Lazard MD's compensation vs KPMG Partner's compensation

So i have been arguing with a friend about this topic and he says that a partner at KPMG in NYC or Toronto which (he says takes 10-12 years to get to this position) makes more money that an MD at Lazard. What do you guys think?

 

I'd say partner takes more than 10 years to get to. I've never seen a 30-32 year old partner. I am sure there are exceptions, but going by the sheer number of grads joining the Big 4 firms compared to number of people entering i-banking, it seems like you'd have to go through a longer selection process. But maybe someone who actually knows about this stuff can make it more clear :)

 
Best Response

Are we talking an audit partner? Having interned at the Big 4, I can tell you this: I know from very reliable sources (managers to senior managers in audit(2 steps and 1 steps below partner)) that they only cleared about 150K and were waiting until partner to bring in the big paydays which they had heard was anywhere from 450-500K as an NYC partner. Partners in Chicago, Dallas, and other more regional offices clear anywhere from 300-400K (from a close family friend who's a tax partner). The group I interned w/ was a specialty advisory practice (a much larger margin business) and those partners generated the most revenue per partner (think TAS, Structured Finance, Transfer Pricing) and these guys cleared anywhere from 1-2mm. One partner made it to partner in record time for my firm (8 years). The typical partner takes anywhere from 12-15 years. It's too structured to make it any more quickly and like I said, there's not enough new business to bring in revenues nor are the margins high enough to justify that compensation. Too much competition for such a commoditized service.

There's no way in hell that your typical big 4 partner clears anywhere near an MD at Lazard. It's all about margins and deals - no way an accounting partner can bring in as much revenue or source as many new deals as you can do in banking. The only way this would be possible is if it was a KPMG managing partner leading the NYC office or an entire business line (tax, audit, advisory). Hope this settles things.

 

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They say money can't buy happiness? Look at the fucking smile on my face. Ear to ear, baby.

They say money can't buy happiness? Look at the fucking smile on my face. Ear to ear, baby.
 

Making partner in 10-12 years is not uncommon. It's even possible to do it faster then that.

But the starting salary for a partner is quite low. Compensation ties closely with seniority and how much money you are bringing in. That is until/if you make equity partner which shares in the firms profits.

 

Making partner at a place like KPMG isn't like making partner at, say, a law firm where there is a set 8 year path. That being said if you do make partner you're going to make good money (if you think 500k isn't good money, well, I don't know what to tell you) but I think more importantly you're going to have a real say in how things are run. That, at least to me, would be the best part.

 
LABruin09:
Making partner at a place like KPMG isn't like making partner at, say, a law firm where there is a set 8 year path. That being said if you do make partner you're going to make good money (if you think 500k isn't good money, well, I don't know what to tell you) but I think more importantly you're going to have a real say in how things are run. That, at least to me, would be the best part.

Look, 500K is great money. But when you compare it to banking, HFs, PE, it's like peanuts. It's all about risk / reward. Acctg can be great for many because its a set path, a set progression, you know how much you'll be making and when you'll be making it. Not to mention it's got great job security.

As far as having a say in how things are run - if you're talking about at your client business, then yes you'll have an impact. If it's within the accounting firm then probably not, your vote will count just as much as the other thousands of partners.

 

From my experience at a big 4 (PwC), a partner said they make anywhere from 300K up to around 1.5mil. Now when I was in a transaction group and I was with the guy that started the group 26 years experience, I was told he cleared 3 mil a year. Actg track as they put it to me was 5 yrs to manager, 2 - 4 yrs to sr manager and then going to partner can range from 2 or 3 years, to never (since you have to buy in to the partnership). So 12 years is possible...

But to answer the question, my good friends uncle is an MD at Lazard, he told me how much he clears... and assuming he is avg its is definetly more than KPMG or any Big 4 partner.

This is Toronto by the way, and the Lazard Partner was NYC.

 

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They say money can't buy happiness? Look at the fucking smile on my face. Ear to ear, baby.

They say money can't buy happiness? Look at the fucking smile on my face. Ear to ear, baby.
 
Look, 500K is great money. But when you compare it to banking, HFs, PE, it's like peanuts. It's all about risk / reward. Acctg can be great for many because its a set path, a set progression, you know how much you'll be making and when you'll be making it. Not to mention it's got great job security.

I think that's what it's all about. If you want a somewhat steady career path, job security, and the potential to earn 1-4 million/yr go into accounting or law. If you want the ability to earn 10, or even 100 million/yr go into banking/hf/pe etc but realize that with your ability to make much more $$ comes much more risk (which makes sense, obviously). That being said I think it's much easier to clear 7 figure at an accounting or law firm as opposed to banking, hf, pe. You're going to hit a ceiling in those industries that, truth be told, you wont in banking/hf/pe.

 

I didn't put a number on it because its his word from the word of his father from his father's brother, so it's broken telephone possibility, and obviously not necessary either way. In short, more than the group head at PwC, so more than 3 mil. Obviously depends on deal flow, and this and that, but that's the number I was provided.

 

I can't speak for the MD side, but in FY2008, the average partner salary at the US side of the big 4 firm I work at was $1M. This was the average salary of the 8000 partners.

  • The higher ends of this range includes: office managing partners and regional partner heads, regular partners at larger offices/regions, the most senior members of the smaller offices, etc.

  • The lower end of the range includes the new partners (In FY08, they had a $250k cap for year 1), and other less senior partners.

