Investment banking is known for its high salaries, especially for senior executives like managing directors (MDs). However, the pay comes with long working hours and high pressure. Based on surveys, a MD’s average base salary is around $250k-500k, with total compensation reaching $1-2 million including bonus. This is about 5-10 times the salary of a junior analyst. Salaries also differ greatly between front office, middle office and back office roles. Front office roles directly involved in deals and trading tend to be paid the most. Geography matters too – US bankers make more than Europe/Asia due to higher bonuses.To progress to these highly-paid MD roles requires many years of persistence – 12+ years on average starting from analyst.
MD yearly income buys 3 Ferraris
According to surveys, the average MD total compensation on Wall Street is around $780k per year in 2016.With luxury sports cars like Ferrari California costing around $250k each, a MD’s annual income can afford 3 Ferraris. The MD income is around 6-7 times of what an junior analyst makes out of undergrad, which is around $120k. The difference comes mostly from bonus, as senior bankers get a higher cut of the deals and trades they lead.
Front office earns way more than back office
Within the same investment bank, front office staff like M&A bankers and traders make a lot more than risk management and operations in the middle and back office. For example, an analyst in the front office debt trading team can make £15k more than an analyst in the controllers team, with the gap widening to £50k+ on the director level. This reflects the direct income generating nature of front office roles.
US bankers paid higher than Europe/Asia
Salaries for front office bankers in the US is considerably higher than peers in Europe and Asia, owing to much higher bonuses. For example, an analyst in London may get a £5k bonus while the same peer in New York gets 4 times more. The difference persists into higher levels like director roles. This can be demoralizing for European and Asian bankers working just as hard for less pay.
Long journey to managing director
It typically takes around 12-16 years for an analyst to rise up the ranks to managing director level through promotions. Few make it due to the long hours and high turnover rates. Associates usually exit after 2-3 years post-MBA for private equity and hedge funds. So making it to the MD level is an achievement demonstrating perseverance.
In conclusion, investment bank MDs earn multi-million dollar total compensation, but the journey is long and arduous. Front office bankers directly involved in deals make far more than support functions. US banks pay considerably higher than Europe/Asia too due to higher bonus. But the job requires long hours under high pressure for average 12+ years before reaching MD level.