Investment Bankers: How Much Do They Really Make?

Investment banking is one of the most prestigious and lucrative career paths in finance. The pull behind investment banking roles for most people is the ability to make a lot of money. The general salary compensation range for a first-year investment banker is $85-95k, which can be bumped up with signing bonuses, stub bonuses, and end-of-year bonuses. As investment bankers climb the corporate ladder, their base salary increases significantly, with senior investment bankers earning upwards of $1 million a year.

Bonuses

The size of the year-end bonus is determined by four main factors: individual performance, group performance, firm-wide performance, and firm type. Individual performance is assessed through a ranking system, with top performers receiving higher bonuses. Group performance is evaluated based on the number of deals closed and revenue generated. Firm-wide performance looks at overall deal size, deal count, and total revenue. Finally, firm type refers to whether the bank is an elite boutique, bulge bracket, or middle-market bank, each of which has different bonus structures.

At elite boutiques, bonuses tend to be higher due to their leaner organisational structure and focus on compensating the deal team. Bulge brackets and top middle-market banks have similar base compensation, with bonus variations based on individual, group, and firm-wide performance. Regional middle-market banks tend to be on the lower end of the compensation scale but may offer a better work-life balance to make up for it.

In addition to cash bonuses, investment bankers may also receive stock-based bonuses, especially at publicly traded banks. These bonuses are designed to incentivise employees to stay with the firm, as they vest over several years.

Base salary

The base salary of an investment banker is the conventional "salary" in the conventional sense. It is earned biweekly, is stable, and increases each year. Performance does not affect this component much.

The general salary compensation range for a first-year investment banker is $85-95k. This gets bumped up with signing bonuses ($5-15k), stub bonuses ($20-30k) and end-of-year bonuses (70-80% of base salary).

An associate base salary in the US can increase to $140-180k as they climb the corporate ladder.

The actual salary you receive will depend on where you hire. The figures above are ballpark numbers.

For junior analysts and associates recruiting into investment banking, the base salary will be in the range of $85-95k for 1st, 2nd and 3rd-year analysts. Boutique banks might pay more or less. Associates will earn $140-180k as they move up the ladder.

The base salary for a first-year analyst at a "bulge bracket" (i.e. large, top-tier) investment bank in New York City was raised in 2021 to $100,000 (from $85,000). Some elite boutiques are starting at $110,000.

The base salary for investment banking analysts at the top US firms is $155k to $220k. This includes the low range from analysts in their first year to the high of analysts in their second year.

Most investment banks will make a base salary between $105k to $115k.

Investment Banking Vice Presidents through to Senior VPs will be earning a $200-300k base salary.

If you ever reach the level of Managing Director you will be earning upwards of $1m a year with base salaries in the $400-600k range.

Senior Investment Banker salaries

In New York, senior bankers can expect to earn higher salaries than in other regions, with a wider gap at higher levels. Senior bankers in London, on the other hand, tend to earn higher base salaries.

At bulge bracket banks, senior investment bankers' base salaries increase significantly as they climb the corporate ladder. However, a large portion of their bonuses comes in the form of stock and deferred compensation. These deferred portions often vest over 3-5 years, incentivizing bankers to remain with the firm. Bonuses for senior bankers are closely tied to individual performance and the fees they generate for the bank.

At elite boutique banks, senior bankers can earn higher base salaries and bonuses, with some banks paying up to $400,000 for top-ranked associates. The total compensation for senior bankers can reach upwards of $450,000 to $700,000, including bonuses.

It is important to note that the career path in investment banking is relatively standard, but titles may differ between banks. The typical front office hierarchy, from lowest to highest, includes Analyst, Associate, Vice President (VP), Senior Vice President (SVP) or Director, and Managing Director (MD).

Investment Banking Analyst salaries

Investment banking is a lucrative career, and the position of an Investment Banking Analyst is the most junior position at a firm. It is a high-paying job that business students can get straight out of school. The role involves working on financial models, preparing marketing materials, and helping to organize the deal process.

The salary for an Investment Banking Analyst varies depending on the firm and location. The typical salary range for analysts at top U.S. firms is $155k to $220k. This includes analysts in their first year and those in their second.

Base salaries for analysts tend to be between $105k and $115k, with bonuses adding a further 50-75% on top. Some banks will also tier bonuses into "buckets", paying higher-performing analysts more.

Elite boutiques tend to pay more, with some analysts at Centerview earning over $300k.

In London, investment banking analyst salaries are lower, with a standard base of £60k, growing to £65k and £70k for second and third-year analysts, respectively.

Managing Director salaries

Managing directors (MDs) are at the top of the investment banking hierarchy. They are responsible for bringing in clients and closing deals, as well as overseeing directors, vice presidents, associates, and analysts in their group. It is a high-pressure role that requires excellent networking and relationship-building skills, as MDs are expected to be the primary revenue generators for their firms.

The path to becoming an MD is a long and challenging one. It typically involves starting as an analyst, getting promoted to associate, and then working through the vice president (VP) and senior vice president (SVP) or executive director (ED) roles before reaching the MD level. This process can take over a decade, and many investment bankers burn out or get stuck at the VP level.

The average base salary for an MD ranges from $350,000 to $600,000, but total compensation, including bonuses, can reach several million dollars. Bonuses for MDs are typically very high and can range from 100% to 200% of their base salary. However, MDs are expected to generate significant revenue for the firm, and their bonuses are closely tied to their performance and deal flow.

The role of an MD is demanding and stressful. While the hours are better compared to more junior roles, MDs often spend a significant amount of time travelling to meet with clients and prospects. The job security for MDs is also precarious, as they are under constant pressure to generate revenue, and banks are less willing to wait for several years to see if newly appointed MDs can deliver.

Overall, the position of MD in investment banking comes with high compensation and prestige, but it also demands a strong commitment, advanced skills, and the ability to navigate the political landscape within the firm.

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