Let's say by the grace of god, not only did you stick around long enough to make MD. You also had the tenacity and grit to grind the early MD years out and not get fired. You've now had 7 - 10 years of steady deal flow under your belt. The last 5 years have ramped quite considerably, and you find yourself putting in increasingly less effort / hours but, every year, you're doing the most business you've ever done.
You're not Ken Moelis or Blair Effron. You're not even Jimmy Lee or Sage Kelly in their glory days. You're a successful investment banker, pulling in mid- double digit millions in fees per annum. You have a formula that works and, absent a macro pull-back, you know there's only more upside from here. How much are you worth today? How much could you be worth when all is said and done?
Say mid 40’s or 50’s, low 8-figure millions would be reasonable (10-20mm?). Say you become an MD at 36-38 and bring home ~$2mm pre-tax for 10 - 15 years plus appreciation in value of your RSU’s, you should have $10-15mm in net worth including real estate.
This is obviously at the best case scenario though (single, no kids, dealmaker) as a lot of your net worth is dependent on your lifestyle. Knowing MD’s with multiple kids, expensive wives, and luxury lifestyle, it’ll eat up into your accumulated wealth.
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From a pure numbers perspective, it seems like a lot of MDs should have enough money to retire fairly on...mid 40s-50s with a decent chunk of changed saved up. But you'd be honestly shocked at the lifestyle that some of these guys choose to live and they either keep working usually 1) they love doing deals and making money, 2) if they stop working they can't keep up with the other Joneses in their UES or Greenwich neighborhoods which is social suicide to them, their wives etc..
I worked for a BB group head whose admin told me that he spends upwards of $100k on fucking landscaping and pool maintenance. Even if you make $5mm a year, once you take out taxes and when you add together the $25k a month mortgage, 3 kids in boarding school at $50k a year each for 4 years, 3 Ivy league college tuitions after they finish high school, Hamptons houses in the summer, skiing in vail in the winter, Not to mention, alot of times flying first class isn't enough they like to fly private. After all of that there's not much left to be saved up...I'm sure this is an extreme but it happens a lot more than you think.
I hope this post helps and gives you a perspective about net worth, and maybe even life in general.
A bit about me - I graduated from a top ivy, worked at a top BB, and have recently left to start my own business. I worked in both investment management and investment banking.
Let's take Goldman Sachs as an example. The average tenure of a managing director is thought to be around 11 years. It is possible to accumulate a net worth of $10-15 million during this time, but that is dependent on how your company/rsus have been performing (unfortunate for those at deutsche), your individual performance, and your lifestyle habits. Having all these aspects aligned is less common than one would think. Moreover, most MDs are pushed out after this time frame and are forced into "retirement/semi-retirement." Net worth doesn't grow much more after retirement.
For those few who can reach the partner level, it is possible to hit the low-mid 8 figure range. However, the likelihood is really slim and obviously comes with extreme stress and pressure to perform. Even after reaching this stage, the average tenure is thought to be 8 years.
So the question comes - is it worth it? If you look up the NYTimes article "The Goldman Sachs diaspora," all of the pre-ipo partners have reached 9 figure status. But how many pre ipo opportunities currently exist these days? Maybe in tech, but hardly any in finance.
I had a close friend from college who cursed his father for having to many children (wealth is too "diluted" as there were four siblings total). His father was a well respected partner at a top BB firm and worked countless amount of hours. Unfortunately, he never saw his dad much growing up and has become extremely bitter. Would it still have been worth it if your children felt this way about you, even after achieving an 8 figure net worth?
If you believe you would be happy in finance despite any monetary outcome, I would encourage you to go for it. A very small percentage of analysts going into finance are passionate about it. It is a hard, arduous path, especially these days. Follow your passions and do what you love. The money will come.
what business do you own now ?
Pardon my ignorance, but is this a common thing?
These sentiments really can't be generalized. It depends on how old the family fortune is, interpersonal relationships among the family, cultural values, etc. Though the more you are exposed to people wealthier than you, the more jaded/bitter you become.
To be fair if I had a kid like that I would write their ass out of the will for being an ungrateful little bitch,
IDK... if you never see your kids and have no relationship with them, and the excuse for that is that you were out chasing $$$ all the years of their childhood, it seems like a pretty reasonable reaction for your kid to treat you more like a trust fund and less like a parent. I think that is what joe419767 was getting at - that destroying your family (or never having a real relationship with them in the first place) isn't always or even usually worth the extra money.
great post!
