Investment Bankers / Banking Industry Pay Junior investment bankers to Wall Street: Take this job and shove it. While young bankers said they enjoy their jobs, most are dissatisfied with pay and hope to leave the field, with almost 60 percent saying they want to work in private equity, according to a survey released yesterday by headhunting firm Capstone Partnership. “It’s been a rough couple of years for them,” Rik Kopelan, managing partner at New York-based Capstone, said in a phone interview. “Fewer and fewer plan on making it a career, because they’re working these long hours and not getting paid as well as they were.” One investment banker who participated in the survey described a breach of the “tacit understanding” that he or she would be well compensated. Considering “the sacrifice I make in my personal life (100-hour work weeks, canceled vacations, etc.), this business has to be more rewarding,” the person said, according to Capstone. That banker isn’t alone. Of about 2,000 associates and vice presidents in their first three years, 67 percent identified “disappointment with compensation” as one of the biggest reasons to leave the field. Almost the same percentage described their jobs as “satisfactory,” according to Kopelan. More than 80 percent said they don’t believe that their compensation is mainly predicated on performance. Instead, Kopelan said, young investment bankers worry that it’s “based on the profitability of the firm, based on how powerful the group heads were, based on capricious things.” Last year, according to New York State Comptroller Thomas DiNapoli, Wall Street paid out $20.8 billion in cash bonuses, instead of the $22.5 billion a year earlier. Kopelan said that his firm has recently placed people at Morgan Stanley (MS), JPMorgan Chase & Co., Barclays Plc (BARC) and UBS AG. (UBSN) To contact the reporter on this story: Max Abelson in New York at To contact the editor responsible for this story: David Scheer at

So, I thought this was interesting. I think we’ve all long since generally agreed that the pay and lifestyle ain’t what it used to be in the 90’s and probably never will be again. It’s also likely things will just continue to deteriorate in that regard. But I was also interested in the feedback that 60% of bankers are trying to get into PE. What does that mean for the PE industry? A spike of crappy start ups with no pay followed by a collapse following a bubble as too many young bankers try chasing deals in PE land? Or similarly, maybe the number of firms remains static and the new worker supply rises causing wages to fall for new analysts in PE (think we’re already seeing this)? Maybe some combination of the two?

young investment bankers worry that it’s[compensation] “based on the profitability of the firm…" Where do they find these idiots? The only jobs I know where your bonus/profit sharing isn’t based on profitability would be a Gov finance job Treasury, OPIC, FED, etc…

But young IB people do not have much influence over overall firm profitability. So even if they do an outstanding job, this might not be reflected in their compensation.

@ohai, Have you worked a finance job where your additional compensation (bonus/profit sharing) wasn’t based on profitability? Maybe I’m in the wrong section.

I was an IB analyst for two years at Citi and had absolutely no control over the firm’s profitability. If your MDs suck (these are your sales force and closers on big deals), the firm sucks and you all get laid off (which is what happened to me in 2008). As an IB analyst, you are essentially a spreadsheet monkey and you have to be in the office all day and all night.

I don’t think entry level workers in any field have an impact on the company’s profitability. They are all interchangeable. Outside of high draft picks in the NFL/NBA at least…

Even if this is standard industry practice, it doesn’t mean that the concern should not exist. The whole industry might have some dysfunctional policies.

There is already too much money chasing too few deals in private equity.

But wait??? I thought that private sector entities were super efficient capital allocators… you mean to say that people just out of college might have been a wee bit overpaid for their marginal contribution to bank profitability??

No question investment banking fees are way too high (~7% underwriting fees for example); it is largely an agency problem in my opinion. Much of the business of the financial services industry consists of selling snake oil to those who are playing with other people’s money (the agency problem) and/or are starry-eyed and/or ill-equipped (often very badly) to understand and evaluate what they are buying.

bchadwick Wrote: ------------------------------------------------------- > But wait??? I thought that private sector > entities were super efficient capital > allocators… you mean to say that people just out > of college might have been a wee bit overpaid for > their marginal contribution to bank > profitability?? You can’t measure it like that at the analyst level in investment banking. Analysts need to be on call almost 24/7 to create pitches for the higher ups on the deal team. Contrary to what Goldman, etc. want you to believe, M&A is basically a commodity service. Several investment banks put competing pitches tforward at the same time, which means that pitch books have to be fast and perfectly executed. So while people “just out of college marginally contribute” in the knowledge sense, they put in serious hours and should be compensated for that – banking completely destroys your life, so it should at least be a fair trade from that perspective. If you look at it on an hourly-basis, the pay is a joke.

But aren’t analysts also compensated by the chance at big paydays in the future (if they’re able to stick around where they are, or somewhere else due to the value (real or perceived) of their experience at banks)? If you took away that chance I doubt any of them would put up with the current lifestyle for the current pay.

Pointless. There will still be way , way, way more people who want to get in IB than IB jobs, so the unsatisfied bankers can kiss the bank’s a$$. IBs have absolutely no incentive to make their junior bankers more satisfied.

You don’t work as an analyst in IB in order to get compensated in the hundreds of thousands. You work as an analyst in IB for the experience and knowledge in order to get the hell out of there as fast as you can. Compensation might not seem like a lot when you measure it hourly, but that’s not why you’re sitting at your cube at 2am working on pitch books. You’re doing it for the opportunities it opens up and for the skill sets you gain. Also, considering a high school dropout can do most of the work an analyst does, the pay is commensurate with the difficulty of the work.

Very, very few high school dropouts can do that work an analyst does; that’s silly.

That’s exactly my point, the pay is commensurate with the difficulty of the work on an hourly-basis, adjusted upward somewhat by the fact that many of those hours are at crazy times of the night and over the weekend – adjusted for those factors, the pay is not that much different from administrative work, and that’s why it’s fair. It’s ridiculous to suggest that banking analysts should make less. You don’t make hundreds and hundreds of thousands as an analyst anyway. Above the analyst level, investment banking increasingly becomes a sales job with compensation determined by how many deals you can close. At the VP level and above, bankers eat what they kill, and there’s no reason they shouldn’t earn some fair portion of whatever deal flow they bring through the door. You can argue that investment banking fees are too high in general (and I would agree), but that’s a seperate discussion.

Yes, and I agree with you. I just threw the hundreds of thousands out there, however, it seems to me that these fresh college grads expect to be paid $200k in their first year as an analyst and $400k in their second. The point I believe both of us are making is that analysts are compensated fairly (more than fairly according to many) for the work they do.

Socrates, I agree with most of what you said. However, the “fairness” issue that you mentioned only addresses half of the problem - that is, that IB analysts overall are paid fairly. The second issue is that “[m]ore than 80 percent said they don’t believe that their compensation is mainly predicated on performance.” In other words, IB compensation structure might still be unfair to the most productive analysts.

I used marginal in the economic sense, not the pejorative sense. I agree that being on call 24/7 is a sacrifice that needs to be compensated. But I suspect they could hire 2x the people at 1/3 the compensation and greatly reduce the superhuman demands.