What's the recipe for achieving first year fixed compensation in investment banking of $200k, even if you have no prior banking experience?
It turns out that it helps to spend $78k on a top-tier MBA, plus around the same again on living expenses.
Three top U.S. MBA schools have now released their employment reports for 2021-2022: Wharton, MIT and Chicago Booth. They suggest that in the current employment year, the going rate for a new MBA becoming an associate in an investment bank is a median salary of around $150k (Wharton and MIT), plus maybe a signing bonus of $52k on top. At Chicago Booth, the median starting salary for an MBA in banking is a mysteriously higher $175k. Bonuses will be paid in addition to this.
This isn't bad, when you consider that the average age of MBAs leaving these schools is around 29 and that a significant proportion won't have worked in finance before. One recently ex-analyst at JPMorgan says that many of the MBAs the bank hired into his sector team knew almost nothing about financial modeling and had to be trained by the analysts below them. He said new MBAs' only advantage is that they might have direct industry experience, and they tend to be more loyal than analysts, who typically want to leave for private equity.
While $200k was the going rate for this year's batch of MBAs, pay is likely to be even higher next year. - Most banks increased associate salaries to at least $175k this summer. The chart below, based on Wharton data suggests a salary increase was overdue. Entry-level MBA pay hadn't increased for three years in banking (along with hedge funds and various other sectors).
While MBAs going into investment banking are compensated well, some of the best entry-level compensation in finance instead goes to a handful of MBAs in private equity. - At Chicago Booth, one private equity MBA achieved a salary of $225k this year; at MIT, an MBA going into PE received $250k.
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