4 show me the money


Bonuses, Bollinger and the baying public – the truth about investment banking pay


Put aside images of investment bankers quaffing Bollinger and high-fiving each other after another bumper bonus round. Hubris around banking pay is no longer the order of the day. With regulators cracking down and public anger over bonuses, banks have instead been keen to point to how responsible they’re being about remuneration.


However, at graduate level, the fact remains that you will earn more in your first three years working in a front-office role than in any other industry. Median starting salaries in investment banking come in at £38.2k ($57.7k), according to figures from the Association of Graduate Recruiters in the UK. However, this figure includes support functions.


Those in the sales & trading and investment banking divisions receive a base salary of approximately £45k ($68k), according to recruiters Dartmouth Partners. Add in bonuses and you earn £65k ($98k) in your first year. In the US, first-year analysts earned an average of $110k, according to research from headhunters Glocap, which breaks down as $70k in base salary and a $40k bonus.


“Investment banks still want to attract the very best graduates, and part of this is being able to


pay accordingly,” says Jon Terry, partner in the reward practice at PwC. “There’s a perception that investment banking is the place to earn more money, more quickly than in any other industry. Banks are trying to change that image – but not at graduate level.”


Among the largest investment banks, the biggest payer for analysts in their first year in 2012 was Credit Suisse, which offered average remuneration of £74k ($111k), according to Dartmouth, closely followed by Barclays at £73k ($110k).


Pay rises are fairly regimented in the following three years as you move up from analyst one to analyst two and three positions. Base salaries increase moderately to £50k ($75k) in year two, suggest Dartmouth’s figures, but bonuses range from £30- 40k ($45-60k) and, by year three, total compensation rises above £100k ($150k)


Jon Terry Partner,


Reward practice, PwC


There’s a perception that investment banking is the place to earn more money, more quickly than in any other industry. Banks are trying to change that image – but not at graduate level.


– largely driven by bigger bonuses that are around 90% of salary.


“Any 21-year-old will have their head turned by the potential to earn £65k in their first year,” says Logan Naidu, chief executive of Dartmouth Partners. “What’s changed is that as job opportunities for graduates have shrunk in investment banking, firms want to see students who genuinely love the work and have demonstrated this throughout university.”


Investment banks also have to ensure that they remain competitive with other areas of the financial sector. It’s common – particularly in the last 12 months – for analysts in mergers & acquisitions, leveraged finance and financial sponsors divisions to move into private equity positions after only a year or two working for an investment bank. Analysts in private equity earn $117k, according to Glocap figures.


If you want to earn the sort of money where you can retire on a yacht by the time you hit 30, though, investment banking isn’t the right industry. There’s pressure from financial regulators across the world to ensure that remuneration is more closely tied to risk – this means smaller bonuses, an increasing proportion of which needs to be deferred over a number of years and


tied up in the bank’s stock. Still, managing directors in M&A can expect to bring in up to $1.7m, according to figures from headhunters Options Group.


In Europe, regulators are pushing through proposals that would limit bonus payments to 100% of salary, or 200% if shareholders agree.


$98k


The average total remuneration offered to first-year analysts in investment banking. Pay experts expect total compensation to fall by 30% over the next five years, but not in the junior ranks.


“If your base salary is close to a million dollars, and you have a bonus to match – which can happen at senior levels – then relative to the vast majority of equivalent job roles in other industries, people are still very well paid,” says PwC’s Terry.


Most banks raised base salaries three years ago in response to increasing pressure on bonuses, and are doing so again.


Generally, though, most experts agree that pay in the investment banking sector is on a downward keel, albeit from a very high starting point.


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