Investment Banking Salary and Bonuses – From Analyst to MD

Unless you grew up surrounded by investment bankers, you probably have no idea how much people in this industry really make. I grew up in a middle-class family where my parents barely made six figures combined for most of their careers. I was never exposed to NYC wealth as a kid and I thought the doctors/lawyers making $200-400K were the ones that were extremely wealthy.

In high school I could never have dreamed of making six figures right after college. It took my parents decades to get to that level. It wasn’t until my sophomore year when I found out that you could make over six figures with an investment banking job right out of college. Once I found that out, I was laser focused on landing a job as an investment banker.

How investment banking compensation varies

There are three main factors that determine how much you get paid in investment banking:

• Type of bank (bulge bracket vs. boutique) – some smaller boutique firms pay out substantially more in compensation than the traditional bulge brackets
• Deal flow / Economic cycle – Every bank’s profits are tied to the economic cycle. Better times lead to better pay while recessions tend to lead to pay cuts. Usually in finance the more money a firm makes, the more money all the employees get paid. Rising tide lifts all boats.
• Seniority – Obvious of course. The more senior you are the more you will get paid. If you can consistently generate revenue for the firm as an MD, you will get paid significantly more than MDs who are just execution guys (i.e. people who know how to go through the process and get a deal done, but don’t actually have the relationships with the clients).

Investment banking career = rich, right?

Depends on how define “rich.” These days after working for a long time in finance, my perception of money has changed substantially since I was in college. At the time in college I had no idea of the kinds of money that some of the senior bankers make. During my time in banking as an analyst, I met MDs making $1MM per year and senior MDs who were making $5MM+ in any given year when deal flow was good.

Once you surround yourself with these people, your perception of wealth is guaranteed to change. As you get older and more successful in finance, you realize that there is always someone making more than you. That is why people who are so focused on making a ton of money are never satisfied. They are always comparing themselves to their friends or bosses who make significantly more than they do.

Success is not about being special

One of the biggest lessons I learned after progressing through my career is that there is nothing special about people who are very successful. They are just normal people who find what they are good at, stay focused and work hard.

I was very intimidated during my first year as an investment banking analyst. I was surrounded by people from Ivy League schools who were incredibly smart. I was made fun of for being the only public-school kid in my group. Higher ups were making millions of dollars each year. Up until that point, I have never met someone who was that wealthy.

After a few years, I realized that there was nothing special about these people. They became good at one thing, stayed focused and remained in the same career path for a long time. Even though everyone made it known that I was only public-school kid in my group, I began to realize my worth overtime. I became a top-bucket analyst and moved on to the buyside at a multi-manager hedge fund, leaving all those bankers behind.

Once you realize that you can do whatever you want to do in life, and you yourself are in control of your own destiny, the possibilities are endless.

One of my favorite quotes is from Steve jobs:

“When you grow up you tend to get told that the world is the way it is and your life is just to live your life inside the world. Try not to bash into the walls too much. Try to have a nice family life, have fun, save a little money. That’s a very limited life. Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it… Once you learn that, you’ll never be the same again.”

So, don’t be intimidated by other people’s success / wealth. There is nothing special about them.

Why do people work in investment banking?

When interviewers ask why you want to do banking, nobody ever says the real reason. Most will say something that is politically correct, like “I am really interested in M&A and think investment banking is the perfect career path longer term.” Wrong answer. People go into investment banking because it is the best way to jumpstart a finance career and make a lot of money. You learn so much in such little time that you are miles ahead of your peers who didn’t do banking.

Better be straightforward. Show that you are eager to learn and want to work as hard as possible early on in your career. Your 20s are the time to put a lot of effort into your career. No kids, no wife, no real responsibilities.

Investment banking compensation

Most people reading this blog are either in college or in their early 20s. Most don’t realize the amount of money you can really make in a finance career on Wall Street. Most people like myself who didn’t grow up upper class don’t even believe you can make six figures right out of college.

Well, investment banking is one of a few career paths out of college where you can make well over $100K during your first year. It is one of the best paying finance jobs out there. The only other industries where you can make six figures out of college are either tech/engineering or consulting at large firms.

Intern salary ($85K pro-rated)

The best way to get a job in investment banking is to land an internship, so learn how to get that job you love if you are focused on breaking into the industry. Typically, you land a job your junior summer, get the offer before your senior year starts, and then party during your last year in college.

Best advice for your senior year with an offer at hand is to not push yourself too hard. It is your last year of freedom, so enjoy it, take easy classes and have fun. Once you land that full-time job, grades don’t’ really matter anymore.

During your internship, you work for 8-10 weeks and get paid an $85K pro-rated salary with a few thousand dollars for a housing stipend. Don’t expect to save much during the summer, $85K pro-rated is enough to live comfortably spending $2-2.5K per month apartment and a few hundred each weekend on dinners/going out.

