Over the past few months, I've received a bunch of comments asking me how much
investment bankers make and so I decided to just make a video about it
What's up everyone my name is Ben-I'm a former JP Morgan investment banking
analyst and welcome to rareliquid, the best channel for tech investing
Today I'll be going over the different levels in banking, how much you can make
per level, and I'll also calculate for you how much
you'd be making per hour But before I get started with this video
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Okay now before going into compensation position by position, let me first start
off by providing you with some context First off, I'll be showing you two
salaries per level: bulge bracket banks and
elite boutiques. Bulge bracket banks are the largest international ones like
Goldman Sachs, Morgan Stanley, and JP Morgan
and you would think that they pay the most but they don't. Although these banks
are the most well-known, they don't actually pay the
most because they know that candidates are willing to take a pay cut for the
brand name Later on in the video when I get more
into the compensation data, I'll be basing the numbers off of my personal
experience at JP Morgan so I feel pretty confident about the numbers for the
bulge bracket banks. Elite boutique banks like Center View, Catalyst, and Evercore
are less well-known, but tend to only work on a select number of really big
deals and because the firms are smaller the
fees they earn are spread out amongst less people,
and so everyone get paid a lot more Elite boutique investment banking
compensation varies incredibly widely because there's
no standardization amongst them like there are for bulge bracket banks and
boutique banks are pretty much just private firms so they're willing and
able to just provide whatever compensation they feel
is fair depending on how well that firm does
during that year to all of its different principals, partners,
managing directors, associates, and analysts. My elite boutique investment
banking compensation numbers are coming from friends who I personally talked
to, so there's going to be a really wide range as you'll see,
but that's pretty normal in this industry. The second thing I want to
mention are how bankers get paid, and there are
two important factors for this First is not always in a banker's
control and that is how the overall firm and group performs, and obviously if the
group does well everyone gets paid more especially senior bankers. The second is
how you as an individual perform and at the end
of each year you're reviewed by your seniors and juniors if you're an
associate or above These two factors determine how big your
bonus is going to be as a banker and obviously bankers care a lot about this
because they're working crazy hours in order to
earn big bonuses Alright with that said let's take a
look at investment banking analyst compensation
Analysts are usually in charge of four things and those
are financial modeling, building presentations, research
and attending meetings, which are usually conference calls with clients and other
parties I'm not really talking about the
meetings where you're literally meeting the client or the board of directors or
things like that Any one of these four things can really
take up the entire portion of the day for example, I remember when i was at JPM
one time I worked literally 28 straight hours
on a financial model and I didn't work on anything else and I'll always
remember this because i got in at 9:00 am
and then left the following day at 1 pm At the same time, I've also had
days usually when I was working on equity transactions and we're trying to
launch a follow-on offering where we would have
just non-stop meetings and sometimes I even was
double booked on my call so I was sometimes on my work phone
on one hand and then had like my cell phone just on speakerphone
just to make sure that I was on both but it was incredibly inefficient I don't
feel like I even was able to pay attention to either correctly
and things like that are a little bit more rare on the busier side but
just kind of goes to show that meetings can even take up an entire day as well
Anyway if you want to learn more about the day of an investment banking analyst
or if you want to learn why I quit investment banking, feel free to check
those videos out Going into the salaries it's very
standard for analysts at bulge bracket banks to earn 85k
in their first year then 90k and then 95k
Overall across all three years the range is usually anywhere from 115,000 to
195,000. At elite boutique banks, compensation is significantly higher and
ranges from 150,000 to 240,000 in your first two
years Let's now take a look at how much these
bankers are making per hour Assuming that they work 80 to 90 hours
per week and 50 weeks a year, bulge bracket analysts make 26 to 49
dollars an hour and about half of that post tax
For elite boutique analysts that range is 33 dollars to 56 dollars, and 17
to 28 post tax. So basically the takeaway is that if you're an analyst and even if
you're working at a top bulge bracket bank or elite boutique bank you're not
actually making money incredibly efficiently- the dollars per hour as you
see especially post tax are not really that
high but of course as you get promoted more and
more, the compensation increases exponentially
while your number of hours decrease, so you'll see throughout the video that
your dollars per hour really increases and improves dramatically
as time goes on. Also in case you're wondering why an investment banking
analyst would ever leave banking feel free to check out my review of the
leaked Goldman Sachs working condition survey
Alright next up, let's talk about associates. Associates do a lot of the
same things as analysts but a lot less of the grunt work and actually spend a
lot of their time checking analysts' work and this doesn't
sound like a ton of work, but it really is. Just to give you an example
as an analyst I might build a financial model with hundreds of rows and more
than 10 different tabs on excel, and what an associate would need to do
is make sure that every single cell in that entire model is correct so that
might mean manually checking all the different rows
and columns and all the data in there to make sure
that everything is 100% correct Or if I just worked on a 50 page
presentation draft and I sent it over to my associate,
then he or she would have to check every single word to make sure that there are
no spelling errors even sometimes if the font sizes are too
small or too big those kinds of really small changes and
every single little detail would need to be caught by an associate
Of course a really good analyst will do his or her best job to make sure that
there are no mistakes, but basically associates are the ones that
have a little bit more responsibility and pressure on their shoulders because
they're expected to be that first check after the analysts and before the
work is sent over to more senior bankers to make sure that everything is correct
Going into the salaries, bulge bracket banks usually pay 150k base to 200k
with bonuses varying pretty widely depending on performance
making all in compensation range from 225,000 to 400,000.
