EDITOR'S TAKE: Beware the juniors prepared to work for zip

17 March 2009

2 minute read

EDITOR'S TAKE: Beware the juniors prepared to work for zip

Earlier this year, we ran a survey on our Student Centre asking what students would be willing to compromise on to get a first banking job. 460 people responded; 33% of them said they'd be willing to work for nothing.

Given first year analysts (at top firms) were earning six figures not too long ago, that's a big step down. It's also an interesting indication of where pay for mid-ranking and junior bankers is heading.

Investment banking careers have always had a whiff of Ponzi about them. MBAs and graduates squeeze in at the bottom, work relentlessly, and hopefully emerge midway up the pyramid to retire early without joining the civil service. For the past few years, the pong of Ponzi has obscured by the immediacy of big rewards. It's likely to be less nuanced in future.

All the indications are that low level banking pay is set to plummet. Associates and analyst hired over the past two to three years are now out of the market and desperate to get back in, whatever the price. A senior recruiter at one bank says he now has an "inbox full of people willing to work for free."

At the same time, the supply of entry level bankers is building up behind a wall of MSc in finance courses which will begin crumbling at the end of this year. Having spent 20k+ to study these courses, who's to say graduates won't even be willing to pay banks for the privilege of getting some valuable experience. A whole new business model could be born.

Meanwhile, the top of the market looks relatively robust. Rainmakers bring revenue streams. Deutsche has poached a large proportion of Merrill's US FIG team and boutiques like Moelis, Quattro and Evercore are picking up senior staff with the right high level connections.

The outcome looks will be an industry in which senior staff collect big payouts and junior and mid-ranking staff work unfeasibly hard for peanuts in the hope of becoming senior too. It may whiff of a Ponzi scheme, but in reality it's more like a partnership structure. Investment banking is going back to its roots.

AUTHORSarah Butcher

Global Editor

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16 April 2009
This six-figure salary for first year analysts comment is the kind of sensationalist stereotyping that I see far too often on this site. It's akin to tabloids making sweeping generalisations about bankers getting "million pound bonuses". ExperiencedQuant makes a valid point in that a lot of people do not reach 6-figure packages for many years. Potential new entrants should set their expectations accordingly.
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Chris
20 March 2009
First, that 6 figure salary number probably includes bonus - not so unreasonable ... I'm from the US and even if you take a 6 figure salary of say $100k and calculate an investment bankers hourly wage you get something around minimum wage
Let's try not to confuse M&A bankers with so call capital markets specialist and traders who created and move these derivatives and high-yield instruments ... just because they work at an investment bank doesn't make them investment bankers
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taras.di
17 March 2009
Thanks for the information about the salaries - very useful.
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Dominic Connor, Headhunter of
17 March 2009
We often saw a 6 figure bases in $, but never in , though if you include 1st year bonus some people did get more than 100K first year out of university, but that was far from common.
Certainly as EQ says, some quants are little more than Excel jockeys, but I have to say there are very few Excel specialists I regard as competent. EQ is right that the distribution of annual pay is very wide with there being a lot more people on <60K *including* bonus than you might think.
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ExperiencedQuant
17 March 2009
@John, @Sarah,
Whatever recruiters say, the truth is that 6-figure salaries were and are not widespread. But they do exist. It is the 'lottery' effect. You just have to be at the right place at the right time. When you are a junior fresh out of school who has been lucky to find a seat on a desk that makes tens of millions, if the top traders get paid millions, usually it is considered 'fair' to give you at least a six-fugure bonus.
It is the same thing as being Bill Gates' cleaner, you are surely not paid 8 an hour!
I interviewed many juniors in the past making that kind of money to join my team where people with a similar number of years of experience were making a maximum total package of 50k. The reality if that most of them had spent their time formatting spreadsheets and surfing on the web, which is very sad for quants. Smart recruiters know that you can find excellent quants or financial engineers from software firms or small-size banks for a quarter of the price of those coming from desks of big banks.
It should also be told to all young graduates planning to work in IB that a lot of people do not reach 6-figure packages before 5, 7 or even 10 years.
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