Each year, thousands of graduates from across the world set their sights on breaking into investment banking (IB). While the field is infamous for its demanding schedules and intense pressure, investment banking remains an attractive career path due to its potential for substantial financial rewards.
The hefty salaries, generous bonuses and lucrative compensation packages, coupled with the associated status and prestige that come with career advancement, continues to draw ambitious graduates and professionals to the field.
In this post, we delve into one of the key reasons why IB continues to be a popular career choice: money. Our aim is to explore why so many people are driven to pursue this path, despite the acceptance rate often being lower than that of Yale or Harvard.
Did you know that the average salary in the UK is only £34,900? That may sound modest, yet these are the numbers reported by Forbes for pre-tax salaries in the UK ($59,384 in the US)* in 2024. t’s no surprise, then, that investment banking appeals to so many young graduates and even professionals considering a career change.
The finance sector is renowned for offering lucrative opportunities and in fact, graduates nowadays who secure an entry job in an investment banking firm can earn up to £100,000 in total compensation, with 0 experience. But how did we get here? Were the salaries always so high?
*While salaries in the U.S. are higher than in the UK, the cost of living is often higher too, potentially offsetting any gains (for an average salary). That’s why tools such as a purchasing power parity calculator are essential to assess the real cost of living. And keep in mind, these are national averages – median salaries in cities like London and New York are notably higher (e.g. £44k in London and $74k in New York)
It is true that IB salaries have historically been high, but in recent years, there has been a noticeable increase. The reason? Well, it all started with Goldman Sachs analysts complaining about their low mental health.
During the COVID-19 pandemic, deal activity surged. Between a SPAC frenzy and money being printed due to the impact of the pandemic on the economy, the markets were flooded with transactions.
Investment Bankers, who are generally focused on generating more profit and keen to be part of new sell-side or buy-side projects, continued to take on new clients. The result? While senior bankers got richer, analysts got (mentally) poorer, having to work extremely long hours in an even more competitive environment than usual. Senior Bankers initially dismissed these claims, but then soon realized that things were about to change. Goldman shortly announced that a cap had been introduced to the number of working hours, and that employees would no longer be pressured to work on Saturdays.
With time, not only did other banks followed suit, but they also started increasing salaries, as a general response to analysts’ hourly rate being lower than MacDonalds’ workers, due to such long hours. All of this led to the salaries below which, after a hopefully entertaining intro, we are ready to present to you.
| Position | Years of Experience | Average Base Salary (GBP) | Bonus (%) |
|---|---|---|---|
| Analyst 1 | 0-2 | 67.5K | 50-75 |
| Analyst 2 | 1-3 | 80K | 50-75 |
| Analyst 3 | 2-4 | 90K | 50-75 |
| Associate 1 | 2-6 | 110K | 50-100 |
| Associate 2 | 4-8 | 122.5K | 50-100 |
| Associate 3 | 4-8 | 130K | 50-100 |
| Vice President 1 | 5-12 | 150K | 60-120 |
| Vice President 2 | 6-12 | 160K | 60-120 |
| Vice President 3 | 7-12 | 170K | 60-120 |
| Director | 9-14 | 220K | 80-150 |
| Managing Director | 10-18 | 260K | 100-250 |
Source: Efinancial Careers
| Position | Timeframe for Promotion (Yrs) | Average Base Salary (USD) | Bonus (%) |
|---|---|---|---|
| Analyst | 2-3 | 100-125K | 50-80 |
| Associate | 3-4 | 175-225K | 50-100 |
| Vice President | 3-4 | 250-300K | 60-125 |
| Director / Senior VP | 4-6 | 300-350K | 75-200 |
| Managing Director | N/A | 400-600K | 100-300 |
Source: Mergers & Inquisitions
This article aimed to provide an overview of the salaries in the investment banking sector and we focused on London and New York City as the figures provided for the base salaries do not differ much compared to other European cities (e.g. Paris). However, we acknowledge that bonuses tend to be higher in London and New York than other European financial hubs.
In addition, note that these are indicative salaries for bulge bracket banks and elite boutiques. The salaries were based on some of the most popular banks such as Goldman Sachs, JP Morgan, Citi, Nomura, Morgan Stanley, Rothschild & Co, Bank of America, HSBC, UBS, Barclays, Lazard, Evercore and Jefferies.
Nevertheless, this large industry is also subject to being impacted by the wider economic and social landscape, and it has been marked by disruptions over the years, which in turn, have also affected the salaries and bonuses received by employees. As such, activity levels dropped significantly during the global financial crisis of 2007-2008. Although there was a sharp increase in 2020-2021 due to the events mentioned above, salaries and bonuses in the sector have since declined, with M&A activity returning to the deal volume seen in the 2010-2013 period, following the 2008 global financial crisis.
Finally, it’s worth noting that, although there have been variations over the years, salaries in the investment banking sector remain appealing to graduates who are keen to pursue a long-term career in the sector given the opportunity to climb the ladder, coupled with increasingly rewarding bonuses and compensation schemes.
P.S. – don’t forget to check our Advanced Resources where you will find valuable content to help you break into the industry!
