NEW Investment Banking Salary & Bonus Pay (2021) - Why Bankers Are Getting RICHER

when you work in investment banking there is a running joke that the average person thinks that in your spare time you're just partying it up with models and bottles but instead of hanging out with kendall jenner and drinking champagne at a hot new york nightclub what you're actually doing as a banker is spending a lot of time in excel models and drinking a lot of water bottles stay awake in the vast hierarchy of investment banking analysts and associates who are the most junior bankers are least likely to be partying it up with models and bottles but wall street did recently increase their compensation in an effort to attract junior banker talent and that's what we're going to be talking about today i'll first be starting off by describing how investment banking compensation works i'll then go over investment banking analysts and associate compensation and make sure to stick to the end of the video as i'll be sharing the most important thing that helped me land my job at jpmorgan before i get started though quick shout out to financial edge for sponsoring this video and helping me be a full-time youtuber so i can make videos like this for all of you alright with that said let me first give you a brief overview of how investment banking compensation works really simply there are two parts to an investment banker's total compensation and that is their base salary and their bonus and your bonus is affected by two things the first is not really in a banker's control and that is how the overall firm and group performs and so if a group brings in a lot of deals in a given year everyone gets paid more especially senior bankers the second is how you as an individual perform and at the end of each year you're given a final review and a ranking which is a super intense process at jpmorgan there was a five-tiered ranking system with the lowest being n for needs improvement then m stands for meets expectations then e was at the very top for exceeds expectations as you might imagine there's a lot of build up when it comes to bonus day because you just worked an entire year put in a ton of hours in order to get your final ranking and bonus number and it's kind of like if you're a student and you are waiting for your college decisions that's pretty much what bonus day is like one by one you'll go into an office for a private conversation with your resource manager and he'll give you some feedback from your teammates and your directors and vps and everyone above you and basically during that whole time you're just thinking in your head okay i don't really care i just want to know what my number is and then he gives you a number and you're ranking then people leave the room either sad or unhappy usually there are sometimes some people who are kind of okay and satisfied with the ranking but bankers are pretty competitive people and even though they can be genuinely nice people when you're working with them and for the most part i really liked a lot of my co-workers and but with that said you know everyone wants that top rating and so if you don't get that a lot usually you end up being a little disappointed and if you get that you're just ecstatic by the way if there's anything else you'd like to know about investment banking maybe recruiting or what it's like behind the scenes let me know down in the comments below okay next up let's go over old versus new analyst compensation going straight into the numbers in the past banks used to pay analysts base salaries of 85 000 in their first year 90 000 in their second and 95 000 in their third two things to quickly note before i move on the first is that the salaries i just gave you are for bulge bracket banks which are the largest banks in the world probably ones you've heard of like jp morgan morgan stanley goldman sachs not really talking about elite boutique banks in this video and the second thing i want to mention is that for a very long time all these banks had the exact same salaries their bonuses kind of differed but there was kind of this unspoken rule that no one would raise their salaries because then everyone would have to kind of just one-up each other and that's kind of what happened you see what happened was a few banks first started to raise the base salary to 100 000 and then all the rest of them followed that is except for goldman sachs which is arguably the most prestigious bank in the world and there was some grumblings from the inside that they may not follow the herd and raise salaries at all but then just a few weeks later goldman announced that it was one upping everyone and paying first year analysts 110 000 and second year analysts 125 000 so as you can see in this chart pretty much every bulge bracket bank is paying 100 000 to first-year analysts 105 000 to second years and 110 000 to third years so while all the other bulge bracket banks are paying the same amount goldman is paying even more and it seems like that was just a chess move that they were making where they were acting like they were not going to do anything and then they just one-upped everyone and so honestly props to goldman on that one by the way the reason goldman only has two years here is because they either promote second-year analysts to associates or have them leave while other bullish bracket banks have three year programs but a lot of them usually also have fast track programs where second year analysts who perform really well are promoted directly to associates anyhow next up let's look at bonuses and please keep in mind that these are estimates because no one yet knows if bonuses are going to go up or down with the salary bumps but 70k was the highest for first-year analysts at jpmorgan and when i was there at least and so that's the number i'll use for the max so here i've broken down bonuses down into three sections which are bad average and good which as i explained in the previous section of the video depends on the firm and your performance for first year analysts we're looking at a range from 30k to 70k for second years 45k to 85k and third years 60k to 100k using the base salary that most of the bulge brackets are paying basically minus goldman this gets us to an investment banking analyst total compensation range of 130k to 170k for first years 150k to 190k for second years and 170k to 210k for third years which is a good amount to earn coming straight out of college you may also notice that the differences between a bad and average bonus is smaller than between average and good and that's because most banks paid their top performance a lot more to reward great performance compensation figures are obviously a huge draw for investment banking and if you're interested in recruiting for the industry i highly recommend checking out financial edge the company's founder alistar is literally the instructor who taught me and hundreds of other analysts during my summer training at jpmorgan a few years back and he's this british guy with a really great good-natured personality who cares a lot about being a good teacher financial edge has a course called the investment banker and i highly recommend it because i think