Total Compensation sell side vs. buy side

Addendum to original post: Sell side front office total comp for 3rd year (trader, sales-trader) : 500k+ This is a fact in NYC. Sell side front office personnel, particularly fixed income traders, have the highest total compensation for age range coming fresh out of school all the way to the age when people typically head back to business school (ie. start at 21 years old, head back to school around 27 years old plus/minus 1 to 2 years on average). Given this fact, money-wise, college seniors should focus on landing a trading job (esp. fixed income) at an established institutional bank (JPM, GS, MS, BAC). They will be well ahead of their investment banking peers in terms of savings by the time their peers are thinking about heading back to business school. For example, at 21 and 22, you could expect 100k-150k roughly each year, at 23 after two years on the desk, you would expect around 500k total compensation; similar package at 24, 25, 26. By the time you are 27, you would expect to have grossed around $2million. Take away taxes, living expenses, you will have saved up a bit over $1million at the age of 27. On the other hand, your peer who decides to go into equity research or investment banking fresh out of college will typically see these numbers; at 21 and 22, 80k-120k roughly each year, at 23, given that he has not been “encouraged” to apply to business school, he will become an associate, and make roughly 200k; by this point, said peer will typically apply to business school, effectively wiping out what he grossed as an associate on tuition. If not, said peer will apply to entry level positions on the buy side, in which he will most likely start at a similar base salary as he had in investment banking (anywhere from 70k to 100k base), and would expect around 120k-200k total compensation first year on the buy side. But their hours will be much better than before, but still, even not as good as sell side traders’. So, at 23, you would be making 200k on the buy side working slightly more hours usually in a library type environment, compared to 500k as a 23 year old trader on the sell side in a bustling environment. Career path of a buy side analyst is also more volatile than a sell side trader, especially at smaller funds; could mean huge upside, or just a two year pit stop before once again being “encouraged” to go to business school. Of course, there are risks in committing to anything, and preferences (working environment, education, family life, etc.). But it seems like sell side trading, particularly fixed income trading, is the place to be for someone who enjoys a louder environment and not as much emphasis on mandatory supplementary education. From 21 to 27, the sell side fixed income trader will make more money than your typical 2 year investment banking, entry level buy side analyst. Also, the sell side fixed income trader will typically not have gone through the CFA process, and most likely will not bother starting the process in his career.

ok chief

http://www.analystforum.com/phorums/read.php?13,1173449,1173523#msg-1173523 pawn, would you be able to enlighten us on what HR make at BB 1-3, 4-6, etc.

This analysis is pretty flawed. pawn Wrote: ------------------------------------------------------- > Addendum to original post: > > Sell side front office total comp for 3rd year > (trader, sales-trader) : 500k+ > > This is a fact in NYC. If you make it to 3rd year in S&T. What portion of college graduates get this far? It’s not 100%. > Sell side front office personnel, particularly > fixed income traders, have the highest total > compensation for age range coming fresh out of > school all the way to the age when people > typically head back to business school (ie. start > at 21 years old, head back to school around 27 > years old plus/minus 1 to 2 years on average). Not sure what you’re talking about. People succeeding in sales or trading (or those that make 500k) simply do not go back to b school. > Given this fact, money-wise, college seniors > should focus on landing a trading job (esp. fixed > income) at an established institutional bank (JPM, > GS, MS, BAC). They will be well ahead of their > investment banking peers in terms of savings by > the time their peers are thinking about heading > back to business school. You’re not taking into account a large survivorship bias in sales and trading. There’s a higher conversion rate to seniority banking (less risky) than trading, but the hours are worse.

Um… I don’t think it works that way. What is the source of this information? (In reference to pawn’s post).

LOL at Pawn! I bet these people well I assume if they are making millions at twenty something must be ivy educated. These people although highly doubt about their total compensation being in the mid $500,000 to millions would never study for CFA. It’s nice to be naive. That is why you have such big goals and dreams, in your case making that kind of money. I mean because of those inflated, ridiculous dreams, some people find the motivation study hundreds of hours and work hard. It’s nice that you are like this, this is a sign of youth and ignorance. Best of luck to you getting that million dollar job at age 21,22,23 LOL Man I have some people with MBA and undergrads from top universities at my firm but they don’t make $500,000 and most of them are over 40 years old. WOW according to you these 22 year old are making one or two million!! insane!! lol

I wanna live on pawn’s planet. :slight_smile:

InfinityBenzo, please re-read my statements. In summary, by the time sell side fixed income traders hit 27, they will have grossed nearly $2million, given the described trajectory. It is illogical and misleading to say that 22 year olds in the industry make $1 to $2 million. They are however, certainly on that career path, and will hit that target by the time they are 27 on average. Justin88, I am not sure what proportion of college grads make it to their 3rd year in S&T. I assume it is greater than the proportion of graduates in the typical 2 year investment banking program, as many investment banking analysts leave even after just 1 year, most likely the average is 1.5 years, rarely do college grads stay on for a 3rd year in IBD. Also, I agree with you that traders do not go back to b-school. To clarify, 25 to 28 is around the time the rest of the industry heads back to b-school. The point here is that trading does not emphasize outside education as much as other sectors of the investment banking and investment management spheres. Lastly, even with this survivorship bias in S&T, albeit less than in investment banking, traders in their 3rd year on the desk make more than investment banking analysts who have just completed their two years and are now associates performing the same tasks as 1st year analysts.

