MBA, but spening all that time and money for and MBA and moving back 5-7 years on your career growth seems silly to me.

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Feb 15, 2015

Lots of banks are hiring in M&A right now. We would probably hit you back and start you as an A1, but assuming you have good pedigree (S&C, Cravath, Latham, etc., good law school) , no need to go to b-school.

Feb 15, 2015

GS Stairs - Thanks for the reply. I'm def familiar with those firms, just didn't know peopled called them EB's. I think legal compensation will depend on the economy. If 2015 is like 2014, salaries will probably go up 10-15% for all class years. NYC big law salaries haven't gone up since 2007, so you're right--def overdue. But according to some of our clients, this bubble is about to burst, so maybe we'll be in a recession next year. Who knows.

M&A 78 - That's good to know. Thanks for sharing. Skipping $200k worth of b-school + 2 years of no compensation would be a huge relief. Would you recommend I apply online or try to network with alumni?

Feb 16, 2015

Range of VP comp last year was about 350k - 650k. Pre financial crisis it was probably 475k - 750k

Range of MD comp is wider - 750k at the low end to 20mm+ at the high end

You don't come into banking as a midlevel lateral if you think you will peak as VP. Its just not worth it. There are plenty of interesting exits but in my mind, its only worth it if you intend to / believe you can be a sustainably successful MD.

Feb 16, 2015

Data? Last year my BB paid 1st year VPs over 500k and we aren't known for paying top end of market.

Nov 28, 2016

Deleted

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Feb 16, 2015

Data? Last year my BB paid 1st year VPs over 500k and we aren't known for paying top end of market.

Feb 27, 2015
CountryUnderdog:

Data? Last year my BB paid 1st year VPs over 500k and we aren't known for paying top end of market.

I call BS (your original comment that all 1st year VPs at your BB made more than 500K). Let's ignore for a moment that (i) you don't know every 1st year VP at your BB and (ii) VPs aren't going to share their comp numbers with you.

Base salary for 1st year VP is 175K. In order to clip 1/2 a stick or more, you need to pull in a 2X end of year bonus. Very doable, but it is by no means a floor. Not even close. VP pay is much more variable than that of associates. Moreover, for the guys who do pull in a lofty end of year #, a greater component is in the form of deferred cash/stock.

I have never shared my compensation details with junior bankers. Through the years, I have noticed that those who make the most money are also the most tight lipped about it. They guys (gals) who are "killing it" probably got kicked below the belt in a conference room on communication day.

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Feb 16, 2015

It's more performance driven these days, and yes, top guys probably got 700. But lower performers definitely had 3s in front of their total comp

Feb 16, 2015

Out of curiosity, do you have any insight into what compensation is like for MD's at MM firms like Baird etc in Chicago? I've always wondered how compensation differs between MM places and BB's. Do they make up for smaller fees by sheer volume of transactions the churn out? You always seem to be the most knowledgeable person around these threads so I figure you would be the best person to ask.

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Feb 16, 2015

Out of curiosity, do you have any insight into what compensation is like for MD's at MM firms like Baird etc in Chicago? I've always wondered how compensation differs between MM places and BB's. Do they make up for smaller fees by sheer volume of transactions the churn out? You always seem to be the most knowledgeable person around these threads so I figure you would be the best person to ask.

Feb 16, 2015

Have seen top law firm associates with relevant experience lateral over as IB associate, etc. Should look into that as numbers will look more palatable that way (no MBA cost, less time, etc.).

Feb 20, 2015

@"cayo275" I'm interested in VP and MD comp at MM firms in Chicago as well. I'm hearing for a good MD it's definitely $4M+ but I don't know if the median is more like $1.2M or something.

Feb 27, 2015

In my very humble opinion, you don't need an MBA since Banks are now very much recruiting for "Compliance" Lawyers, you could easily find something without getting into much debt

Feb 27, 2015

Had a friend who did law -> MBA -> M&A. Hated it because as a first year associate you still deal with a ton of bullshit work. Ended up quitting and going back to law after a year.

Feb 27, 2015

The comp is going to work out to being similar over a career, it really should come down to what you want to do in the long run.

I would also say there is more of a linear path to the top in Law than in Banking. Law partners have to bring in business just like MDs, but I feel like the very best law firms can almost choose the work they want to pursue. MDs at banks have way more variability in year to year comp and really live and die by deal fees.

Feb 27, 2015

Kind of missing the point aren't you? Whichever one you take you'll make more than enough money. Do the one which you actually enjoy and will wake up happy for.

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Feb 27, 2015

This depends on how much you really know about banking. I say that because my brother is a newly minted partner tech law firm in the Bay Area (MoFo, Wilson, Cooley) and after speaking with him, I've determined that the career bankers are good if they really understand the space. If you don't genuinely like writing S1s and participating in the adivsory process in drafting sessions, your experience as a banker won't be that much better. Think long about what you are doing because IBD is just as political as big law is but depending on what firm you're at and what space you work in, it can be very fortuitous. Yes, the pay can be higher as a banker but VERY similar to banking, if you don't see yourself becoming a deal banker via relationships versus a trasactional lawyer, then you have another problem.

At the end of the day, whether you do banking or law, you need to love the job regardless of the money. Ultimately your all-in comp will be largely dependant on the deals/transactions you bring to the firm, whether you are a banker or a lawyer. In reality, because corporate law is so similar to investment banking (basically counterparts in that you can represent the issuer or the bank in on either side of the table) making this switch seems pointless unless you genuinely like the quantitative side of a deal versus the qualitative/legal side of a deal.

Hope that helps.

Feb 27, 2015

I am all about taking a step back to move your career forward, but why would you want to leave corporate law? IB is not going to be much of a difference. You seem like you are on a solid path as a career, do you really want to start all over?

Feb 27, 2015

Job security is also rough in BigLaw even for a partner (nominal - but not equity):

http://www.nytimes.com/2014/01/25/business/partner...

Feb 28, 2015

Sometimes I feel like recruiters of investment banks are posting on this website with absurd compensation levels, hoping to attract more people to IBD post-MBA.

I do have to concur with CountryUnderdog that the profit per partner is definitely not evenly divided among partners. Almost every V50 law firm has an average profit per partner north of $1 MM+, but - speaking from my own firm - there are quite a few partners making only $300,000 - 400,000, with a few rainmakers making $4 MM+ a year. I would be very curious to see the average salary + bonus of Managing Directors, published per investment bank. I doubt it would differ that much from BigLaw these days.

Feb 28, 2015
LiamNeeson:

Sometimes I feel like recruiters of investment banks are posting on this website with absurd compensation levels, hoping to attract more people to IBD post-MBA.

More like dumbass kids who have no idea what they're talking about or young people who've been working for a year or two and just want to throw out numbers to impress other people. I doubt many recruiters are wasting their time posting on a forum of mostly college kids

Feb 28, 2015

Do you like the law or finance more? I realize M&A is a mix. Just saying that I think whatever you're more interested in you would probably be better at and thus more successful. I'm not so sure you need an MBA to get an IB job with your experience.

Mar 2, 2015
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