Investment Banker Salaries

When it comes to lucrative careers, none really come to mind as quickly as investing banking. Investment bankers are tasked with helping businesses get funding by getting them in touch with investors and providing financial advice. Rumor says that young hotshots can earn six-figure salaries straight out of college, and that makes this career choice very attractive to those looking to strike it rich in their youth. If you’re looking to get into investment banking, you’ll want the real numbers before starting your academic journey. Here’s a quick glance at how investment bankers get paid and how much they generally earn.

Pay Structure and Influencing Factors

The most common compensation format for investment bankers is regular salary plus an annual bonus. Contrary to popular belief, individual performance isn’t the biggest factor that affects how much an investment banker gets paid. While you obviously have to be competent at the job, everybody at the same financial institution who performs will generally make the same basic salary at the same job level. Bonuses are what really distinguishes one investment banker earnings from the next, and they’re determined by several major variables.

HEALTH OF MARKET

The strength of the economy will determine whether or not an investment banker earns a large bonus or a small bonus. When the economy is strong, your bank will make big profits and pass on the earnings to you. When the economy struggles, your bank won’t rake in as much, so that money is less likely to make it to you in any significant quantities.

PERFORMANCE OF YOUR DIVISION

Every investment bank is split into divisions called IBDs. When your IBD as a whole contributes a lot to the bank, every member in the division will get a nice bonus.

PERFORMANCE OF YOUR GROUP

Even within the division are separate groups. If your particular group shines, you and every other group member will benefit financially.

INDIVIDUAL PERFORMANCE

Finally, your individual performance will influence your bonus. Your exact position within the bank, time working at the bank, the number of deals you close, your timeliness, your professionalism, and other factors all affect how hefty your bonus will be.

Average Investment Banking Salaries

There are several different positions that may be categorized under the investment banker label. Here are their salary estimates as of 2013.

ANALYSTS

First-year analysts earn a base salary of about $70,000 and a yearly bonus that ranges between $30,000 and $70,000. Second-year analysts earn a base salary of about $80,000 and a bonus of $30,000 to $80,000. Third-year analysts make nearly $90,000 annually and get a bonus of $35,000 to $100,000.

ASSOCIATES

First-year investment banking associates earn a base salary of $110,000 to $125,000 plus an annual bonus of $55,000 to $145,000. Second-year associates make $120,000 to $145,000 a year and get a bonus of $70,000 to $160,000. Third-year associates earn $130,000 to $160,000 with a $90,000 to $190,000 bonus.

VICE PRESIDENT/DIRECTOR

After many years working in one or more of the positions above, it’s possible to move up to a VP or director position. These experienced investment bankers earn a starting base salary of $175,000 to $200,000, but they can make anywhere between $250,000 and $750,000 annually with bonuses after a few years.

SENIOR VICE PRESIDENT/EXECUTIVE DIRECTOR

If you ever make it to this level, you’ll earn an astounding $300,000 to $1.5 million annually with bonuses.

MANAGING DIRECTOR

At the top of the ladder is the managing director who earns $700,000 to $3 million per year.

What is Investment Banking

Investment banking is a tradition as old as the Roman Empire and as American as blueberry pie. Economic freedom has led to economic prosperity in the “Land of the Free and the Home of the Brave,” and millions upon millions of Americans are not only citizens, workers, entrepreneurs, and businessmen and women, but they are also investors. Wealth management and wise wealth investment strategies can be as decisive to the economic success of an economy as is wealth creation. Nest your “nest eggs” with the wealth creators. Give more to those who produce more, and they can use it to produce more even than that! And you, having aided them in their successful enterprise, can partake of the bounty! But there is always risk. Beware of poorly run or staffed companies, one-time wonder stock market stars, crooked businessmen who may seek to take advantage of the unsuspecting, and of loss of the value of your dollars due to perpetual inflation. There are risks and there are rewards. Each investor must find a risk-reward balance that they are comfortable with. It is also a good idea to invest in a variety of different places to reduce the risk of losing it all at once. This is the proverbial “not putting all of your eggs into one basket,” and the more suave-sounding “diversifying of your portfolio.” Despite the fact that investment goes on all over the world and has from time immemorial, we Americans have somehow claimed it as a national trait. Let us examine, then, this “American institution.”