@Pawn Listening to you, if true, I would like to be a trader. Shoot I’d rather make $2 million at age 27 then work as a portfolio analyst making 55,000 because even after few years I won’t be making 6 figures as an analyst. It’s amazing how firm’s give such important positions (traders and assuming it’s important given the insane pay) to rookies and yet pay them so much money. Is this here on earth?

pawn Wrote: ------------------------------------------------------- > Justin88, I am not sure what proportion of college > grads make it to their 3rd year in S&T. I assume > it is greater than the proportion of graduates in > the typical 2 year investment banking program, as > many investment banking analysts leave even after > just 1 year, most likely the average is 1.5 years, > rarely do college grads stay on for a 3rd year in > IBD. I’d like to see what the IBD attrition rate (completely out of the industry, not to B school) is. I think the annual attrition rate is probably around 15-20% for both traders (not sales) and bankers. Very roughly, that would put 3-year retention at ~50%, and 5-year retention at say ~40%. > Also, I agree with you that traders do not go back > to b-school. To clarify, 25 to 28 is around the > time the rest of the industry heads back to > b-school. The point here is that trading does not > emphasize outside education as much as other > sectors of the investment banking and investment > management spheres. Agree, though I would phrase as trading emphasizing experience more than other spheres. > Lastly, even with this survivorship bias in S&T, > albeit less than in investment banking, traders in > their 3rd year on the desk make more than > investment banking analysts who have just > completed their two years and are now associates > performing the same tasks as 1st year analysts. Trader comp has higher variance, so looking at the average will skew the results (in favor of traders) too.

the SS numbers are definately understated for an employee who is sitting for the Level I exam…add about 20% to those numbers just for registering!

this is why people hate financial institutions because we have people like pawn running around screaming how 3rd year analysts make 500k. come on. even at the biggest companies you are not making that much. maybe some traders but that does not justify your posts. just look at the data that top MBA programs put out - the average all in comp is closer to 200k. yes this includes NYC schools. also pawn you haven’t cited a single source and I cant figure out if you really believe what you are saying or if you are trolling AF.

^ yeah wait a minute - do all these people have their charters/passed L2 at least? if so then I agree with builders you are low-balling them

wake2000 Wrote: ------------------------------------------------------- > http://www.analystforum.com/phorums/read.php?13,11 > 73449,1173523#msg-1173523 > > pawn, would you be able to enlighten us on what HR > make at BB 1-3, 4-6, etc. Ha ha, good catch. How do you know the numbers when you are asking for them? Do you even have a job?

starbuk Wrote: ------------------------------------------------------- > also pawn you haven’t cited a single source and I cant figure out if you really believe what you are saying or if you are trolling AF. Anecdotally, I can confirm the numbers as I know someone who was 2yrs out of school making over 1MM as a HY trader at one of the BBs. That’s irrelevant though, as it’s the minority and not the norm - so why get hung up on it? Good for them, sucks for us, whatever.

Minimum veterans salary for NBA is $1.1 million after 10 years. Even the rookie minimum is around $300k, thus all “professional” basketball players will net millions over a couple of years playing. Can the OP be a bit more realistic? Is he really trying to justify “total compensation for average FO/MO personnel” by citing compensation numbers of top 10% performers of highest compensated department in a top tier BB of the most expensive city in the US? Give me a break.

starbuk Wrote: ------------------------------------------------------- > no 3rd year analyst makes 400k, not even in PE > mega funds. > > /credibility of op First year traders a HF’s can clear 7 figures.

Did you guys see that movie, The Social Network? I’m thinking of starting an online social media company. Those guys make bank at a really young age.

brain_wash_your_face Wrote: ------------------------------------------------------- > Did you guys see that movie, The Social Network? > I’m thinking of starting an online social media > company. Those guys make bank at a really young > age. yeah!!! Why didn’t I think of that? Did you know neither Bill Gates nor Mark Zuckerberg finished college and never studied for the CFA? But look at 'em now, arguably two of the most influential people in the last 20 years.

Allegedly some business owners and actors can make bank too. I’m sceptical about these claims though. YMMV.