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Investment banking is one of the most prestigious career paths in finance and even though the work is gruelling at times, the pull behind investment banking roles for most people is that you have the ability to make a lot of money. So, let’s jump right into it – how much do investment bankers really make?
On average, an entry-level investment banking analyst earns $100,000 annual base salary, while a first-year investment banking associate may earn up to $180,000. Vice presidents are typically paid $200,000-$300,000. The highest on the food chain is the managing director, who makes anywhere from 600k to several million dollars.
Disclaimer: The actual salary you receive will depend greatly on where you are hired. The figures above are ballpark numbers.
Investment banking total compensation is made up of five components:
- Base salary: This is your bread and butter, which you’ll take home regardless of performance.
- End-of-year bonus: Your end of year bonus will be a percentage of your salary and it depends on your performance, deal flow, industry experience and which ranking bucket (general five buckets) you fall into. These bonuses tend to be in the range of 70-100% of base salary and, like base salary, can vary if you are an elite or boutique bank.
- Stub bonus for new hires: When analysts are hired in the summer, they’ve been working at the bank for 5-6 months when bonuses are due. These hires get a stub bonus in the region of $20k – $30k. Associates hired in the summer will get a lower percentage of base salary.
- Signing bonus: First-year analysts can also receive a one-time signing bonus in the range of $5k – $15k. For associates level, the signing bonus is significantly higher, around $10k – $30k.
2. Investment Banking Summer Analyst Salary
Summer analysts refer to interns working for 8 to 10 weeks in the summer. During the internship, they can get paid an $85K pro-rated salary with a few thousand dollars for a housing stipend. However, they do not receive any additional bonuses.
The best way to get a job in investment banking is to land an internship. 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.
3. Investment Banking Analyst Salary
For a first-year investment banking analyst in the US, the base salary is $100,000, and most analysts will receive a year-end bonus in the range of $30,000-$40,000. Absolute top performers will get a bonus as high as $50,000. The all-in comp for most 1st year analysts thus comes to around $150,000.
Investment banking analysts are typically hired straight out of college into a two-year program that sometimes extends to the third year.
Position | Base Salary | Bonus | All-In Comp |
1st Year Analyst |
|
| $150k-$170k |
2nd Year Analyst |
|
| $160k-$180k |
3rd Year Analyst |
|
| $170k-$210k |
Since May 2021, major Wall Street investment banks like Goldman Sachs are giving their junior bankers a pay raise. First-year analysts — the most junior of investment bankers who are typically recent college graduates — will be paid a $110,000 annual base salary, up from $85,000, according to a person with knowledge of the changes. The person added that second-year analysts will earn $125,000, up from $95,000, and first-year associates will get a $25,000 pay bump to $150,000.
A note on the stub year: Analysts arrive in the summer after completing undergrad. Traditionally investment banking analysts get their first-year bonus a full 12 months after arriving and don’t switch to calendar year bonuses until they are promoted to associate (“a to a”). However, firms are increasingly switching to the “stub year” model for IB analysts, to reset their bonuses to a December calendar year-end. In this case, analysts get a small stub at the end of their first calendar year (usually $25,000-$30,000 just 5 months after arriving), with the next bonus coming 12 months later.
4. Investment Banking Associate Salary
For a first-year associate in the US, the base salary is $150,000, and associates will receive a year-end bonus in the range of $90,000-$120,000. Absolute top performers will get a bonus as high as $130,000. The all-in comp for most 1st year associates thus comes to around $240,000-$270,000.
The investment banking associate salary consists of a base and a bonus. Investment banking associates are typically hired after business school.
For competitive reasons, base salaries are fairly standard during all 3 years at most investment banks at $150k, $175k, $200k for year 1, year 2, and year 3, respectively. Meanwhile, bonus disparity based on associate performance grows over time.
Total compensation is usually just a bit lower at large middle-market investment banks, but can get considerably lower at small regional firms outside of New York. Elite boutiques generally pay in line or better than bulge brackets. Below is a table summarizing average compensation for stub year, 1st year, 2nd year and 3rd-year associates.
Position | Base Salary | Bonus | All-In Comp |
Stub year Associate |
|
| |
1st Year Associate |
|
| $240k – $270k |
2nd Year Associate |
|
| $275k – $270k |
3rd Year Associate |
|
| $320k – $450k |
A note on the stub year: Associates usually arrive in the summer after completing business school. Instead of paying the bonus 12 months later, banks pay associates (and analysts) their bonus for just the next 5 months (“stub bonus”) to reset them to a December 31 calendar year-end. Bonuses for the past year are usually communicated in January and February (“bonus season”).
