Introduction
The job of an investment banker is incredibly stressful, yet at the same time, an immensely rewarding one. The most remarkably rewarding part of the job is no less than uncommonly lucrative monetary compensation, amongst other things. Even at entry levels, the job of an investment banker pays significantly over the national average income in the US. Let us know ‘Salaries For Investment Banker’.
Salaries For Investment Banker
According to PayScale, an investment banker who is just starting out with his career can expect to make around $84,285 per annum. This figure includes ancillary additions like overtime, bonus, and tips. The income that an investment banker can generate sees proportional growth with experience. For example, an investment banker who has accumulated 4 years of experience can hope to draw an annual salary of $101,276. The salary of an investment banker with an experience of 5-9 years can go up to $143,751 P.A; while a very experienced investment banker with multiple decades of experience in the field can see his earnings shoot up to $162,500 P.A.
Factors Affecting Salaries of Investment Bankers
While the compensations that investment bankers can hope to draw are decidedly higher than most other industries, they vary widely depending on a cornucopia of factors. These factors not only define the pay scale that investment bankers can expect, but also the bonuses and other incentives that are afforded to them.
- Experience: As discussed earlier, the salary of an investment banker is largely dependent on the experience he has accumulated in the field. The more time an investment banker has been associated with his job, the higher his salary is likely to be. There is an almost military-like hierarchy associated with most investment banks. That means, the higher your position in the bank, the higher risk associated with your decisions, and therefore the higher the salary paid to the investment banker. That’s why an analyst, earns an average base salary of $55,000 per annum in an entry-level position. The vice president whose decisions have a far deeper impact on the firm’s financial performance earns an average salary of $215,000. At the top of this chain is the managing director, whose average annual salary can be something like $325,000—owing to him being at the pinnacle of the decision-making hierarchy.
- Education: The weight of your academic degree is one of the prime determinants of your potential earnings as an investment banker. The minimum level of education that this profession requires is a bachelor’s degree in either business or finance. An MBA is also a valuable addition to your CV if you hope to be taken seriously by employers in this field. While it is possible to join this profession with a degree from the humanities stream, getting prospective employers to hire you becomes exponentially difficult if you don’t have a degree in business or finance. Specialized and unconventional degrees that can aid you in doing the job of an investment banker better, like a degree in advanced mathematics or statistics, can not only make you a lucrative candidate for this job but also supercharge your career in this field.
- Location: The location you will be working in also affects the salary you will be drawing as an investment banker. Large cities that have a vibrant financial sector tend to have the highest-paying investment banking jobs compared to smaller cities, or cities that have fewer financial activities going on. For context, an entry-level analyst job at an investment bank in New York will pay $85,000 on average; while the same job in an investment bank in Sacramento will pay $70,000 on average.
- Industry: It is a no-brainer that the specific company that you end up working for will also determine how much you are paid as an investment banker. The size of the company, its client portfolio, and its yearly financial performance, are all factors that contribute to the levels of pay that they afford its employees including investment bankers.
Salary Structures
An investment banker’s total remuneration is structured in different tranches of pay and bonuses. There are other ancillary streams that contribute to the total remuneration figures as well. The exact structure of the remuneration investment bankers generally earn is as follows:
- Base Salary: This is the guaranteed monthly or bi-monthly salary that an investment banker is supposed to receive from their employers. As discussed before, they are dependent on the person’s experience, education, location, and employer industry.
- Stub Bonuses: This is the bonus given to employees that were taken on board less than one year before yearly bonuses are disbursed. This bonus is provided against the few months of service they have been able to provide within that time period. It is generally pegged at about 20%-30% of their base salaries.
- Yearly Bonuses: The yearly bonus paid out by investment banking firms serves the function of retaining their best-performing talent within their firms. Apart from cash bonuses, which can go up to 50% of base salaries, investment bankers can also hope to earn stock options in the firm as a part of these bonuses.
- Signing Bonuses: As the name suggests, this particular tranche of bonuses is meant to be a deal sweetener for first-time joiners to get them to choose the firm offering it over other firms that don’t, or don’t so handsomely. The signing bonus gradually increases for the position of the person being taken into employment, with the vice president and higher positions sometimes netting 60% to 80% of the base salary.
- Performance Bonuses: Self-evident from the name, this bonus is paid to employees that have been deemed to have played an important part in any recent successes of the firm. This is entirely proportional to the employee’s contribution, and its effect on the bottom line as deemed by the firm. These are the highest ancillary income that investment bankers can earn, and can sometimes go as high as 100% to 150% of their salaries.
- Benefits: These are calculated parallel to the base salary drawn by the investment banker, and are not dependent upon performance metrics. They include things like travel compensation, paid vacations, life, and health insurance, and 401(k).
Conclusion
As the adage goes, “nothing worth having ever comes easy”, it should be evident given the humongous amounts of money you could be making in this career, that the path leading to it is not going to be easy. However, the riches waiting for you at the end of this arduous path, make the difficulty of the path well worth enduring.
FAQs
- What is the maximum amount of money I can make as an investment banker?
Based on the data shared by PayScale, the maximum salaries drawn by an investment banker in the US is $248,000 Per Annum.
- What is the minimum amount of money I can make as an investment banker?
Based on the data shared by PayScale, the minimum salaries drawn by an investment banker in the US is $55,000 Per Annum.
- How can I increase my earnings as an investment banker?
- Switch employers for someone willing to pay more for your skills.
- Accumulate more advanced degrees, thereby increasing the likelihood of promotions.
- Oversee a team of junior IBs thereby demonstrating managerial capabilities.