Full-time salary

Your compensation varies significantly depending on what level you are. However, don’t expect comp at the junior levels to vary that much.

Most analyst at banks always complain that they don’t get paid enough. They think that their bonuses are $20K less than what they should be. As a young grad fresh out of college, I understand why you may think $20K is a lot of money, but once you become more senior in your finance career or move to the buyside, you will realize that $20K is a drop in the bucket in the grand scheme of things.

During my time in banking, we were asked how life as an investment banker could be improved and everyone always brought up more compensation. Funny thing was the head of investment banking literally told these people that $20K more won’t make it difference in their lives.

We were all angry then that they wouldn’t pay us more, but now looking back I can see what he means.

Analyst Salary

• Year 1: $85-95K Salary + $45-$75K Bonus
• Year 2: $95-105K + $55-$85K Bonus
• Year 3: $95-115K + $65-$95K Bonus

When you accept your full-time offer, you usually receive a $10-15K signing bonus as well. Once you start working, the annual bonus comes down to what bank you are at and whether or not you are a top bucket analyst. Some of the elite boutiques pay the most, while the bulge brackets pay average. Make sure you read these investment banking tips to become one of the best analysts.

Compared to other career paths, investment banking compensation is at the top. You can look at the other best paying jobs in finance and I promise you won’t find one that pays more (unless you landed a quant/hedge fund role at a large fund out of college).

That said, you sacrifice two years of your life and freedom working in banking. Make sure you believe that investment banking is worth it before going down this path. Last thing you want is to be surprised at how much you’ll end up working.

Associate Salary

• Year 0: $125K Base + $50K Bonus (this is the stub year from when you graduate business school or get a direct promotion to the end of the calendar year)
• Year 1: $150K Base + Bonus Up to 100% of Salary
• Year 2: $175K Base + Bonus Up to 100% of Salary
• Year 3: $190K Base + Bonus Up to 125% of Salary (~30% of bonus is deferred in stock)

Signing bonus as an Associate is larger than as an Analyst – expect to get ~$50-60K when you sign your offer. Your base salary could be ~$10-30K different than what you see above depending on the bank. Once you start getting more senior (usually when you are a third year Associate), then part of your bonus will start to be deferred over three years.

Say you got a $200K bonus as a third year Associate. ~$60K of that will be granted in restricted stock that vests over three years, meaning after the following year you receive $20K in shares (depends on the price of the stock at the time as you are granted X number of shares during the time of your bonus).

Vice President Salary

Once you are an investment banking vice president, compensation starts to rise significantly, with more and more of your bonus granted in stock that vests over three years.

Expect to make a base salary of $200-$300K and a bonus of 100% to 175% of your base.  

Director Salary

At most banks you will get paid a base salary of ~$275K and a bonus of up to $300-400K depending on performance.

As an investment banking director, you start to fully run the deals that the managing directors bring in. Most of the compensation will be in the bonus. To make it to the next level, you need to show that you can maintain relationships with clients and potentially bring in new business one day. Most of the job is spent executing deals and trying to build relationships with new clients.

Managing Director Salary

MD compensation is highly dependent on the amount of deals you bring into the firm. Base salaries range anywhere between $400K-$650K and bonuses can be as little $100K per year or as high as seven figures.

If you are able to bring in some business each year, a seven-figure income is not out of the ordinary. A lot of the bonus will be deferred and vested over a number of years to prevent senior employees from leaving the firm.

Investment banks that pay the most

A number of the boutique investment banks pay more than others. Expect to get paid ~$15-20K more during your years as an analyst at the shops below and a larger difference at the Associate and VP levels.

• PJT
• Evercore
• Moelis
• Perella Weinberg

Investment banks that pay average

Don’t expect any large bulge bracket to pay the most. They use their names/brands to attract talent and usually pay in the middle of the pack.

• Goldman Sachs
• Morgan Stanley
• JP Morgan
• Lazard
• Bank of America
• Credit Suisse
• Barclays
• UBS
• Citigroup
• Deutsche Bank
• Wells Fargo

Even though people think of Lazard as a boutique investment bank, they do not pay the same as the others. They pay average at best on par with the bulge brackets.

Investment banks that pay the least

Analyst get the least pay at basically any of the middle market investment banks that don’t get the same level of deal flow as the larger banks.

• William Blair
• Stephens
• Stifel
• Miller Buckfire
• KBW

Buyside Compensation

Compensation on the buyside is similar to banking, but will be more variable depending on the performance of the fund. Once you get more senior, you get a percentage of the P&L (what they call “carried interest”). The amount you make will greatly depend on the performance of the fund. You can make substantially more than investment banking if the fund does well. More detail below:

• Hedge Fund Salary and Bonuses
• Private Equity Salary and Bonuses
• Venture Capital Salary and Bonuses

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