Securities (Stocks and Bonds) are the main type of investments. Stocks involve buying a share in a company. With common stocks you gain voting rights in the company, while with preferred stocks you do not. Preferred stocks do, however, have established dividends. Convertible preferred stocks can be changed into common stocks after a specified waiting period. There is no fixed maturation date with stocks, but they can be owned indefinitely. Bonds are a loan to a company. You are the bondholder (loan holder). Bonds will have a fixed maturation date at which point you will be paid back in full, having received periodic interest payments all along the way. The amount you gain from each payment is your “running yield.” The amount you gain in total from the bond investment is the “final yield.” Bond-like investments that are shorter-term are called “CDs.” Bonds can range in term from one to 12 years or even longer. They are a long-term, relatively safe investment as compared with stocks and CDs. If the company goes bankrupt, for example, bond-holders must be paid off before stock-holders. U. S. Savings Bonds are a very safe yet very rate investment.

Money Market-type savings accounts will offer a better interest yield than regular savings accounts, but neither is likely to keep pace with inflation since they usually will pay you only 1% or less interest. The government itself admits to 1% yearly inflation, but it is common knowledge that inflation is higher. Continued access to your money, though qualified by minimum balances and withdrawal number restrictions, may make Money Market accounts a good choice for some in place of a regular savings account. Otherwise, they are not very good investments.

Mutual Fund is a term referring to a company that pools the resources of many investors into one or more security. You can buy stocks and bonds indirectly through such a company rather than directly yourself. If buying from a mutual funds company, however, check to see if it is open-ended or closed-ended. If open, you can sell the securities back to the company at any time. If closed, you cannot. It is also of note that many banks, insurance companies, pension funds, etc. will use some of their funds on hand for investment rather than just having them “sit around doing nothing.” One special type of mutual fund is an IRA (Individual Retirement Account). These are often tax-deferred or tax-exempt. You should investigate the history of the mutual fund company before entrusting them with your life savings- of course!

When investing your hard-earned dollars through investment banking, remember that the reward is usually proportional to the risk. High-yield, quick-paying securities will generally be high-risk. Lower-yield, slower-paying ones will be low-risk. Some few may make a quick fortune through the stock market, but that will take not only know-how but a good dose of luck as well. Most of us will do well to follow a few simple guidelines: know the company you do business with, get an interest rate above inflation and even look at inflation-linked bonds and the like to be extra safe, put some money in easily-liquidateable accounts and others in long-term investments, “diversify your portfolio” to include different companies and both high and low risk options, choose a low risk option for a retirement fund. After you have done all that, all you can do is wait and pray for the best!

Careers in Banking

Considering a career in the banking industry? A bank is a necessary service, just like a grocer. We often obtain a bank account in our early years, whether for savings, checking, personal, or college savings. This is an essential, like a car or home loan. Banks need to fill a variety of career positions in order to provide broad financial services to their customers.

Traditional or Specialty

When you think of a career in banking, you might automatically picture tellers or bank managers. But in addition to those retail banking positions, there are many other fascinating careers you might consider in banking. Some of these can be found in segments such as financial planning, foreign exchange, and mortgages. Within a specific segment, there are specialty areas. For example, mortgage banking specialties might include:

  • Reverse mortgage processing
  • Loan origination
  • Loan underwriting
  • Auditing

If you choose to work at a large bank, some positions might lead to other career tracks that aren’t as available in a small bank environment. Some positions don’t require a college degree and most banks offer on-the-job training, as well. Some positions and career tracks will require graduate work or other advanced degrees and certifications. Here’s a look at some possible banking careers to consider.

