Why does everyone want to be an analyst not a broker making way more money?

It seems everyone wants to be an analyst and not a broker. Am I missing something?

A broker often makes over an analysts entire salary in one deal. It appears a good broker with a top 5 shop in most major markets is making 250-1,500,000 a year. Mediocre ones are still pulling over 100k. On the other hand analyst starts out at around 60k all in and maybe goes up to $140k all in if you are lucky but typically stays under 100k even at associate level (outside new york). True or am I under estimating analysts pay?

Comments (45)

Jun 13, 2017

They're not really comparable at all. Analyst is an entry-level position, whereas a broker who actually produces has put in years to get to that point. Most brokerages start people off as analysts, with the expectation that only some will last long enough to become real brokers.

Being an analyst is a highly desirable position because it grants someone a lot of flexibility. It allows someone to move over to the investment side, and you'll find that most people in RE want to be on the investment side because well, if you went into a financial career, it's generally because you had some degree of interest in actually making investments.

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Jun 14, 2017

RE analysts really make only $60K? You sure that's right?

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Jun 14, 2017

Depends where. Eastdil analysts easily make over six figures but they work 80+ hours a week. Places like JLL/CBRE/CW pays their analysts like 60k + bonus but they have an easier work week. All depends where you work at and what city.

Jun 13, 2017

because the majority of brokers that enter the business make jack shit

Jul 7, 2017

I worked as entry level broker for a good NYC shop right out of school for 18 months. I made it longer than most. All I made was the draw and I left for an analyst position. To be successful you need serious connections before you go in. Ideally family. Saying brokers make more than analysts is akin to saying entrepreneurs make more than middle managers. You shouldn't compare the top 1% to the average in any analysis.

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Jun 13, 2017

You are not underestimating analyst's pay, you are grossly underestimating the difficulty of being a successful CRE broker. An analyst role is a stepping stone to many other positions in real estate, including a brokerage role.

Having success as a broker is extremely difficult for many reasons, the first being that no seller worth his salt will list a property with you unless you demonstrate some sort of advantage or track record over the countless other brokers competing for their business. Secondly, no reputable shop that is generating commissions that, in your words, "makes over an analysts entire salary in one deal", is going to hire someone to a producer role and put their reputation and resources on the line unless that person has a demonstrable mastery of the business and their product type and has had time in the industry to build a rolodex. Those two facts alone are a pretty huge barrier of entry into the world of large-deal CRE brokerage, not to mention the personality requirements and potential initial financial strains.

So (generally) in order to even get a crack at brokerage with one of the big players, you have to do your time and learn the business another way, which is where the analyst role comes in. That is not to say that their aren't the rare few Hyper-Type-A guys that rise from the bottom of a Marcus and Millichap sweatshop to become the next Glen Kunofsky or whatever, but those cases are very rare.

I also bet you would be surprised by how many of these "successful brokers" are still struggling to pay off their draws despite all the "dealz" they are doing. Brokerage, especially in the beginning, can have some long dry patches, and as a young broker those steady $2000 every other Friday analyst checks can start to look good. Not to mention that as a young guy splitting deals with more senior brokers, a $4 million dollar deal can potentially wind up netting you like $10 grand after splitting with the other side, the company, and your team.

TL:DR: There are far fewer brokers pulling in 250,000+ than their are analysts making $70,000, and there is a reason for that.

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Jun 14, 2017
Beers:

TL:DR: There are far fewer brokers pulling in 250,000+ than their are analysts making $70,000, and there is a reason for that.

"There"

Other than that no concerns :)

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Jun 13, 2017

Thanks for the comments. Interesting to hear. I actually currently work part time as an analyst for a small private equity real estate firm. It's enjoyable analyzing acquisitions but I would much rather be making big money and able to afford to do these investments myself.

I work on the side doing residential real estate leasing. I put in 20-30 hours and average $3000 a month. Not a ton of money but its just residential leasing. Even if I did it full time not sure I see it ever making more then 50k as the winters are dead.

Had one offer with a small commercial brokerage to get co-listed on a few deals. May take them up on it this winter. Have seen some investment sales firms do "analyst" where it's really broker with a base but those are hard to come by. I have done a few million dollar+ small multifamily showings just out of my residential firm and although none panned out I really loved knowing in the back of my head if this works out I just made 20+ thousand.

