IB Salary Report

Question

Found this on the web today and thought you guys might be interested.

jallenmorris · Answer

In many cases, that's how critics classify someone as a great writer. They push our buttons and stretch our thinking. I think this is true in some instances if the author is really trying to get people a new perpective. Other times, I think an author can just write something for shockvalue and to get a reaction (I think Michael Moore does this to some extent).

agold · Answer

This book is fictional and written purely for humor.

jb32 · Answer

It basically goes to the extreme about the benefits and lifestyle of an investment banker. To get a preview of the book check out:
 https://www.leveragedsellout.com/2004/12/black-car/

agold · Answer

I'm partial to this one: https://www.leveragedsellout.com/2008/02/the-money-seat/ The Chicago and New Trier pun had me laughing pretty hard.

aviroop · Answer

look up on https://www.glassdoor.com it gives a better picture for base salaries, but not for bonuses.

pelihu · Answer

I looked at the report in the OP. The numbers seem generally in-line with what I know, but terp06 is right in that they got the timing wrong. The 6 months immediately after graduation is considered the stub year. Fresh MBA grads join as associates and typically get some type of fixed bonus for that period, base salary of around $95k (annualized), and for the past couple of years the standard signing bonus of around $40k. Then, the new calendar year will mark the first full year for associates. Base salary will be unchanged (generally $95k) and bonuses are basically what is shown for second years in the chart ($210-240k). The bonus numbers in the second table are somewhat lower than typical levels at BB i-banks and probably include numbers from regional firms and/or other departments (like fixed income or research).

2006 was a very good year for I-bank compensation. 2007 was a better year, with most of the top banks setting all-time compensation records even as business dried up half-way through. 2008 will be a crappy year, I've read estimates in business publications that bonus levels will be down anywhere from 15-40% compared to last year. The people that keep their jobs will still get healthy paychecks; the real thing to watch for is how many people are let go. There's already been a lot of bloodletting, and the rumors are that huge announcements will be coming in the next month or so, as firms usher out their summer associates and take stock of how bad business has been. Regional firms, non-public firms, and firms that don't back transactions with their own balance sheet (advisory only firms) seem to be the safest, and in fact many of those are doing quite well. Firms with all sorts of stuff ranging from MBS's, CDO's, auction rate securities and other stuff on their balance sheets are taking a bath.

Senior Vice President and Director are exactly the same level; just different titles used at different firms for the same position.

ac8706, the transition is always associate to VP at the bigger firms. Some of the smaller firms might have their own quirks, and of course PE firms are so small they all operate differently. With the crappy economy, everyone is starting at the 1st year associate level. When banking is booming and recruiting is hot and heavy, I have heard of people with relevant related experience (for example in PE or as a lawyer) being credited for prior experience and brought in at more senior levels; that's definitely not going to happen for people graduating this year.

pelihu · Answer

There's something else I was thinking about that might be interesting for people considering banking. There's a real question right now whether investment banks will continue to be the money making machines they have been in recent years. A lot of their profits (and hence compensation) has been tied to providing funding for the transactions they have advised on, essentially helping fuel the boom in private equity LBOs (among other things).

These days, when you read analyst reports about any of the big banks, they almost always make some type of comment about whether the bank's "franchise is intact going forward" or whether the "bank is killing a key part of their profitability". Essentially, they are trying to answer the question of whether banks will have the ability to make money in the future after they get through their current problems. The landscape might get tougher, as regulators are forcing banks to reduce their leverage, their holdings in illiquid assets and other ways in which they do business.

Private equity has not been immune to the changes either (to say nothing of the fact that no deals have been getting done for almost a year now), and the IPOs of Blackstone, Fortress and Apollo (proposed with a pre-offering so far) have been hammered, demonstrating how tough that landscape has been.

I think there's a real question if banks and private equity firms will be returning to the profitability of the past few years (a question I've been asking myself). This will in large part determine whether universal banks, traditional investment banks or advisory firms will do the best going forward. Certainly, finance will evolve and the people and firms that adapt fastest and best will set the new standards (in profits and compensation). I'm certainly wary about jumping on the PE bandwagon right now; seems like they could go the way of the junk-bond trader, at least in the short term.

I guess the point is that looking at the historical figures is enlightening only to a degree. I have no doubt that some groups will capture compensation levels higher than those shown in the graphs and charts above - Wall Street with find a way. Will the big banks keep up? Hard to say right now, as their business models are under fire, and their earnings (and in turn compensation) will be under pressure for years to come following the write-downs they have been forced to take and the business types that are no longer open.

riverripper · Answer

What about people that were former IB who were already associates or VPs before going to school?

jb32 · Answer

I know two people that made Associate straight from Analyst and neither one is planning to go back to school ever. One works in Atalanta at a mid-market and the other had a 3.9 out of UPenn and works at CSFB. The person in Atlanta can probably make VP in a few years without going back because they are very highly regarded and the practice they work in is very sepecialized. The guy who came from Penn could do just about anything he wanted and will mostly likely leave for a HF or PE in the next year or two.

agold · Answer

The total cost (including forgone salary) of a full-time MBA program if you've made it to the VP level is generally between $1.0-1.5M.