Teller Supervisor

A teller is often the first person you see at a retail bank. Tellers represent the bank to customers. A supervisor or head teller will often assist newer tellers by handling deposits, withdrawals, check cashing, wire transfers, currency exchanges, and helping to market products such as savings bonds. Requirements for this position are usually a high school diploma plus considerable on-the-job training in customer service skills and finance knowledge.

Branch Manager

A branch manager is the person who handles the daily operations in a retail bank behind the scenes. Responsibilities can include:

  • Hiring
  • Payroll
  • Marketing
  • Security
  • Training

Branch managers at banks in large cities typically have different responsibilities than their counterparts at retail banks in rural towns. In the larger banks, a finance-related degree is usually required for this position along with significant job training. Branch managers often hold assistant manager positions before advancing.

Loan Officer

A loan officer lends money to the bank’s customers who apply for mortgage, vehicle or personal loans. These individuals are tasked with finding great rates for their customers while acting as an advisor to their employer on whether a customer is a good risk for the bank. Loan officers are highly trained in risk assessment, lending rates, and in understanding regulations at both state and federal levels.

Wealth Management Representative

The most affluent members of a bank are typically assigned to a financial planner or support representative who has a high level of customer service skills, understands their needs, and has extensive training in financial advising. This individual uses consultative and soft selling techniques to present the bank’s products which are tailored to wealthy customers. In smaller banks this position requires significant job training and is possible to obtain without a degree. In larger banks it often requires an undergraduate degree in finance.

Trust Officers

Trust officers handle things like pension funds and profit sharing. They sometimes function as a bank’s lawyer or accountant. They are also expected to handle endowments upon occasion, making this a position with a variety of options depending upon the employer.

Support Staff

There are many support positions in banking from administrative and office positions to legal and financial support. Behind the scenes, these individuals process deposit slips and checks that customers deposit and perform data entry, computer maintenance, track records, and automate the paperwork that travels through the banking system. Some of these positions include:

  • Administrative assistant
  • Accountant
  • Audit clerk
  • Lawyer
  • Computer specialist

While these jobs make up a smaller segment of the population within the banking industry, these positions are critical to keeping any bank running smoothly. These individuals play a key role in keeping their banks in compliance with all existing federal and state regulations.

While some positions, such as an administrative assistant won’t require a degree, positions such as accountant or lawyer will require graduate or post-graduate work in their specialization. Computer specialists will be required to have at least an undergraduate degree, along with some advanced skills in areas like programming, software security, and databases.

Investment Banking Internships

College students majoring in accounting, business administration, finance or other areas of business get plenty of classroom theory, discussing what works and what doesn’t with faculty and fellow students. However, no matter how much time is spent in the classroom, the best way to ensure success after graduation is by having previous real-world experience. While in school, the best way to get that experience is through internships. Students planning on careers in investment banking have many opportunities to obtain internships with leading companies, allowing them to put classroom theory to the test. (more…)

What Do Investment Bankers Do?

Investment bankers play a crucial role in the structuring of financial operations found within all types of businesses, and more importantly, they help the economy to progress. Most investment bankers are highly-skilled as well as paid good. They spend their time giving companies advice in regards to the issuing of stocks and they help configure stock offerings. To become this type of banker, a person will need to successfully take part in an MBA program. (more…)

Banker Salary

Banking is viewed by most as a very respected occupation. Offering excellent pay and benefits, along with regular office hours typically called “banker’s hours” and more, makes the field a highly desirable one for those seeking a career in finance. While most people who are employed in banking have a college education, it is still possible to gain a position with only a high school diploma and work one’s way to the top. (more…)

How to Become an Investment Banker

There are many reasons why people want to learn how to become an investment banker. According to industry insiders, many find the lure of a high profile lifestyle and seemingly abundant income to be irresistible. Technically, a bachelors degree is the only post-secondary education needed to enter the world of finance, but a masters-level education helps candidates stand out in a highly competitive field. Read on to find out more about how to become an investment banker. (more…)