Pay progression in banking is a hot topic. Wall Street Oasis has a thread where financiers humble brag or complain about their full-year earnings since graduating college. There are those who’ve hit the million-dollar mark in investment banking just eleven years out of school, and others whose meagre progression has them exclaiming in all caps: “NOT HAPPY.”
Using the 2022 Investment Banking Compensation Report from recruitment firm Dartmouth Partners, eFinancialCareers has estimated the amount employers can earn at a top-tier investment bank in the City of London if they progress smoothly up the ranks from Analyst to Associate to Vice President. The chart below assumes that most graduates leave university and enter the work force aged 23 (accounting for four-year undergraduate degrees or pre-university gap years) and that the employee will be promoted each promotion cycle.
The chart shows that Analyst total compensation progresses slowly from the ages 23 to 25 - from £80k (USD $108k) to £120k (USD $162k) - but increases rapidly once you make Associate. The drop at age 26 is due to some banks having Associate 0 positions closer in responsibility to a 25-year-old Analyst 3. The same applies to the drop at age 32: some banks have ‘Associate 5’ positions for 31-year-olds and this is likely the equivalent to the 33-year-old Vice President 2 in seniority.
Source: Dartmouth Partners
While being an investment banking lifer can reap rewards, a more common career progression to the top dollar still involves a jump to a boutique or independent investment bank, private equity fund or hedge fund. This can lead to less consistent salary progression and extreme jumps in pay. Heidrick & Struggles’ recent private equity pay survey says VPs in mid-sized private equity funds can make $410k in cash compensation and nearly $3m in carried interest. Given that they too are probably only in their mid-30s (although they might be 40 by the time the carried interest pays out) and that they theoretically work less than VPs in banks, this isn’t bad going.
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