How Much Do Investment Bankers Really Make?
The term investment banker is usually synonymous with a high-income, high-demand job. While that can often be true, it’s not always the case. Several factors from the type of institution, job level and even the COVID-19 pandemic determine what an investment banker ends up taking home at the end of the day.
What Do Investment Bankers Do?
As far as what the job entails, investment bankers typically raise capital using stocks or bonds for governments, corporations and other organizations. They basically serve as intermediaries who are involved in pricing and selling capital, buying and selling securities, managing investments and more. It’s a demanding job that can — but not always — command big bucks. Here’s a look at the most up-do-date information about what income investment bankers are typically paid, how that’s changed in recent years and how the industry has adapted to a market changed by the pandemic.
How Much Do Investment Bankers Make?
According to Indeed, in August of last year the average salary in the U.S. for an investment banker was $56,894. Granted, this range varies significantly depending on where the investment banker lives, what kind of financial institution they work for and, of course, their own individual personal performance.
While the average salary for investment banking doesn’t seem particularly impressive, as it’s almost exactly in-line for the average U.S. salaries in 2020, salaries increase significantly when looking at senior members of some of the bigger, more reputable establishments. When adding in bonuses, some of these bankers can end up taking home $200,000 or more per year.
Granted, not all investment bankers are salaried. As the Corporate Finance Institute points out, it is possible to nab a $100,000 salary out of school, but it’s not always the case. Those who start off their careers as hourly workers will net closer to $25,000-$35,000. While that’s certainly a respectable wage, it does serve as a reminder that this particular career path doesn’t guarantee big bucks. At least not at first.
How Do Investment Bankers’ Salaries Differ?
There’s a hierarchy involved that dictates quite a bit about who takes home what. On the bottom of the ladder are analysts, who can make anywhere from $85,000 to $100,000, along with the potential for $50,000 to $100,000 in bonuses. On the top end, a managing director can expect an annual salary anywhere from $300,000 to $10 million, with bonuses that could end up doubling that amount to $20 million.
The bonuses are broken down into a few basic categories. There’s an end-of-year bonus, usually a set percentage of the base salary. Though it’s often based on the individual performances, which obviously can have a big impact on the bottom line. After a few years, it’s common that a portion of the bonuses are paid as stock options. Other perks include signing bonuses or stub bonuses, which are paid at the end of the year to college or MBA graduates who began working midway through the calendar year.
Obviously, the career can be lucrative, but there are some downsides. Namely the hours that these employees are often expected to put in. Given that these jobs often involve the handling of enormous sums of money, expectations run very high, as does the work that goes into it. In fact, the schedule can amount to working 75 hours a week or more. This isn’t limited to weekdays, as the job involves working weekends and holidays. When broken down per hour, this can make even a significant salary seem less impressive.
How Has COVID-19 Affected Investment Bankers?
Of course, investment banking certainly wasn’t immune to the effects of the COVID-19 pandemic, which began in March 2020. Mergers and Acquisitions noted that the base pay and bonuses began to vary more widely, which could make salary estimates tougher to pin down in the future.
In general, associate-level salaries appear to be up overall, jobs at the analyst level are actually paying slightly less in certain markets. So much so that the average entry-level salary for these positions is down slightly overall. On the other hand, promotions from analyst to associate appear to be happening more quickly, which is due in part to companies trying to incentivize their workers to stay onboard for long-term careers.
There’s also the issue of remote work, which has been an easier transition for those who know the ins and outs of the job, though it’s been reported that onboarding new hires has proven to be a challenge. This has resulted in lower morale and increased turnover, which has meant it’s been harder for some companies to get and maintain workers.
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