I may or may not be overestimating cre broker pay but I am talking about investment sales not leasing. 99% of what my firm buys is pocket listings. It never hits costar or mls. So the broker is making both sides of the commission. Even just a 3 million dollar deal at 4% is $120,000 and they are doing these every month out of small firms on high splits. Do 8 a year and you just broke a million. It's also courtesy to relist the after rehabbed/stabilized property with the same broker so they get the commission again this time on an even higher priced asset.

Jun 13, 2017

Spread that after tax income out over all the years of ups and downs and it's a lot less impressive. The stress related to the uncertainty of your next paycheck wears you down too.

Jun 13, 2017

Some of your assumptions are just a bit off. I think it was understood that your were talking about IS, but successful leasing agents and tenant rep guys can make just as much as IS guys, just depends on market and climate.

A 4% commission is about the ceiling on a $3. Mil deal, and at the associate level your company split at a top firm will be 50%, and then you will probably have had at least one other team member on the deal with you. That $120,000 commission just became $30k pre tax.

I am also unaware of this "courtesy", in my experience investors either take pitches on dispositions or roll with their preffered broker, but never just dish out listings to whoever they bought the property from years ago.

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Jul 12, 2017
Beers:

I am also unaware of this "courtesy", in my experience investors either take pitches on dispositions or roll with their preffered broker, but never just dish out listings to whoever they bought the property from years ago.

This is actually incredibly common. A large number of owners I know generally give the listing to the broker that sold them the deal barring a few exceptions. It's how they keep good relationships with the brokerages. If I sold a property to a client in what I thought was a well executed transaction and then they listed it at disposition time with another broker that would chap my ass bigly. I would never show them any of my off-market opportunities. I know of a very successful brokerage group that blackballs anyone that does this to them.

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Jun 14, 2017

RE Associate speaking here..I prefer to be part of the decision process..Our team gets to say Go or No Go..whereas the broker is the seller...that's what I like..As you get more senior you get small shares of the deals you work on..

Jun 13, 2017

I was an office broker at a major shop in a mid market. It was fucking awful because it didn't fit my personality at all.

Now I work at a development shop, and while my income potential this specific year is lower than my theoretical commission potential, it's also guaranteed, I still have the option for a performance-based bonus, I have equity in every deal, and I'm learning the ropes so that I can go out and run my own company in 10-15 years. Plus, my theoretical long-term wealth potential in development is significantly higher than brokerage.

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Jun 13, 2017
CRE:

I still have the option for a performance-based bonus, I have equity in every deal, and I'm learning the ropes so that I can go out and run my own company in 10-15 years.

CRE... Thank you for sharing. This is really what I hope for down the line. If I may ask what size shop, how many years experience did it take to get where you have a little equity in the deals and did you start as an analyst or was acquisitions the title? Any advice to get there appreciated.

In regards to taxes. Not sure if you guys realize but even at my residential brokerage the good agents set themselves up as an LLC with S Corp election. This way you pay yourself 80/20 in dividends/salary bringing almost your entire tax rate to capital gains level of 15%. One of the nice things about being a 1099 worker is you can legally do this and keep a lot more of your money.

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Jun 13, 2017
alkjpty768:

If I may ask what size shop, how many years experience did it take to get where you have a little equity in the deals and did you start as an analyst or was acquisitions the title? Any advice to get there appreciated

Small shop (less than 15 people)

I have 3 years experience and 2 years of a Masters degree, but I got that offer when I started with my current company.

I also started as an ADM (Associate Development Manager.) No one here is an analyst or whatever. Everyone does analysis but the focus in on project management.

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Jun 13, 2017

Dividends are not treated as cap gains, they are taxed at your marginal income tax rate. However, you do not have to pay payroll tax on dividends.

Jul 14, 2017

Smaller deal size and therefore different deal structures. There are some M&A advisors/Business Brokers that do larger deal sizes, but they are different. For instance, your not going to issue shares or float bonds to buy a small business. Usually business broker handle cash or seller financed transactions. The later doesn't really happen in investment banking to my knowledge. In addition, one could argue it is closer to real estate and many states require a real estate license to be a business broker. Do I think it is good experience, yes! Do I think you can easily jump the fence to IB, probably not. Combined with a few other positive things, I think it could help.

Jul 14, 2017
bluefalcon:

Smaller deal size and therefore different deal structures. There are some M&A advisors/Business Brokers that do larger deal sizes, but they are different. For instance, your not going to issue shares or float bonds to buy a small business. Usually business broker handle cash or seller financed transactions. The later doesn't really happen in investment banking to my knowledge. In addition, one could argue it is closer to real estate and many states require a real estate license to be a business broker. Do I think it is good experience, yes! Do I think you can easily jump the fence to IB, probably not. Combined with a few other positive things, I think it could help.