it's the best product out there for building out your technical skills and it's something i wish i had back in college their instructors trained the analysts at the top four banks who pay tens of thousands of dollars if not more and you can get the same lessons for just a few hundred dollars so i really think it's worth it you'll learn everything that i learned during my training including accounting valuation dcfs and lbos and they also have other courses about asset management accounting and a whole lot more if you're interested make sure to use my code rare liquid 25 to get 25 off and you can find that down in my description below and a link as well okay next up let's go over old versus new associate compensation by the way i didn't really go into what an investment banking analyst does because i go through that a lot in this video right here associates also do a lot of the similar things but instead of always building the entire excel model or building a presentation associates spend the vast majority of their time checking over an analyst's work so for example if i was an analyst and i built out a financial model with 10 different tabs and hundreds of rows then the associate would basically have to check every single cell to make sure that everything was correct and if i had built out a 30 page 40 page 50 page powerpoint presentation then the associate would have to make sure that all the data made sense and that the font was all correct and there were no spelling errors basically to make sure that everything was ready to send to the client in the past associate salaries were 150k for first years 175k for second years and 200k for third years according to several reports banks have simply increased each year by 25k for the base salaries and there's no news of any bulge bracket banks one-upping each other yet so now the salaries are 175k for first years 200k for second years and 225k for third years next up for bonuses again this involves a bit of guesswork but they're all in the ballpark of what banks have given out in the past for first years the bonus comes out to 85k for the bottom performers to 130k for the best performers 100k to 175k for second years and 125k to 225k for third years putting all this together we get to a total compensation range of 260k to 305k for first year associates 300k to 375k for second year associates and 350k to 450k for third year associates one last thing to note here is that especially if the bank that you work at is public a lot of your compensation actually comes in the form of stocks all right last up let me share with you the most important thing for investment banking recruiting for this i'm actually going to split up my advice first for high school students slash college students and second if you're a few years out of college starting with the former my number one tip is to join a business organization on campus that has a history of recruiting well for banking or at the very least is business focused investment banking recruiting is tough but it's also very systematic and once you understand the rules of the game it's very very possible for you to get an offer especially if you start early speaking from experience i joined a business organization back when i was at uc berkeley and i cannot credit my friends enough for helping me throughout the banking recruiting process i actually even started late my senior year i decided to switch to investment banking recruiting when i first in my first few years focused on consulting recruiting and my friends in that organization really taught me the ropes of what to study for they mocked me for interviews and i promise you no matter how many youtube videos you watch or whatever it just helps so much to have a group of friends in an organization that you're part of to have a bunch of resources but also just to be there with you to let you know when info sessions are coming up or when you need to submit applications or being able to reach out to older people who have gone through investment banking recruiting already all of that is just so so valuable and important and i really highly encourage you to focus on that if you're still in college or a high school student if you're lucky you'll be joining a club or organization that has alumni at different banks who you can reach out to and they can also help you out in the recruiting process and this is kind of an unfair advantage but it's also earned because other people could have joined these clubs or organizations but they didn't and maybe you did i also recommend joining these organizations as early as you can because investment banking recruiting happens so quickly these days either in your sophomore spring or junior fall and so it really takes one to two years to be prepared for everything and i got super lucky by just starting my senior year but it's i would not recommend that to anyone if you really want a good shot i recommend starting even your freshman year next up is my advice for those who are out of college already and this is really really simple just go get your mba roughly 80 of analysts leave after a few years and so investment banks really focus on hiring associates out of mba programs i get asked by people who are a few years outside of college all the time you know how do i break into investment banking and there's pretty much no other advice i can give you and yes mbas are super expensive but hopefully you can see from the compensation that i just showed you you can pay off your tuition debt in a few years by the way if you're interested in recruiting for investment banking i just finished my resume and cover letter guide which is filled with all of the best tips that i've compiled over my career reviewing hundreds of resumes and cover letters and also from leading jpmorgan uc berkeley recruiting for two years and so if you want to check that out it's at www.rareliquidcareers.com you can also see it in my description below also don't forget to check out financial edge if you're interested in building out your technical skills and the last thing i want to just suggest to you guys is if you want to learn more about investment banking what a day in the life is like or want to learn more about the goldman sachs survey that was released a few months back earlier this year then check out my investment banking playlist which has a bunch of videos that you'll probably enjoy with that said thank you so much as always for watching let me know down in the comments below if you'd like me to make videos about anything else and thanks so much for tuning in hope to catch you in the next video [Music]

Channel: rareliquid

Views: 38,465

Keywords: Investment banking, investment banking salary, banking and finance, goldman sachs, morgan stanley, jp morgan, investment banking pay, wall street, how much do investment bankers earn, investment banking analyst, investment banking bonuses, how much do bankers make, investment banker, investment banking lifestyle, investment banking associate salary, investment banking interview, investment banking internship, investment banking summer analyst, investment banking associate

Id: sydRlAvXKUQ

Length: 12min 10sec (730 seconds)

Published: Tue Sep 28 2021