  • The middle end of the range will be the regular partners in the mid-sized cities (think like a baltimore, cleveland, atlanta, etc.... anything but boston/nyc/LA)

Obviously, FY08 numbers included the last Sox404 years, in which partner's salaries skyrocketed. In FY09, partners salaries were cut about 20% so you can do the math for the average salary now, but it should start to increase slowly back to the FY08 range as the economy improves, new regulations come out, and all US companies are forced to adopt the IFRS reporting standards.

In case anyone was wondering, partner salaries are tied to the number of shares a partner owns in the firm. Obviously, a managing partner in new jersey will have more shares than a managing partner in toledo, and the partner on the IBM account will have more shares than the partner who does no-name company audits. At the end of the year, the profits are divided up based on the partner's shares in the firm. Each share will get a "payout" thtt comprises the majority of the partner's annual salary. Basically, a partner will make 300-600k base, and then after the payout, they get to the averaeg $1M accross the board.

Like I said before, I can't speak for the MD, but if anyone who actually knows what they are talking about would like to chime in, please do, but this is was a partner actually makes in the big 4... In case anyone didn't want to trust hearsay, through the grapevine, from a friend of a friend, or from an intern and wanted some actual facts.

 

Also, making partner in 11-12 years is normal... if you consider that only .001% of those who start in the big 4 will ever make partner. When you work in big 4, you are underpaid and overworked. Sure, it won't be like ibanking hours and the summers are typically very light, but its not going to be 9-5, either. A lot of people stay 5 or so yeras and take a payday to be a manager in coporate accounting for company, that has better hours and better pay. For those who stick it out, the are going to be making a lot less than they could elsewhere for 4-6 years. Plus, a lot of times, even if you are 'up' for partner, you won't get the title unless you have a business case. Its a lot harder than some of you are making it out to be. Sure, some people might make it to partner in less than 11-12 years... those people are called absolute allstars who a) had opportunity after opportunity presented to them and b) capitalized on every single one. It's very uncommon.

But back to the original question, i'm guessing the MD would make more money than the partner does in NYC. The only problem is that MD will be working and lieving in New York, maybe chicago, maybe boston, maybe london (see the pattern here?) his entire career. THe big 4 partner doesn't have to live in a big city if they don't want to. They can work in Raleigh or Dallas or wherever they want where $1M might go a lot further than manhattan or long island. Plus, they can get there without giving up their early to mid 20's.

 
Look, 500K is great money. But when you compare it to banking, HFs, PE, it's like peanuts. It's all about risk / reward. Acctg can be great for many because its a set path, a set progression, you know how much you'll be making and when you'll be making it. Not to mention it's got great job security.

As far as having a say in how things are run - if you're talking about at your client business, then yes you'll have an impact. If it's within the accounting firm then probably not, your vote will count just as much as the other thousands of partners.

I disagree. If you compare the two salaries on an hourly basis, you would probably find the two to be about equal. I know for a fact that the average entry-level accountant at a Big Four firm pulls in more on an hourly basis than an entry-level analyst, who is likely working 70-80+ hrs. a week. Even in busy season, that's a rarity for an auditor.

And the key draw to the accounting industry, for most, is the ability to transition to a management position in industry after working only a few years. Of course making partner at a firm is great, but the vast majority leave public accounting before after only a few years. The real money really comes later once you've made the switch (if you decide to) to industry. Investment bankers have the same option available to them, in addition to working at hedge funds, venture capital firms, etc.

My dad worked at AA for 18 yrs. before he transitioned to industry and that was more or less his take on it.

 

People don't do it for the 1st year pay, but for the pay down the road and exit ops. Comparing by hourly basis is also a bit lame considering a lot of bankers aren't working the entire time at the office and there is down time.

 

Assuming if a partner at a big four firm makes 1-2 mm a year, then why the hell people go into banking??

Of course it's hard to make it to the top in every industry, but everyone should agree that making a partner at big four is gonna be easier than making a MD at Lazard?

I am doubting why I am even going into banking now should have taken that big four job.

 

Most people don't go into banking with the expectation that they'll be a MD one day - they go in because experience in banking opens more doors than almost any other position you can get out of college. Becoming an accountant only ever leads to accounting jobs.

And I don't believe for a second that they typical KPMG accounting partners makes $1-2mm per year.

 

It is important to note that there is a huge difference between the various service lines within a Big 4. While an Audit Partner may start at ~$250k - $300k base a Deal Advisory/Transaction Services Partner may start at ~$500k base. In Deal Advisory/Transaction Services it may take 4-5 years at the Partner level to hit the $1M base. Once you lead an industry group and/or service network or office (5-10 years at Partner level) you may bring in as much as $2.5M base (probably the very high end upper level). Obviously, not every Partner makes it to the $2.5M base. Assuming you are an "average" Partner with a few key client accounts, a decent deal/work flow, etc. I estimate you bring in between $800K to $1.5M base. From due diligence experience I estimate there are fewer than 50-60 Partners at any US Big 4 firm who make more than $3.5M base. At Strategy Consulting firms (MBB) a $3.5M base is more common.

That said, I believe in banking there is a stronger correlation between compensation/bonus and the fees/deals you bring to the firm therefore you make more money at the top. There must be. Generally speaking, consulting is fees per hour per resource and banking is based on success fees (e.g. 4% of transaction volume)/minimum fees, etc. Here is an interesting article about M&A advisory fees. http://www.exits.com/blog/ma-advisor-fees-selling-business/

 

So based on you views, an "average" MD at Lazard makes more money than an "average" partner in transaction advisory services at big four?

But those partners make a lot of money from your figures! I doubt lazard MD can pull in that much. Just curious - how much does lazard MD make? Averagely speaking.

 

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