Thank you for your responds. Could you please tell me more about what is seller financed? Also, what kind of transferable skills I can I bulid as a business broker?

Jul 14, 2017

A lot of the difference is client size. I'd say if you're typically working with sub-$1mm EBITDA companies (mature), then you're in the business broker space. With clients this size, it doesn't make sense to give a lot of attention, and provide the same M&A process you would for even a $2mm EBITDA company. That's why a lot of brokers just list their clients online.

At the end of the day, both are intermediaries for companies looking to sell. The approach is generally far different.

Jul 14, 2017

Solid point. I mean you will have to double the Lehman scale and then it might be cost prohibitive for the smaller company to hire you as their business broker.

Jun 13, 2017

Stability. As a young guy it just feels better to be getting the skill set built out to move up the ladder in acquisitions, AM, REPE, or start my own thing. Meanwhile, not starving and getting into further debt blowing my draw. I think that's one of the big factors, you can come out of school at 21-24 (depending on whether you hopped right into a masters) and start getting paid a decent base + bonus. Rather than coming out of school and having to basically kill yourself and waste 3-4 years of your 20s living broke to build up a book of business.

Of course, there are exceptions in brokerage where some younger guys still slay it, but those are few ad far between imo.

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Jul 14, 2017

but you might be overstating your case with #3.

Many traders (it depends) are trading flow, or benefitting from their firm's flow through better information. They also use analysts (though fewer than IB, I suppose).

Then, of course, there's luck. Any honest discussion of trading profits has to include a discussion of luck. In particular, given the compensation structure of traders, it makes a lot of sense to take big risks and to sell lottery tickets, meanwhile providing a great story about why lightning won't/can't strike your trade. It works until it doesn't, and in the meantime everyone thinks you're boy wonder, and you get paid like it. Even without this (conscious or unconscious) gaming of trader compensation, luck inheres in all directional trading or "arbitrage". It makes the difference between (smart and doing fine) and (smart and killing it).

Jul 14, 2017

I'm pretty sure you misread the article. Brokers get 100%+ retention bonuses when they get acquired by another firm, similar to a sign-on bonus.

To your larger point on traders vs. bankers - you're wrong on #2. If you read the history of Wall Street, M&A really took off in the 70s as a product service. Before that, M&A advice was largely provided gratis as part of the debt/equity raisings that were seen as the bigger money makers. M&A became attractive once firms realized they could charge for a service that requires extremely low working capital.

Traders need lots of computers (hardware/software/support/cooling), expensive information services, extensive back office support and huge, huge amounts of working capital.

On point #3, I think the proportion of revenue generated to compensation is actually roughly equal (or at least in the same ballpark). Though bankers use the firm's brand, traders use the firm's capital and systems. I don't know if it nets out roughly equal because of that or because upper management wants to minimize discord between the two groups.

Jul 14, 2017

I gotta run so I really didn't read most of it,

but I quickly wanted to say that the main difference is that brokers work with THEIR clients (not the firm's), whereas bankers simply work with the firm's clients (institutions). That's the difference. If a Goldman MD jumps ship to MS, the odds are that his client will stay with Goldman (unless he happens to be an uber-high profile MD). If a broker switches firms, he brings his clients with him-- hence the need to give them these bonuses (to keep their clients with the firm)

Jul 14, 2017

I think you're all completely off base here. They are comparing the nature of the banker and the trader to the Wealth Management RM.

While it make seem like a banker/trader gets paid more (guys with 10MM salaries, high bonus potential, etc.), the article points out the pay structure is different. Bankers and traders are only paid a small portion of their salary based around how much they bring in. Brokers get paid a larger portion.

Here's how an RM's salary works. They accrue AUM by whatever means there are (trading for hedge funds/institutions, managing funds for UHNW/Family office entities, discretionary and fee asset management, 3rd party asset management through a managed accounts platform) and are paid fees on it, depending on the structure. For the most part, any type of trading (FI/Eq and all stops in between) are on a commission basis, while any sorts of AM product is done on a fee structure around the AUM in the account. Additionally, any placement into Hedge Funds, PE Funds, VC Funds or other investment entities and the sale of insurance and other products will provide the RM a trailer that has a residual payout. Some products are a 1 time deal, while others have a longer payout over time. As such, that's how the RM's book of business grows.

