Investment Banking Salaries – That Much Can You Really Earn

Investment banking is recognized as one of the highest paying career opportunities. However, there is much more to understand about IB compensation than just the impressive salaries and lavish bonuses.

In this article, we’ll explore the often-overlooked aspects of investment banking salaries, and answer your most pressing questions. Keep reading to understand the factors that influence compensation, learn how salaries vary across different countries and firms, discover emerging trends in pay packages, and get valuable tips for negotiating your pay.

How Is the Salary Structured in Investment Banking?

The investment banking industry has a meritocratic culture, where compensation packages are closely tied to team and individual performance. As a result, these bonuses make a large portion of analysts total pay in periods of great deal flow.

Below is a complete breakdown of the investment banking pay structure.

• Base pay or salary: This is the fixed income you are offered when joining the firm. Every bank has its standard base income ranges for different positions. For instance, entry level analysts have a lower base pay compared to senior associates.
• End-of-year bonus: Investment banks often award performance-based bonuses at the end of the fiscal year to reward bankers for their contributions over the entire year and retain top talent. The bonus can range from 50% to 100%+ of the base salary depending on the performance of an individual, group, or bank.
• Stub bonus: New hires who have not worked an entire year receive a fraction of the yearly bonus referred to as stub bonuses. This could be about 20%-30% of their base salary.
• Performance bonus: These bonuses may be awarded at different points throughout the year, not necessarily limited to year-end. The goal is to incentivize and reward specific achievements and deal-making success. So, they're tied to certain performance metrics, including individual contributions to revenue generation and deal success.
• Stock-based bonus: These are bonuses awarded in the form of company shares or restricted stock units (RSUs). They tie compensation to the bank's stock performance, motivating employees to contribute to the firm's success in the long run.
• Signing bonus: This is a lump sum payment a firm pledges to pay if you accept their offer for an investment banking position.

• Other benefits: Besides the bonuses and base salary, investment bankers also receive other perks like retirement plans, vacation days, and health insurance.

Which Factors Influence Your Salary in Investment Banking?

What you take home as an investment banker can vary significantly due to several factors. Let's look at the primary determinants of an investment banking salary.

Location

One of the biggest factors affecting investment banking salaries is geographical location. Prestigious banks are often highly concentrated in certain cities referred to as major financial hubs. These include New York, London, Hong Kong, and Singapore. Bankers in such locations are highly compensated as firms compete to attract and retain the top talent. Such areas also have a higher cost of living, demanding better wages.

Firm Size and Reputation

The most prestigious investment banks in the bulge bracket and elite boutique category offer the highest investment banking salaries. These firms have a strong deal flow and access to high-profile clients which allows them to offer attractive base salaries and higher bonuses. That's how they retain the top talent to execute the deals successfully and maintain the firm's reputation.

Smaller or mid-tier firms on the other hand often provide lower total compensation. This is expected as their deal volume and value are often lower compared to the bigger names. The industries a firm specializes in also tend to cause income disparities. Some areas like healthcare and technology are often the highest paying sectors due to higher deal value

Experience and Position

Due to the meritocratic nature of the industry, work-experience and performance are the main drivers of promotions. Your work history typically reflects your deal exposure and track record of execution. That's why investment bankers with prestigious qualifications often command higher salaries and better bonuses. In short, most firms are willing to pay more to attract the best talent.

Educational background and professional qualifications, such as advanced degrees (MBA) or certifications (CFA), can also enhance earning potential. And compensation in investment banking increases with seniority. Summer analysts earn the least. But as junior analysts advance to associate and vice president roles, the base salaries can double or triple. The bonuses for senior roles also tend to be quite high, sometimes more than 100% of the base pay.

Your work history typically reflects your deal exposure and track record of execution. That's why investment bankers with prestigious qualifications often command higher salaries and better bonuses.

Specialization is also important when it comes to experience. Most professionals in IB often work in one group whether that's mergers & acquisitions (M&A), equity capital markets (ECM), debt capital markets (DCM), leveraged finance, and restructuring. The pay can vary by grouping with M&A getting higher packages compared to others like capital markets groups. This is often true in periods of higher mergers and acquisitions activity.

Performance

High-performing bankers enjoy covetable bonuses especially in strong financial years. Banks aim to retain such individuals and teams as much as possible by offering competitive bonus percentages. The overall performance of the bank also influences bonus amounts.

