Investment banking is known for its high salaries, especially for senior executives like managing directors (MDs). However, the path to reach MD level is long and arduous. An MD at top investment banks can make $1-2 million per year, which is about 6-7 times the salary of a junior analyst. But it takes about 12-16 years on average to be promoted to MD level. The main driver of the high salaries is the revenue senior executives like MDs generate for the bank. An MD is expected to generate over $20 million in revenue. But the tradeoff is very long working hours, often from early morning to late evenings, including weekends.
Investment bank departments have large salary differences
Although investment banking is known for high pay, there are large differences within the bank. Front office roles like M&A, IPO, trading directly interface with clients and generate revenue. As such front office roles pay much more than middle and back office roles in risk, operations, IT etc. For example, an analyst in front office M&A can make £15-20K more than an analyst in middle office risk. The gap at senior levels like Director is even larger at £52K.
Managing directors have the highest salaries
At the top of the investment banking pyramid are managing directors (MDs). It takes 10+ years to reach this level coming up from analyst. MD annual base salary itself is over $250K. Adding bonuses an MD total compensation averages around $780K at top US banks. This is about 4.5 times the total salary of a junior analyst at $120K. So the earning potential is very high but Requires long hours and ability to bring in multi-million dollar deals.
Salaries higher in US vs Europe
There are also geography based differences in investment banking salaries. Front office bankers in the US earn the highest, followed by UK and Europe. For example an analyst bonus in the US is 4 times that in the UK. Even at senior levels like Director, US bankers get 50% higher bonuses than UK peers. So those aspiring for top paying banking jobs should aim for US banks.
Certifications lead to higher salaries
There are a number of sought after certifications in banking and finance that also boost salaries significantly. Some top certifications are: CPA, CFA, FRM, ACCA etc. Those with multiple certifications can command salaries upto $2 million in consulting firms and investment banks. So acquiring relevant domain knowledge and certifications is key to both career growth and higher compensation in investment banking.
Investment banking, especially front office roles, offers very high compensation potential for senior executives like managing directors. However long working hours leading teams on million dollar deals is required. Certifications like CPA, CFA also help move to higher salaries.