Can Investment Banking Make You A Millionaire?

02-Feb-2023

Investment Banking is a highly prestigious profession in the field of finance and whoever works in this sector is known to lead a luxurious life making it a hot career choice for many people. So yes, if you work hard and do your job right, there's no way you cannot become a millionaire. So how much investment bankers earn that makes it possible for them to become millionaires? Let's find out the Investment Banker salary structure in this post in a detailed manner.

How Much Investment Bankers Earn?

An Investment Banker at the beginners level in India generally makes an average salary of around INR 8-10 LPA, exclusive of other perks. At a higher-up rank with some years of experience, for instance, a Managing Director, the investment banker's salary goes up to INR80-90 LPA, which can go further up with regard to experience, job roles, position, and the company one works for.

investment banker salary

In the US, the investment banker salary pattern is similarly huge starting at USD 85-95K at the beginners level. There are several other perks and bonuses like a signing bonus of $5-15k and a year-end bonus of $20K-30K.

The Investment banker salary at the associate level in the US may go up to $140-180k.

Let us dig further into the details of how much investment bankers earn yearly and learn more about the criteria that define the structure of the Investment banker salary.

Outline of Investment Banker Salary Structure

In principle and in practice, the investment banker's salary structure is

segmented into five parts for a Junior Analyst or Associate Investment banker, in the following heads:

Basic Pay: Regardless of your performance, this is your main source of Income. As previously noted, this will be in the range of $85–95k for first-, second-, and third-year analysts at mid- to large institutions. Boutique banks may offer higher or lower rates. As they climb the ladder, associates will make $140-180k.

New Employee Bonus: When analysts are hired in the summer, they have been employed by the bank for five to six months, which makes them eligible for incentives. These new hires receive a stub bonus of between $20–$30k. A smaller portion of the base wage will be paid to associates hired in the summer.

Signing- Bonus: Additionally, first-year analysts are eligible for a $5k to $15k one-time signing bonus. Associates receive a sum that is much higher and is multiplied by this amount.

Employee Benefits: The 401(k) plans, health insurance, and vacation days are frequently forgotten.

Senior Level Investment Banker Salary: Investment bankers at bulge-bracket banks earn significantly higher base salaries as they go up the corporate ladder. However, a sizable amount of their bonus is made up of stock and deferred compensation.

Deferred portions often vest over a period of three to five years, which encourages bankers to stick around and possibly earn a bonus of up to $1 million.

Bonuses are tightly correlated with personal performance once you reach the rank of senior investment banker and what you produce in the form of fees for the bank. Deals costing more than $1 billion will often only carry a 0.1% charge, although even then, a 0.1% charge on a $50 billion deal is still $50 million. This largely depends on the bank.

Role/Position Specific Investment Banker Salary

Analyst Salary

The Investment Banker salary for an Analyst in the first three years (First/Second/Third) varies from $85 to $95k, with bonuses between 70% and 100%.

Associate Level Salary

Salaries for Associates often fall between $140-180k, or $250-400k after bonuses. Due to their stub bonus, first-year associates often make less than $200k; moreover, from Year 1 through Year 4, their salaries increase pretty well.

Director and Vice President Salary

Vice Presidents and Senior Vice Presidents in investment banking will make a basic salary of $200-300k. Their incentives range from 120 to 150 percent of their base pay, with their total remuneration exceeding $450,000 to $700,000.

Managing Director Salary

If you ever rise to the position of managing director, your annual salary will be in the neighborhood of $1 million, with basic pay of $400-600k and bonuses that can range from almost nothing to millions of dollars.

Other Relevant Factors that Impact how much Investment bankers Earn

A few additional elements affect the annual remunerations of Investment Bankers. At the analyst level, pay for different groups does not differ significantly. Even if the analyst's deal flow is weak, compensation levels typically average out at that level because junior investment bankers don't handle the majority of the deal closing. At that level, salary normally does not seem to fluctuate too much depending on the employing bank.

Your income starts to vary significantly more as you advance in your career depending on the sort of investment bank you work for. Generally speaking, compensation at capital market groups tends to be at a lower level, whereas M&A groups tend to make a lot of money.

So now you know how much investment bankers earn and how consistency and commitment in the job can make you become a millionaire.