Market Conditions

The investment banking industry is highly sensitive to market fluctuations, which affects the pay levels. During periods of strong deal flow and high revenues, banks offer larger bonuses and higher salaries to attract, reward, and retain top talent.

On the other hand, compensation packages, especially the bonuses are more conservative in times of economic downturns.

Negotiation Skills

During the interview process, the most nerve-wracking question is about salary expectations. What if you say too much and lose the opportunity or request too little and end up making less than your peers at the same level?

That's where your negotiation skills come in. Having the ability to communicate your value during the hiring process and backing up your salary expectations with industry benchmarks can help you bag the competitive compensation packages.

How Do Investment Banking Salaries Differ by Country?

Investment banking salaries vary significantly by country. The factors that influence the differences include local economic conditions, cost of living, talent supply and demand, financial market maturity, and the presence of major financial markets. The U.S. is known for the highest salaries in investment banking, particularly in major financial centers like New York City.

If you want to know more about salaries in investment banking, check out the following articles:

👉 Investment Banking Salaries in the US
👉 Investment Banking Salaries in the UK
👉 Investment Banking Salaries in Germany
👉 Investment Banking Salaries in Singapore

What Are the Top Paying Investment Banking Firms in IB?

The common perception in the IB industry is that the biggest names like Goldman Sachs, JPMorgan, and Morgan Stanley offer the highest investment banker salaries. While they are among the highest paying investment banks, they are not the absolute top payers.

Several elite boutique investment banks sometimes offer higher total compensation for first-year investment banking analysts than the big names.

Below is a list of the top paying investment banks:

• Centerview Partners
• Evercore
• Lazard
• Rothschild & Co
• Jefferies
• Goldman Sachs
• JPMorgan Chase
• Morgan Stanley
• Bank of America Securities
• Citigroup
• Moelis
• PJT Partners
• Perella Weinberg Partners
• Barclays

You want to learn more about the top investment banks in your region? Check out the following articles:

👉 Top Investment Banks in the USA
👉 Top Investment Banks in the UK

How Do Investment Banking Salaries Progress with Experience?

Typical investment banks operate in strict hierarchical structure. This gives bankers a career progression path that marks experience, expertise, and seniority. The standard investment banking career progress includes:

• Summer analyst or intern
• Investment banking analyst
• Investment banking associate
• Vice president
• Senior vice president
• Managing director

Salaries and bonuses increase with each promotion, with base salaries doubling or tripling from analyst to associate, to VP and MD levels. The pay raises reflect the increasing responsibilities, deal experience, and revenue generation expected at each level. However, career progression in IB is highly competitive. Many analysts and associates leave the industry, for the buy-side, before reaching the VP and MD ranks.

How Do Investment Banking Salaries Compare to Other Top Paying Industries?

Investment banks rely on the expertise, relationships, and deal-making abilities of their IB bankers to generate revenue from advisory fees, trading profits, and capital markets transactions. So, they allocate a larger portion of their revenue towards compensating their highly skilled workforce. This is crucial to attracting and retaining top performers who can drive the firm's success.

While top consultants and software engineers at major tech firms can earn investment banking-level salaries, the average income in these industries is often lower. An investment banking analyst in their first or second year at top banks typically earns higher salaries than entry level software developers, consultants, healthcare workers, sales and marketing professionals, and other finance careers like CFAs and corporate finance.

Investment bankers in more senior roles might even have incomparable figures due to hefty bonuses in great financial years. The high pay reflects the intense workload, high-pressure environment, and performance-based culture in investment banking.

This does not sound like the right career choice for you? A career in consulting may be a lucrative alternative:

👉 Consulting Salaries – How Much Can You Really Earn?

How and When Do You Ask About Salary During the Application Process?

Salary discussions would be much simpler if companies disclosed their exact pay and available wiggle-room for investment banking roles in the job postings. You would determine upfront whether a position meets your salary expectations. Unfortunately, this is rarely the case. Often, you must navigate a competitive application and interview process before learning about the compensation.

So, when and how should you inquire about compensation? Here are some guidelines to help you approach this topic confidently and professionally.