I think the difference here is clear though - it is rare to generate serious wealth without taking equity risk that pays off
Bankers at deutsche took equity risk (whether they wanted to or not) and it hasn’t paid off
Putting aside the increased competition in finance these days (which is not an argument I’m necessarily sympathetic to), making pre-IPO partner at GS was very very difficult because you are literally getting a cut of the equity
Everyone thinks tech is a bubble and the easy way to make money but a lot of these unicorns are dependent on network effects and industries dependent on network effects have very steep power laws.... so yeah if you are able to get an equity cut in one of those companies then you can build serious wealth
Not enough
It depends on if you give all of your money to your wife or not
I think you mean "it depends how much your first wife takes in the divorce"
or how many wives there were
1
FWIW the guy who ran my "sub"-group retired when he hit his #, which was ~$10MM.
This was in the early 2010s so he was probably set back a couple years by the financial crisis.
MD for ~10+ years, in mid- to -late 40s.
I would consider this to be your typical successful banker -- made it to MD and ran his own niche but still reported to the head of the group who reported to the global head who reported to the head of the division who reported to the CEO.
I fail to see the point of this thread.
I had a junior MD I worked with who made MD at 35. No wife, kids or divorces. I know he owned a 3 bedroom apartment in a fashionable neighborhood in NYC, but he had a mortgage. He bought that as an analyst (!) with friends, and then bought them out. Clearly some good capital gains there, probably worth about $3mm.
He showed us some of the Hamptons houses he was looking at. They were in the mid 7 figures. To be looking to own $8mm or so in real estate at age 38, I figure he would probably have to be worth at least $4mm. He came up A2A, so that probably helped with accumulating that much wealth so quickly.
Our group head in a small group had about $5.5-$6mm in real estate at age 50 with 2 small kids. I know for a fact he was making at least $2mm a year and had been in his role for about 7 years with a number of years as an MD before that. I figure all in he had at least $7-8mm, possibly a fair bit more.
A lot of these guys also have family money or their wife's family has money. If you stand to inherit millions of dollars, you don't need to save as much for retirement, even if that money is coming down the line.
Do MDs not make huge money anymore? What ever happened to $10MM bonuses?
Sure they do.. if they bring in enough fees to justify that number. Or if they're the head/global head of a very strong group.. or the regional/global head of IB.
Or if you're a big rainmaker and you get poached by a another with a guaranteed package. See Ben Lorello (Jefferies HC head poached from UBS). Received a $50mm 2 year guaranteed comp package to jump ship post-crisis.
Some of these numbers seem low to me based off what I know from the guys who I interact with.
In your prompt you said "7-10 years of steady deal flow under your belt."
In my experience, if you've made it that long at that title, you're earning your keep. If you weren't, you'd have been managed out (unattractive bonus-to-fee-generation ratio, unfavorable cash-to-RSUs ratio, unacceptable relocation ask, something else...).
If you're earning your keep with a decade into the MD title, you're probably clearing at least $3m annually. This can vary obviously, but assuming you're at a bulge bracket or notable boutique, this shouldn't really dip below $2m and a safe average would be $3-5m.
The variability really shows up in lifestyle. The guy running a DINK lifestyle is racking way more than the guy with three kids between 5-12.
A 'Managing Director' at any reputable place is going to feel a lot of unspoken pressure from the social stratum he is in. He has counterparts on the buy-side, coverage contacts in industry, service providers at major law / accounting / other firms, etc. who he and his wife overlap a lot with.
If you don't have the 'right' answers to "where did you summer?" / "where did your kids get in?" / "where are you going for the January break?" / "what organizations do you support?", you may find yourself experiencing some subtle (sometimes overt) social ostracism ... which then impacts your work ... which then impacts your lifestyle even further.
You could compactly sum this up as "keeping up with the Joneses", but I'm trying to illustrate how the 'golden handcuffs' happen.
This can be $30-50k annually for kids who aren't yet in high school, $40-70k for premiere boarding schools, $250k-1m annually for two to six core philanthropies you or your wife are involved with in some capacity (whether board of directors or steering committee or whatever) ... and you haven't gotten to true lifestyle things like vacations or a second home or anything.
I know a guy who basically owns sponsors for a top boutique whose strength is a lot of the European family offices who have been doing direct deals for three or more decades. Those clients don't want to be at a bulge bracket because they feel the deal process can be noisier than preferred. He prints money. He also spends a lot. He has his two kids at Le Rosey. They have a small (in relative terms) place in Villefranche-sur-Mer. I could go on.
So I'd say someone a decade into being a Managing Director is on average probably just across the eight-figure threshold, although a lot of it is probably illiquid thanks to real estate and RSUs.
