Originations vs Asset Management

Most people have the urge to go to the equity side but am I crazy for wanting to be on the loan origination side? I would assume they make way more than someone on the equity side because they are bringing in revenue for the firm.

What career makes more?

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Comments (13)

  • Director in PE - Other
Oct 14, 2020 - 12:40pm

Nobody can answer that question "what career makes more" with absolute certainty. And no, you're not crazy for wanting to do debt brokerage.

Good for you for knowing what you want and not just follow the crowd and wanting to be on the equity side because it's "cool". Here's my 2 cents:

- Earlier on in one's career, I'm willing to bet on average a person on the equity side makes more. Don't think I've ever heard of (although possible) Analysts/Associates at Mortgage Brokers pulling 150-200K a year - yet this is normal if you're at a top tier equity shop. At a junior level in debt brokerage, you're just crunching numbers and likely not "bringing in" any revenue for your firm. 

- Once you're pulling in deals for yourself as a broker, the sky is your limit. Our shop (20B+) is at a complete halt and has not purchase anything for the past 7 months. Meanwhile, I know brokers (D/E) are still chugging along at the moment. In certain market cycle, sell side > buy side. Yes I'm getting a salary, but I already know what my bonus is going to be like this year...not good. If you're a TOP debt broker in Tier 1/2 market by the time you're in your 30s (10-15 years experience), 7 figure income is not out of the picture (1B in deal volume a year so 10-20 big deals, 20bps in fees and 50% house split you're looking at 1MM in income, sounds about right, no?). I highly doubt even  a top VP in Acquisitions (10-15 years experience) can pull that sort of income - may be 250-750K depending on how good he/she is. If you're a middle of the road type broker, your compensation can still be competitive compared to someone running acquisitions at a top equity shop.

It all comes down to your personality man. If you're a hustler type, entrepreneurial, go for debt brokerage as a career choice. Personally, I don't have the balls for that and would like a more structured career advancement. It's hard for me to answer your question without knowing what you're like as a person. But based on seeing that you're not just a typical WSO kid who wants to do what everyone else does, I'd say your debt brokerage career is already off to a good start. Good luck to you!

  • Associate 2 in RE - Comm
Oct 16, 2020 - 12:22am

It does. For the most part, originations at a bank or lifeco is going to have less upside but more stability. Bigger base with monthly commissions or bonus; where as brokerage is typically fee income. Meaning, you're paid per deal, so generally speaking there is more potential upside. Concept still mostly applies

I work in lending at a bank and while we aren't putting up numbers like we were last year, we're still doing fine

Oct 14, 2020 - 12:47pm

Depends on a large myriad of factors. The variance in incomes in CRE is so large that it is hard to compare which side makes more. You could refence the WSO comp spreadsheet to make your conclusions but I would say that pay is generally comparable. 

On the debt side, I think that general sales skills are more important because it is more volume driven as opposed to the equity side which is a combination of volume and return. 

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Oct 15, 2020 - 11:45am

First, not crazy to want to work on debt side, I mean literally TONS of people have very successful, lucrative careers in this space. The whole "acquisitions at BX or die" mentality is so weird (not suggesting the OP is making that claim, but it stems from same form of thinking).

To address the "who gets paid more" question.... There really is not a fair nor reliable way of making such comparisons, here is why...

Pay in real estate (or most fields really) is a function of your personal performance/value, firm profitability, and your unit/team's role in such profitability all balanced/attenuated by leverage/risk used in reaching such profitability. I think "work/time/life" balance applies a bit, but that is really a function of the above. 

This is why "REPE" (the WSO holy grail industry) can pay so well. With leverage, those firms/strategies can produce really big payouts. Thus, paying the team a ton is possible/doable and needed to keep the team together. But pay actually varies a ton within that industry and even within firm, same is true for other high end fields like development. 

Brokerage/DE placement or anything else fee/commissioned based roles/firms has nearly as close to a 1:1 revenue to pay ratio as possible (subject to comp structure). Eat what you kill is the name of the game, even if salaried (i.e team closes no deals for long enough, you will not have a job at some point). 

The deal with the debt business is profitability is a function of loan profitably and production volume (may or may not be impacted by loan losses), so it is really difficult to generalize. "originations" tends to apply a connection to eat what you kill modes, but most banks/lenders dont pay this way, they do base + bonus standard in most cases I've heard of. Clearly, heavy hitters get bigger bases and bonuses, that should be clear.

Asset mngt (and even acquisitions)... is a lot more based on deal/fund size as much as deal/fund profitability. Individual performance can be harder to measure, so bonuses are more spread around the firm/teams. In this way, analyst/associates (and other junior type roles) get a bigger net benefit in the institutional investment space, you can get lucky on team and even firm profitability. As in your excel sheets and contributions to the IC memos, etc. were great, but let's not pretend you really "drove the deal". Your contribution was the insane hours and endless fire drills the MD/EVP caused you and your team.

My advice, don't pick a role/industry/firm based on pay or prestige. Pick on where you are most interested and set up for success. The top paid people are the BEST people in the field, so go where you can be the best. 

This is really the big downside to "prestige" roles right out of UG and even grad school. You legit get paid super well but are fighting what could be an insane internal dog fight/beauty contest for promotions or even being retained after a few year. 

Oct 15, 2020 - 11:50am

You're not crazy, CML originators at banks and life cos have close to the best job security in the business. Loan origination is also great for "Deal Guys".  You'll review hundreds of deals a year and close dozens if you work for a national platform with production in the billions.  Pay is good but not better than REPE or development.  I'm not sure I understand your assumption that they make more than someone on the equity side because they are bringing in revenue.  Loan Application fees are pretty low, like 10-15 bps, unless you're origination construction loans, 50-100 bps.  Also, interest rates are way low so you're not getting any high fives from investment committee when you close a $30mm apartment loan at 3% interest.        

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