When to Ask About Salary

1. Wait for the right moment: Even if you're dying to know the offer amount, it's best to wait until the employer expresses significant interest in you. This typically happens after the first or second interview depending on the company's recruitment process. Waiting shows you are a serious candidate and allows you to gauge their interest before discussing compensation.

2. During the offer stage: Salary discussions are most appropriate when you receive a job offer. At this point, you can ask for clarification on the salary and total compensation package, which may include bonuses and benefits.

3. If prompted by the employer: If the interviewer brings up salary expectations at any stage of the recruitment process, be prepared to discuss them. Mostly it occurs in later interviews once they have assessed your fit for the role.

4. Room for questions: The potential employer might ask if you have any questions for them at any stage. You can use that opportunity to ask about compensation.

How to Ask About Salary

When the time comes to discuss your investment banking salary, how you go about it is important as well. Here are a few tips to guide you.

1. Express enthusiasm first: Start by expressing your excitement and passion for the company and position. For example, “I’m excited to have this opportunity and would love to discuss the compensation package once we finalize the details of the role.”

2. Ask for a range: Instead of asking for a specific figure, inquire about the salary range for the position. You might say, “Could you please provide the salary range for this role?”

3. Be professional and flexible: Frame your question in a way that shows you are open to negotiation. For instance, “Based on my research and experience, I believe a salary range of $X to $Y would be appropriate for this role, but I’m open to discussing this further.” Always use numbers close to the higher end as it's easier to negotiate downwards than upward.

4. Inquire about total compensation: Don’t just focus on base salary. Instead, ask about bonuses, signing bonuses, and other benefits. This provides a clearer picture of your total potential earnings.

5. Use market data: Before the interview, research the market rate of your role based on location, experience, and firm's prestige. You might even find the average rates for the specific company and role you're hoping to get. Using the industry benchmarks to support your salary expectations can also leave a good impression.

6. Maintain professionalism: Regardless of the outcome, keep the conversation professional and courteous. If the offered salary is below your expectations, express your willingness to discuss it further rather than rejecting it outright.

Can You Negotiate Your Salary in Investment Banking?

Yes, you can negotiate your IB salary instead of just taking the offer given. But whether your efforts will bear fruits depends on several factors.

If it's your first job out of college without much industry experience, you might not have much negotiating power. Bulge bracket and elite boutiques often offer standardized base salaries for junior roles. This leaves little to no room for negotiations except maybe for the signing bonus and relocation package. But if the pay is below the industry trends or you have other offers, you can have a basis for negotiations.

If you're applying for senior associate or higher-level roles in investment banking, you definitely possess the qualifications and leverage to negotiate your salary. And you shouldn't fail to do so. Investment banks actively seek experts who can drive deals and generate revenue. So, if you can demonstrate a strong track record that shows the firm would miss out by not hiring you for the role, they might even allow you to set your compensation package.

What Trends Are Emerging for Salaries in Investment Banking?

Investment banking salaries continue to be lucrative, with most entry-level analysts earning $100,000 to $200,000 in total compensation. When it comes to base salary, analyst positions start in the $80,000 to $100,000 range, while senior roles can exceed $600,000 depending on the firm.

Bonus payouts have been "disappointing" the past two years after spiking in 2020-2021 due to inflated deal volume. The higher bonuses fell back to more normal levels as deal activity cooled.

However, the signs of recovery and rebound in market activity this year might result in bonus increases.

Key Takeaways

• Investment banks rely heavily on human capital as their primary asset and driver of revenue. This explains the high pay packages compared to other well-paying professions like consulting, sales and marketing, software developer, and healthcare workers.
• You can negotiate your investment banking salary but the outcome depends on the leverage you have. It's easier to negotiate for senior banker roles than entry level positions due to qualifications, deal exposure, and industry experience.
• There's no specific time that's perfect for asking about compensation in the investment banking application process. But waiting until the potential employer expresses significant interest in you is important. Also, it's good to be prepared with industry benchmarks from the start so you're ready to negotiate appropriately whenever the conversation comes up.
• Salaries and bonuses increase in investment banking as one moves up ranks from analyst to associate, vice president, senior vice president, and managing director levels.
• Some of the factors that influence your investment banking salary are location, firm's prestige, qualifications and role, economic conditions, negotiation skills, and performance.
• Investment banking salary consists of a base pay and performance-based bonuses.