If you thrive in a highly competitive environment and have the stamina to work long hours and six or seven days a week, then you’re a good candidate for a job in investment banking and the sizeable compensation packages that go with it.
That compensation package can average over $400,000 a year, according to a Bureau of Labor report. Investment banks typically pay a small portion of that in base salaries, with the rest as a bonus depending on the results of the firm. Salary and bonus vary by size of investment bank, and as we’ll see in a moment, there has been some downward pressure on this salary plus bonus structure in light of the recent financial downturn and public backlash against the industry.
Nevertheless, a number of investment banking compensation surveys show that first-year analysts can expect a base salary of up to $60,000 per year, with a possible signing bonus of $10,000 and full benefits package of health insurance, life insurance, travel insurance and meal allowances. The average bonus paid to analysts is $25,000, rising to over $30,000 within a year or two.
Associates can expect a base salary of up to $90,000 with bonuses as high as six figures, taking their total compensation to over $200,000. Vice Presidents typically receive an average salary of $110,000. Depending on experience and their area of expertise, their bonuses can easily send their total compensation package north of $400,000. The compensation for Managing Directors, as you would expect, depends largely on their bonuses, and can range from $500,000 to upwards of several million dollars a year.
That said, banking salaries and big bonuses are under attack as a result of the financial meltdown and a public backlash against the Wall Street firms seen as responsible for the crisis. The notion that public taxpayer money was used to bail out certain banks under the TARP program, who many feel were responsible for the crisis, is a thorn in the side of government legislators.
Downward pressure on executive pay has already affected some firms. Senior personnel have been leaving bulge bracket firmss to head to boutique banks or start their own investment banks. Banks such as UBS, Morgan Stanley, Citigroup and Bank of America have stated publicly that they will be raising the base salaries of their investment bankers to prevent a further exodus of top talent.
Next time we’ll look at why critics are calling for a scale-back in the bonus culture at investment banks.