Sign up to a boutique investment bank for a big pay day

Does Evercore pay more than Goldman Sachs? Can you haul in more at Greenhill than J.P. Morgan? On an average-pay-per-head basis, the answer is a resounding yes.

Included within the much-covered report on financial sector pay by think-tank New Financial is the chart below, which shows that the top paying investment bank is Evercore, followed by Greenhill and then Jefferies, which is also the only investment bank to have increased compensation costs as a proportion of revenues over the last two years.

There’s no doubt that boutique investment banks’ star has risen over the past 12 months. They’ve gained a bigger slice of the fee pool and an increasing number of senior bulge bracket bankers have moved across to smaller firms. The latest is Tom Massey, the former head of M&A for Europe at Citigroup, who is set to join Evercore.

But is money the main reason for joining a boutique? Jon Terry, a partner at the compensation practice at PwC, says the pay model at boutiques is skewed towards the senior ranks: “Once you make it to the top at a boutique, you can expect very significant pay packages, because like small hedge funds, you’re quasi-owner as well as revenue-generator,” he says. “However, this is a small number of individuals – there are going to be far more people earning over $1m at Goldman Sachs than at a boutique.”

However, boutique investment banks, particularly those in Europe, are far less hampered by what they can pay their employees than larger firms are. If they have total assets of less than £15bn, then they escape the CRD IV 100% bonus cap, while punitive measures like deferrals and clawbacks are largely non-existent at boutiques, says Terry.

Boutiques are keen to point out that this pay structure applies equally to junior and senior bankers. Addressing a room full of students at a conference late last year, one boutique CEO (speaking anonymously), said that they “don’t want to get told by the regulator what I can pay my colleagues. It’s my business what I pay my analysts, associates and VPs.”

Large investment banks have been increasing pay for juniors to ensure they don’t leave for a private equity firm or a boutique. The going rate for a first-year analyst is now $85k (£56k), rising to $90k (£60k) for second-year analysts and $95k (£63k) in the third year. Most boutiques have been forced to follow suit and hike base pay for their juniors too.

“Boutiques tend to recruit from the larger organisations and have two weapons to attract investment bankers,” says Terry. “The first is that there are potentially better prospects for advancement because there’s less bureaucracy and less competition for promotions. But they also have to remain competitive on pay.”

Employee reviews of Centerview Partners, Evercore, Houlihan Lokey, Greenhill & Co, Perella Weinberg Partners and Moelis & Co on Vault.com generally cite pay as a positive. Total packages tend to compete with the larger investment banks and bonuses are immediately payable in cash.

What’s more, the ‘baptism of fire’ approach for analysts who are more heavily involved in more aspects of the deal process from the outset means a steep learning curve and ensures that skill-sets are developed quickly.

However, it’s also arguable that making a sideways move into a boutique later in your career is the better option to make it into the senior ranks. Mark Aedy, the currently head of EMEA and Asia at Moelis & Co, took the role after 30 years working at bulge bracket firms, while other senior bankers like James Hartop, who left UBS for Centerview Partners in November, show the benefits of moving after experience in a larger institution.

Breaking into the senior ranks through an internal move appears more difficult – Greenhill, for instance, promoted just one London employee to MD in 2014, its first for two years.