At elite boutique banks this range is even wider from
300,000 to 850,000 and the top end of this range is a number I got
directly from a friend so I think it's pretty legit
So at this point you might be wondering, okay you might get a better brand name
with a bulge bracket bank but why wouldn't
every single person just instead try to work at an elite boutique bank?
Besides the brand name argument usually the reason that most work
at bulge bracket banks is just because there are way more spots and if I had to
put a ratio on it i would say that they're probably around
5 to 10 spots at a bulge bracket bank for every one
at an elite boutique bank. But anyway back to the data
assuming that associates works slightly less than analysts and 50 weeks per year,
at bulge bracket banks they'll be earning 56 dollars to 123 dollars per
hour, while associates at elite boutique banks
will be earning 75 to 262 dollars per hour
So depending on your bonus and where you're working your dollars per hour
is going to vary extremely widely and this is also the point at the
associate level where compensation starts to rise pretty dramatically and
it gets harder and harder to leave banking. Next on the list is the
vice president level position The main difference between VPs and
associates are that VPs hardly ever touch financial models and usually are
just looking at the drafts of presentations to give guidance
and comments to their team. Associates and
analysts drive deals more from a workload perspective but there's a lot
more responsibility on vice presidents to make sure that the entire deal runs
smoothly In addition to this, vice presidents are
also attending a lot more meetings with clients in order to start building
relationships because it basically prepares them to
eventually become directors at the firm Now before going into the salaries I
just want to mention that these are a little bit more estimate versus the
analyst and associate compensation and this is just because the
compensation is so much more dependent now
on your bonus and how you perform and there isn't going to be
a lot of really great reliable data for this because just imagine if you're a
vice president or a director you're not going to be really feeding your
information to places like glassdoor or other companies that collect type of
information. But anyway everything should be in the right
ballpark so let's dive into the numbers first off bulge bracket bank vps have
base salaries around 250,000 to 300,000, and total compensation ranging from
425,000 to 675,000. At elite boutique banks
the range goes from 500,000 to 1.3 million and I've based this
off of a friend who told me that first year VPs at his firm
can make up to one million dollars. With that said I would mention that making a
million especially as a first year VP but merely
at a VP at any firm is incredibly rare and so you'd probably have to be working
at one of the best of the best firms and be
pretty much the top performer. On a per hour basis, the hours continue to
decrease to range from 55 to 65 hours and assuming again that the vps work 50
weeks a year they are earning from 131 to 245 dollars
per hour at bulge bracket banks and 154 dollars to 473 dollars per hour
at elite boutiques. As you probably have noticed at this point the hours continue
to decrease while the compensation goes up
and so this is why at this level it's really hard to leave banking especially
for a non-finance job where you would have
to take a pretty big pay cut Last up on the list are directors. The
director level position is usually broken into different subsets and
for example at JP Morgan we would have the executive director who would then
become a managing director and managing directors who have been
there for usually decades or so would eventually become
heads of groups or vice chairman. And in terms of responsibilities
directors pretty much have a sales type role in my opinion
and that's because the main responsibility that directors have is
maintaining relationships with clients or initiating new
relationships with new clients This pretty much is the most important
job for directors because clients are the ones
who give the firm business and deals and transactions to
work on and so if directors are not bringing in deals
for their group, then there's pretty much nothing for
anyone to work on. The best clients also have the best banks always pitching
to them new ideas and even though a CEO or CFO have a
really good relationship with a managing director at a certain bank,
other banks are always trying to establish new relationships and become
that favorite bank for that executive management team
in order to work on future deals with that client
And so as a result if you want to become a really good director, it's not really
about financial modeling or really sometimes even that your
understanding of the whole industry, although that is important,
it's really about how you are with people and at JPM
all the directors that I remember speaking with all of them
told really really good stories and were just really smooth talkers
But anyway let's go into some estimations of director salaries which
continue to increase over time beyond the three years I have here
At bulge bracket banks we have a base salary going from 350k to 400k
leading to a compensation range of 675k to 1 million, over three years
At elite boutique banks the range goes from 900k to 1.9 million and again, this
would be pretty rare but possible if you're a top performer
at one of the best elite boutique banks Then looking at a per hour basis,
directors work relatively reasonable hours and I'm judging this off of my
directors who would almost always leave by around 5 pm
At bulge bracket banks they would be making around 245 dollars to 444 dollars
per hour while at elite boutiques they would be
making 327 to 844 dollars per hour The best managing directors usually hold
key relationships with the most important clients and that's why banks
do whatever they can to make sure that the directors
are happy, because if a really important director
leaves to another firm they can usually take a lot of those relationships and
clients with them and so that's why directors get paid the
most and it might seem or sound a little bit unfair that
directors are getting paid millions while
analysts who are working literally two times as much in terms of hours
get paid probably like I don't know less than 10% of what the best directors get
paid and it's simply just because analysts
are frankly a little bit more and a lot are actually a lot more replaceable than
these directors who have all these important relationships with CFOs and
CEOs, etc In case it's helpful here is a snapshot
of the entire progression and I think it's pretty interesting to see how the
per hour changes over a pretty relatively short period of
time because this is pretty much 12 years. As usual if a video on any
other topic would be helpful whether it's about investment banking or
investing, please leave those in the comments below and I'll try to make a
video about it. With that said as always thank you so much for tuning in. Hope to
catch you in the next one thanks and peace out