What happens next is where it gets a bit confusing. Compensation is as follows: Any fees and commissions you bring in are added up to get your Gross Production. This is the total amount you have brought into the firm in a given year. Every product has a different type of payout, depending on the investor and what's being done. So an individual doing an equity trade may have a payout of 80%, while an institutional investor may have a payout of 45%. The net production is how much an RM makes a year once you factor in the different payouts.

To put some figures to this, if an RM does 1MM in gross production, all said an done will take home 500K as a net figure. All this talk of retention bonuses and the like is a misnomer. When an RM jumps to another firm, he gets an upfront cash payment of at least his previous year's gross production. If it's a much more high profile name or he is a major player, they may offer a larger percentage to get him to jump. UBS used to offer 260% of Gross Production in order get brokers to jump to UBS. The biggest value is the cash portion, which is what most brokers look at. The equity portion is kinda useless. When the RM jumps to another firm, it is expected he will take his book of business with him. 95% of the time, clients move with the RM unless they have investments, such as PE funds, that cannot be moved due to being proprietary. Depending on the structure of the deal, there may be clawbacks if an RM can't bring over his full production after x number of years. RMs also sign themselves over to a multi-year contract when they move shops. There is no reason a place like MS would pay 160% of Gross Production for a broker if they were not held to a 4-6 year contract because brokers would jump shop every 2-3 years if they could.

I know it's alot to digest, but let me know what you think.

Jul 14, 2017

Interesting article. It seems like their is a dilutive factor as the size of clients gets larger generally speaking. IBD take away the smallest percentages of deal, followed by sales and finally pwm brokers. This probably has to do with how central that particular person is to revenue. In PWM, unless you have a specific broker, you won't get that client's money. Sales guy's rolodexes are important but they get passed more frequently and the clients are sophisticated enough to rely on multiple banks. Finally, M&A deals and ECM-DCM transactions are first and foremost a product of what IBD clients do; the bank performs the work but if not for the companies involved, there would be no deal.

Trading on the other hand, is probably much more influenced by the buy-side. The sell-side tries to give a decent fraction of what would be attainable elsewhere (if you're trading prop), but discounted for the fact that you are supported by a huge institution.

Jul 14, 2017

Dont know if some has already mentioned the following:

Bankers have a better risk-adjusted comp structure, period: brokers' bullshit can only go so far in a down-market (say goodbye to commissions); traders need lots of capital to make lots of money (to the uninitiated capital allocations depend on market conditions, which suck). There are deals to be done no matter what the economy is doing. Bankers (particularly M&A advisors) can capitalize on opportunities at any point in the cycle, whereas traders depend on capital and brokers depend on investor morale (all of which are cyclical).

Jul 14, 2017

By the way, Marcus. Love your American Psycho reference.

Jun 13, 2017

Generally, different strokes for different folks.

Specifically:

  1. The odds of you surviving 3-5 years in brokerage are less than 10%. During your first 3-5 years you will be making peanuts relative to your analyst counterparts.
  2. If you do survive you either had a stroke of luck (e.g. landed a massive deal in your first couple years that even after splits allowed you to pay off your draw; or opened a new office for a big name shop in a tertiary market and benefit from inbound business,) or had wealthy/well-connected parents that: paid for your education; delivered you deals from their business associates; flat out paid your bills those first 3-5 years; or trusted you some money
  3. The average to above average broker with 10 years in the business is maybe making around $150k/yr after all splits are paid; there are a lot of mouths to feed. Sure, there are brokers making $500K+ a year, but they've either been in the business for 20+ years, benefited from #2, or likely both. Keep in mind many top producing brokers started in other areas (development, PM, acquisitions, etc.) and jumped to brokerage in the latter years of their career to benefit from their relationships without having to take on as much risk as development, for example.
  4. Learning the hard skills of the real estate business by starting as a analyst will open up more opportunities for you than will being a broker. While some development/investment shops like the brokerage types due to their b dev skills/connections, many place much more emphasis on knowing the hard skills. It's a lot harder to learn a proforma when you're 40 than when you're 20.
  5. Brokerage earnings potential pale in comparison to that of an investor because as an investor you can use leverage and scale. Did someone say passive income? You could argue that a broker could do the same by starting his own firm, but let's be honest, the days of the dudes running with corporate deals out of their garage is quickly coming to an end with the amount of industry consolidation (CW, JLL, CBRE) going on. Plus, corporate controls continue to become more stringent creating the need for execs to bring big names to the table, if for nothing other than optics. Likewise, most brokers view starting their own brokerage as a waste of time because they like (or need?) the infrastructure and name of a big shop to bring in deals.