The only way that I could see this happening is if someone was at a regional/lower-tier firm (which is a very difficult mold to break out of) and was looking to get into a bulge bracket. In this case, I would assume that the BB would not credit their experience.

I think these guys tend to pursue Part-Time programs or Executive MBAs once they have been direct promoted to associate (if they bother with an MBA at all). That is, unless they're looking to get out of banking altogether, which would make the question a moot point.

Peli should be able to shed some light on this as well.

I'm also curious river - do you have any ex-BB associates or VPs in your class at Kellogg?

IHateTheGMAT · Answer

I have never heard of somebody that was already a VP going back to school full time. Ever. In fact, the number of VPs at bulge bracked IBs that don't already have an MBA is extremely tiny, almost non existent. I'm sure there are some Associates that apply to business school, but I'd be willing to bet it's pretty rare. Why would you take 2 years off to go to MBA when you are already making 300K+ and everyone in school is recruiting to try and get a job that you already have? Plus, almost all (but obviously not 100%) of Associates already have an MBA.

jallenmorris · Answer

I think you answered your own question. See the red. If someone is an associate without an MBA, that person evidently (according to the part in red) has such a slim chance of gettign a promotion that it only makes sense to get the MBA if it's a de facto requirement for promotion to VP. Does it make short-term economic sense? No. This person might be one of the tiny few that get promoted to VP without the MBA, but like you said: It's very rare. Thats' why I think they would leave being an Associate for 2 years to get their MBA.

pelihu · Answer

That's pretty rare. I haven't actually known anyone who made it to VP and then went back to a traditional business school. I would assume that they would be credited with prior experience, provided it is relevant (not all banks do work of the same sophistication). The only real reason I could see someone doing that is if they want to make a dramatic career shift into something where banking does not translate - perhaps something like a marketing or GM role with a non-profit or something, or maybe if they want to build connections to launch a fund or start a business. Bankers regularly move into other finance roles (like PE or HF), consulting, and even the path to management roles at many companies (fortune 500 and PE portfolio companies for certain) is pretty well traveled, so bankers at well respected firms will not see much benefit from getting an MBA if they want to stay withing finance or transition into many typical roles.

IHateTheGMAT · Answer

Damn you just highlighted my misspelling of bulge bracket which I went back and corrected. Haha. But that's a decent point about the associates. I still think there are so few associates without an MBA that they are not very common in bschool. almost all IBers in MBA are former analysts. but I don't know this for a fact and someone currently in school can correct me. I have seen some MBA resume books though and pretty much everyone with IB experience was an analyst.

pelihu · Answer

There's actually a tried-and-true method for people who won't be promoted at their own firm to get that promotion - jump to another firm. In fact, one of the career guides I read last year (Wet Feet, Vault, something else, I don't remember) specifically says that bankers are often forced to switch firms if their career stagnates for whatever reason. Again, it's really hard to imagine someone at the associate, let alone the VP level going back to business school (full-time MBA) with the goal of re-entering banking at a higher level. Recruiters simply won't be focusing on that level and you'd probably be left to conduct the search on your own. Far better, in my opinion, to just tap into your network while gainfully employed as a banker.

riverripper · Answer

My cousins fiance is a 2nd year MBA student right now and was a VP at a bulge bracket (I will say top 3 at that). So it definitely happens and he is not in at HBS or Stanford. I dont believe he is going back to traditional IB and now was a good time to take a few years off...I think lots of bankers have seen the writing on the wall with layoffs and big cuts in bonuses. I think for him it was more of he wanted to take 2 years off and not sink his career and then transition into a different career path.

I have met several associates and I have probably met less than 20% of the class so far. Also Kellogg doesnt attract the vast number of finance folks that GSB, Col, and Wharton do.

agold · Answer

Bulge Bracket or Non-Bulge Bracket? And are any of them trying to re-enter banking?

IHateTheGMAT · Answer

This really surprises me. Are you sure they were associates? I'm in the finance industry (though not IB) and know plenty of people in IB, plus plenty of MBAs and I just don't think this is common at all. As Peli stated a couple posts above, from what he has observed it is very rare for an Associate or VP to go to MBA full time. Just to be sure I went and took a look at the Tuck PE resume book. PE aspirants tend to be the top finance guys at a school, and though Tuck is not a "finance" school it is a Top 10. Out of about 85 people, nearly all with prior finance experience, exactly 2 were full time associates before MBA. This matches much more closely with what I would expect.

agold · Answer

Agreed. https://mba.tuck.dartmouth.edu/pecenter/ ... e_Book.pdf There are a grand total of 2 former investment banking associates here. One was at Jefferies and one was at Robert W. Baird. There may be 1-2 more middle-market/regional guys max in Tuck's class that have zero interest in private equity. EDIT: We're duplicating each others posts here, hah.

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