Illustratively, it could've been $1 / $1.5 / $2 / $2 / $3 / $3 / $4 / $5 / $7 / $7. Factor in taxes and non-asset expenditures and you can see the math.
Candidly, if you aren't someone who produces on the basis to support numbers like that, you are going to feel some pressure (as referenced above in terms of being managed out).
I know you said 'average' and asked to exclude the rainmakers, but it's worth pointing out that there's a healthy number of guys who get eight figures a year. Every ten- or eleven-figure deal that happens has bankers on it. Those guys then enjoy something of a self-fulfilling phenomenon. Once you have the hot hand, more comes your way. A banker known for successfully handling a billion-dollar transaction will get more billion-dollar transactions.
It was interesting to see the other comments from people who spoke to seniors in their group. Thanks mrb87 and @The Invisible Hand" and Mee Eff.
Curious to hear your thoughts on the timing of production, specifically as it relates to being "managed out". As a mid-level banker, although there is implicit support for marketing and beginning to try and build a franchise, there is obviously little time and frequently any marketing activities are cancelled to deal with existing client issues.
I'm outgoing at times and enjoy client and prospect interactions, as well as those with buyers or potential buyers (PE, C-Suite Strategics, Corp Dev, etc.), so my hope is that if I gain as much knowledge as possible during the execution stage of the career, I may be able to more effectively leverage that into deals.
But, even for the most extrovertive of us, there is going to be a ramp period required at Director and MD (which I suppose your illustrative $ example demonstrates going from $1 to $7 million).
Is there a specific time during Directorship where you know you are not going to make it to MD?
I'll be candid and say that I have not progressed up the ranks at a bank so I can't speak with any firsthand knowledge.
Most of the guys I've spoken to for advice on career progression have been guys who rose through the ranks of private equity, not banking.
One strong indicator is how you're progressing relative to your peers. A bank offers one advantage on this relative to private equity firms: the class of people who earned your title at the same time as you is always larger.
(Speaking in the context of the bulge brackets and notable boutiques) An investment bank promotes usually a couple dozen at a time. Every group probably has at least three associates becoming VPs at the same time. A private equity firm may have three associates total, all of whom may be on different schedules for Principal or Vice President or whatever the firm calls its pre-partner role. Check this comment for more I wrote on how it goes in private equity.)
Again, I never pursued these titles in banking, but I think watching some simple metrics like volume of pitches you originate, volume of deals you don't originate that you're staffed on, exposure to senior internal people you receive, volume of directly attributable fees generated, etc. and evaluating how you stack up relative to your peers ought to be a helpful indicator.
(It's important to recognize that this can all be lumpy: you may spend the first eight months of the year at conferences meeting people before starting three live deals all in the back half of the year that generate revenue. You shouldn't be discouraged if it's inconsistent, it'll take time to get stood up.)
The goal is not necessarily to be demolishing all your peers. It would be absurd to expect that. The goal is to avoid being dead last. Make sure you're in the middle of the pack at worst, and you're probably safe from getting managed out while you ramp up.
The classic joke holds true here: you don't have to be faster than the grizzly bear, you just have to be faster than the guy you're hiking with.
I don't think there's a single specific time you can take a pulse check (e.g. three years after becoming a Director). My thought is that you constantly have to do a depth check the way a leadsman on old sailing ships would repeatedly plunk the sounding line into the water while the ship navigated its course.
If you notice you're lagging behind others, that's when you should be concerned. And know that people understand things don't always go perfectly. One bad year as a VP or Director doesn't get you fired. I think it's probably reasonable to know that three consecutive zero years would be enough of a basis. Trajectory matters: one weak one, one okay one, and another weak one is probably okay ... if the next one is okay or strong.
I hope this is helpful. I am not nor did I ever want to be a senior banker, you're already farther on that path than I ever was. Good luck.
No "Senior MD" is really making millions of dollars. It depends on what they do (trader/Banker) and how their numbers are. Most live on a salary and bonus. Any other type of comp is deffered in equity and locked up 5-7 years,
Now that being said they are merely agents in all this ie employees. The real money makers are the principals (IE Ken Moelis) who are the owners.
You are right when saying that the real money makers are the principals. But saying that no senior MD is making millions of dollars is simply untrue. There are actually many managing directors pulling in more than $1M annually, and there are also numerous managing directors pulling in a few millions (as in $2M or more) annually (they are less common obviously, but they do exist).
And to clarify, I'm speaking of mainly M&A/DCM bankers (which I am one of) and not addressing traders etc which CAN make those bonuses but again on a deffered basis.
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wrooooooong even my director made 900 last year lmaoo
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