This isn't to completely bash on brokerage as a career choice or as an entry point into CRE. I know many brokers who make good money and enjoy a ton of flexibility - they love their lives. Even further, if you are young, want to be in CRE, and brokerage is the only opportunity staring you in the face then you'd be dumb not to take it. That's what I did (without #2) and after a couple years I made the switch to development.

When life gives you lemons.

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Jun 13, 2017

Great point here that is often missed, some legit brokers were acquisitions dudes for years and after they got very well acquainted with XX brokerage shop, lateraled over, took a base salary haircut but joined a team that is crushing deals and gets a good piece of the pie.

If you have been working on acquisitions and dispos for years and are at the Director/VP level you probably have a ton of contacts and know how to run deals. You can still get to the big deals, but never had to starve on your way there.

Jun 13, 2017

Because analyzing stuff is more rewarding than lying to people for a living.

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Jun 13, 2017

I can relate. I honestly don't know how a lot of my former colleagues slept at night.

Jun 13, 2017

Honestly, it's not even the lies that bother me. It's the the petty rookie shit that they think I'm dumb enough to believe. There's a long list of statements that may have meanings in a normal context, that are BS 99% of the time coming from a broker.

Jun 14, 2017

This. I love RE, grew up in the environment, but took an analyst role partly because of the many people I've met who would have been my colleagues if I went into brokerage.

Jun 14, 2017

There are many reasons to choose an analyst role over being a broker. For me, the biggest reason was the skills developed in each role. In brokerage, you develop the skills a salesman. What I find in my firm is that most of the brokers are severely lacking in analytical and mathematical skills. They see the basic numbers on an OM (cap rate, IRR, etc.) and if it looks like there's a chance it could work they'll pitch it to our equities team. We then do the underwriting and rip it to shreds and they go back to the drawing board to look for something else to throw this way.

I know that part of this is just brokers trying to make deals- throw 10 OMs at the wall and see which one sticks. But once in a while they'll get defensive and try to justify their pitch. This is when you truly see the difference in skill sets between brokers and analysts. After we pull up the rent roll and financials and walk them through the reasons why the asset is a pos, you see a change in their facial expression and demeanor as they realize they have no damn clue what they're talking about when it comes to financials and analytics.

I will say this- good brokers have a solid understanding of their market. In some of these secondary and tertiary markets it's difficult to be an expert for a shop out of state, this is when a good broker can be the difference between a buying a good asset and a complete fuck up.

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Jun 14, 2017

It's already been alluded to above, but I think you're also underestimating how much money is at the higher levels on the principal side.

You hear about brokerage deals that get done in news, articles, gossip, etc., and you can estimate the commissions made off of that, but what you don't ever hear about is a guy who's been in acquisitions for 5-10 years, has money in a few deals/funds, and quietly gets a huge pay day.

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Jul 11, 2017

Lets not forget that there are analysts at brokerage shops. Kinda feel like this is being overlooked. Shops in major markets selling institutional grade assets that also raise equity for JVS, raise debt for development deals have analysts in house that are extremely analytical and are building complex models day in and day out from waterfalls to modeling complex ground lease scenarios to complex value add scenarios.

Jul 11, 2017

Brokerage is hard. Sales is hard. Most of the people here will never become an MD or whatever the title is of whatever division, because they don't have the innate social skills and sales skills needed to pull in those clients.

When you're a broker, that's your 24/7 job. It's a different type of personality, a different skill set and one that is extremely hard to develop except through what I feel like is fucking suffering.

Also realize most people hate confrontation and hate rejection. Guess what being a broker is? Constant rejection and confrontation, and if you can't fuck.. then walk because you aren't making any money that year.

I actually am in Tech SaaS sales at a startup and always considered if there was a route to go, it's definitely the broker rout.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

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Jul 14, 2017

Money isn't everything. Enjoying what you do should factor in and for some selling vs investing is an easy one to answer. I was always told that development is a long game whereas in brokerage you can make more early on. At the end of the day, the developer will have equity in deals and a skill set that allows him to go into the market and create value. My experience with brokers is that they are salesman at the end of the day and thus do not look at their assignments through the lens of developer (led alone ask themselves hundreds of the questions the developer is concerned with to make a given deal work). Years of experience developing these skill sets independently will lead to two people that view the RE landscape differently. I think patience is required to be an analyst as well--the $500k broker payday isn't coming for a longtime, but when it does come maybe it's actually a 3-4x multiple of that. When people look back on their life after their career is over, what they want to see (and the impact they made) plays into career decisions too.