Why is investment banking still attractive to younger generation if 40% of comp is stolen by the big theif aka the government?
Suppose your all in comp is 200k-40%= 120,000. That isn't so attractive anymore especially if you're living in NYC or SF. You might get a refund but that's still very high
Name a job besides investment banking that doesnt require higher education besides an undergrad, offers great exit opps to PE or corporate roles, pays 100k out of school and offers fairly fast and structured promotions.
Programming. All you need is a sexy GitHub profile.
99% of programmers will never break 500k yearly comp. People mention stock options but they only receive these periodically over a few years, it's not like they get an all-in bonus like finance professionals. There are posts on CS forums of programmers themselves saying that they've never met someone earning over 400k or people asking if it's possible to earn 300k without being some senior guy at Google. Secondly, there's no high paying exit opps in the CS world. You just work toward getting into a top tech firm like Google then staying there. Lastly, good luck getting promoted at a company like Facebook, Google or Microsoft.
Hahaha looks like big government didn’t teach you what a tax bracket is and how they work.
40% is not just the federal income tax. Its federal+state+others.
Even in an exceptionally high tax state (like CA) you need to be making ~$500,000 before your effective total tax rate approaches 40%. And that isnt assuming a mortgage interest deduction or other deductions.
Plus, as a poster below said - what is your suggestion? Make less money at a different job?
There are plenty of reasons not to go into finance, your tax rate really shouldn't be one of them.
And so less money is better? I didn’t do IB because of the hours, I never once considered “nope, too much money, my marginal tax rate will be too high”.
I guess I missed he memo where other jobs don’t get taxed
^This.
Depending on where you are, carry usually gets taxed in a very preferential way too... So OP is on c r a c k
Wesley Snipes doesnt pay taxes and it worked out great for him.
I don't want to rain on anyone's parade, but you do know that most bankers don't make 500k. The VPs and MDs do (and much more) but they are a small fraction of the total. Those that go to the buy side typically don't make partner and make the millions because those guys never leave. Supply and demand. You just don't automatically move up like you do from analyst to associate in IB (assuming you're good).
Clearly you make more than almost everyone right out of UG, but that's meaningless from a long career perspective. Most of the time you're out of there in a few yrs.
A Big 4 guy who makes half of what you do right out of UG in audit but moves into corporate finance and becomes a director, a CFO, a business unit leader at a large company, an X will make more than most bankers ever make. Lots of ways to get there. Hope you're not doing it just for the money because that will happen if you're good regardless.
I'll bite here. A few responses:
1) Becoming CFO of a large, public company is astronomically harder than making VP in banking. The saying around our office (this was coming from MDs) was you make VP if you survive being an Associate "with a pulse."
2) At multiple BBs, you do now automatically make Associate from Analyst as long as you're not bad... not if you're good.
3) If you're a top bucket second or middle-bucket third year analyst (let alone an associate), you make more than a middle-market CFO and most middle-market CEOs.
4) A "Business unit leader at a large company" will not make as much as MDs, who are your counterparts at that level. Moreover, your point of supply and demand is actually applicable here too, maybe more so! There's only one CFO, one product head, one head of corp. dev, etc. whereas their are multiple MD spots in banking, and all of those corporate positions are highly competitive.
TL;DR: banking gives you more money as an early twenty-something than anyone out of college should ever have. I agree it shouldn't just be about the money. Banking forces you to learn about something (an industry, transactions, whatever) by spending an absurd amount of time around it, and that's useful. The ridiculous focus on technical skills puts you at an immense advantage for the rest of your life when using PPT and excel. It gives you a mentality of getting stuff done no matter what time it is, what day it is, or who you have to talk to, that just doesn't exist other places.
Happy I did it for those reasons.
“3) If you're a top bucket second or middle-bucket third year analyst (let alone an associate), you make more than a middle-market CFO and most middle-market CEOs”
This is one of the most inaccurate things I’ve ever read on the internet, not just WSO.
Do you really think CEOs of actual companies only make $200k/yr?
You get to learn about interesting industries and businesses. You get to negotiate deals. You get paid great money right out of the gate. Why not be interested if you like business, sales, finance, and/or making money. Some might not agree, but this is my personal experience.
Wouldn't traders earn more cash?
It's not that attractive.
Majority of the young generation are not people posting on WSO; Finance is a competitive field, but it's definitely not as well known as kids here think.
Go ask some 20 something kid working at starbucks what people in finance do, or what kind of jobs you get from a finance degree. Most have no clue.
200,000 - 40% = 199,999.60
It's really not that attractive, but it's one of the most attractive given what's available to people right out of college.
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