5. Investment Banking Vice President Salary
Investment banking vice presidents are the next step after associate and before director in the investment banking career path and earn base compensation of $200,000 – $300,000, with bonuses ranging from $200,000 to $400,000 at the large investment banks and elite boutiques. The all-in comp for 1st year VPs comes to around $400,000- $600,000.
6. Investment Banking Director/Senior Vice President Salary
The investment banking director salary ranges between $500,000- $700,000 at most bulge bracket investment banks and elite boutiques. The all-in comp is comprised of a base and bonus component:
- Base salary: $275,000 at most bulge bracket and elite boutiques
- Bonus: ~$400,000 (plus or minus $75,000 based on individual, group and firm performance)
Directors are almost at the top of the food chain in investment banking, sitting above vice presidents and below the almighty managing director.
7. Investment Banking Managing Director Salary
The investment banking managing director salary (all-in comp) ranges from just under $1 million to several million dollars. Managing directors are at the top of the investment banking food chain. They are responsible for relationship building with clients and revenue generation for the firm.
The total compensation is comprised of both a base and bonus component:
- Base salary: $350,000-$600,000 at most bulge bracket and boutique investment banks.
- Bonus: can range from 100% – 200% of base for all in comp anywhere between just under $1 million to $2 million. Meanwhile, seasoned MDs can make significantly more based on revenue they’ve generated for the firm.
Bonus for investment banking managing directors
Unlike the more junior staff (analysts, associates) and the mid-level staff (VPs and Directors), the large bulk of managing director compensation comes in the form of a bonus which is largely dependent on how much business the MD has brought in. To reflect the importance of performance at the MD ranks, Goldman announced a few years ago that it would no longer guarantee its Managing Directors a minimum salary of $500,000.
At bulge bracket banks, a large portion of bonus for senior investment bankers, however, comes in the form of stock and deferred compensation. Deferred portions generally vest over a period of 3-5 years which incentivizes bankers to stay with the firm and potentially receive a bonus as high as $1 million.
8. What Determines the Salary of Investment Bankers?
8.1. The type of firm
Each investment bank works on different deal types. Bulge bracket banks are mostly involved in various services such as M&A, equity/debt issuances, and restructuring while middle market or elite boutique work on a specific deal type such as M&A or restructuring. Thus, most elite firms pay for their employees generously:
- Elite boutiques: Generally pay the most at analyst and associate level, about 10-15% higher than bulge brackets. This is because elite boutiques are a little bit leaner organizationally, having fewer overall employees and less administrative overhead. Elite boutiques are generally also founded on the principle that the deal team should receive a greater proportion of the money. Elite boutique deal teams get a larger portion of the deal commission. For example, while the standard first-year analyst base is currently $85,000, some (but not all) elite boutiques have started offering $95,000 for new analysts.
- Bulge brackets & elite middle-market investment banks: These firms are all generally clustered around the same base salaries for analysts.
- Regional middle-market investment banks: These firms tend to be on the lower end of the comp scale, but still fairly close in order to stay competitive in the recruiting process. Firms that cannot afford the high base and comp generally make up for it with a much better lifestyle (i.e. fewer hours).
8.2. The success of the firm
The firm’s performance will materially affect the amount of end-of-year bonuses for employees. When the revenue is lagging, investment banks have to face some defections and cut bonuses to reduce costs. Thus, banks’ past performance might be helpful for you to compare compensation among many investment banks.
In 2020 – a year of recession, JPMorgan, Goldman Sachs, Bank of America and Morgan Stanley are leading banks by revenue. The endless money printing from central banks leads to a surge in debt & equity issuance and M&A activity in the second half of 2020 though at the beginning, investment bankers are freaked out about the bonuses when they work from home.
Leading banks worldwide in 2020, by revenue from investment banking
(in million U.S. dollars) (Source: Statista.com)
8.3. The success of the group
One important thing to recognize is that investment banking pay is going to fluctuate with the overall deal volume of the industry. If the economy is slow, then there are fewer deals to do, and fewer commissions to be made.
Top performing IB groups by number of deals and fees 2020 (Source FT)
Top-performing Investment Banks in industries by fees 2020 (Source FT)
8.4. Individual performance
Along with the success of the firm and group, individual performance determines the bonus for each employee. Some banks will further tier their bonuses into “buckets”. They will incentivize performance by paying better performing analysts more. At bulge brackets, top bucket analysts will generally make ~10-30% more than bottom bucket analysts. However, some firms have very small bonus ranges (e.g. as low as $5k).
When climbing up the ladder, senior bankers mostly receive bonuses based on their own performance. Specifically, 1% commission for deals worth less than $1bn while deals worth more than that would come with 0.1% commission.
10. 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.
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