This is a correct calculation. But it helps to be curious about why people take this route – I assume you mean Goldman and the like. I am told the comp curve is steep. Large numbers have been thrown at me by people that I expect would know, further out in your career. There is some attrition of course. People look at exit opportunities 2-4 years out etc. I have no personal interest in figuring out this path because my kids tell me 100 hour weeks are a deal breaker for them.
$40 is above the US average private sector pay of $31.73, but slightly below the $41.19 for those working in financial activities, according to https://www.bls.gov/news.release/empsit.t19.htm . (Medians are probably lower, because (mean) averages can be skewed upward by a small number of very highly paid people.)
Yes, I find 70K to be a low number ( esp in a high income area). But I do think there are many people living on a lower number who are happy. Seems like the unhappiness stems from means below expenditures. I know people who live on much less who are happy and much more who are not and vice versa. For our family, if we couldn’t pay our bills, it would create a lot of angst and take away from daily life.
The cost of college for a private school is extraordinary. Few, if any, can afford to pay it. Even those making huge salaries with a couple of kids have a big hurdle. And that generates most of the talk on CC. Add in student loans and the imbalance of college costs v. early incomes and you have a real issue.
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Nor have the basic rules of business. You have to make money to earn a profit, not all ideas are profitable ( even if they’re cool). Time to market matters a lot. And having the best product does not equal success.
Then they shouldn’t sign up for IB, Goldman, McKinsey or lots of other firms. 100 is pretty standard. I’d say 60-70 hours a week is normal for a Senior Director/VP/Partner level at a major company, firm or VC. Can me more if something big is happening. 50-60 hours is totally unrealistic at any level except a trading desk with support staff ( analyst level or similar).
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An older friend asked him to apply to a boutique IB that he politely turned down for this reason. No interest in IB. 8-9 hours of sleep a day is important.
I have a front and center view on one part of the IB world, and the experience analysts and associates are seeing varies dramatically by year.
Prior to COVID, the typical number for IB averaged around 80 hours per week. People may have worked in the office until midnight, but once they went home, they were free until they showed up the next morning.
COVID removed the boundary between work hours and home hours, so people could be assigned work at 11pm, which might require working until 3am. So those that graduated in 2019 and 2020 pretty uniformly reported miserable working conditions.
But the public news of this misery, due to the Goldman report and others, made working conditions much better for those entering the industry in 2021. Pay went up by over 30%, hiring increased in many places to the point that people are not nearly as overworked. Some places report average work weeks of about 60 hours, although it seems to be ramping up again.
What has not changed is the number of options after the two year stint. Prior to covid, recruiting used to start almost as soon as a new analyst joined. Covid delayed the start of recruitment, but those analysts who joined in 2021 are now actively being recruited for jobs that start in late summer 2023.
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interesting. Was an unsustainable model except for the very few. In a tough job market like now, all hiring needs to be flexible or people will go elsewhere.
What are the most popular exits out of IB? And what portion of the analysts stay back at the bank?
In terms of exits, coming from a well-known bank provides lots of interview opportunities (that’s the stage my D is in now and she has as many interviews as she can handle). She finds it pretty easy to get interviews wherever one wants, whether it be megafund PE, qualitative equity hedge funds, debt investing, etc. The opportunities vary in terms of workload and comp. For example, megafund PE has the highest expected comp, but it’s expected to be 80+ hours per week with only a small fraction getting to partner and realizing the high comp. Conversely, some of the debt investing jobs are about 50 hours per week and still provide very comfortable comp.
The IBs recognize that very few analysts will stay at the bank after their two-year stint. The comp even at the lower workload opportunities, like debt investing, is considerably higher than what first year associates at an IB make.
The bonus structure recognizes that analysts won’t stay as well. Analysts get their bonus during the summer, and over 80% leave the bank after receiving their second-year bonus. On the other hand, it is expected that those that join as associates after an MBA are choosing to make a career at the IB, and they get their bonuses at year end.
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This is interesting. Thank you.
This is all good, useful and accurate information. I found some of the other observations to be way off base. Thanks for sharing your thoughts and those of your daughter.
you probably mean me. was that really warranted? 
i was very non specific. it’s ok.
These jobs are not a panacea. The taxes and cost of living in these places make them very difficult to live in, even at these inflated salaries. Most often, even experienced professionals have a difficult time without two incomes…and even then it takes half a lifetime to save enough money to buy a 1.3 million dollar 1300 sq ft house. If you work in Manhattan, buying a house means a 2 hour commute to work, or trying to raise a family in a 700 sq ft broom closet.
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Yes, there are drawbacks to all jobs. Since more than 236k applied to Goldman’s entry program this year, some find the tradeoffs worth it.
The true cost of the house you would buy in a HCOL area is the interest cost of the value of the house – So 5% of 1.3mm per year in this case – about 65k. The rest of it is forced saving. You should compare that with a lower cost of, say, 400k in LCOL area. This translates to 20k per year. So Manhattan rental is costing you an additional 45k per year in, possible, before tax money. That is the tradeoff to consider. When you are in your 20s, when the 1300 sft apt is sufficient for your needs, does the job in Manhattan pay more than 45k over a job in a lower cost location. The down payment is a separate issue. But these are the basic economics I think.
Manhattan also has 4% city tax on income. This is meaningful. At a 200k income, this is 8k. To afford a 1.3mm house, you probably need a 450k income. 200k wouldn’t be sufficient. Two people working.
Actually, we’ve already had a detailed discussion upthread. And I was already very direct about what I thought. This comment was meant more of an observation on some perceptions. I’d edit but not possible. Sorry if I ruffled your feathers, the comment wasn’t directed at you specifically. I really do appreciate learning what kids are hearing in the job market. And I think your kid seems to be doing lots of research which I find great.
You are right that a random person off the street has almost no chance of being able to retire in their 30s. By “retiring” I mean that work is not required for living expenses, not that these people will quit work altogether.
But that percentage changes dramatically depending upon getting certain jobs. Suppose that somebody joins a mega fund PE shop as an associate at age 24. If that person makes partner in 10 years, and the firm is still healthy, then being able to retire a few years after that is simply a matter of financial discipline. We are talking about a 10% chance or better given the initial placement. The cost of that opportunity is a brutal work schedule that isn’t for everyone (my daughter has no interest).
Likewise, the same wealth building opportunity holds true for certain jobs in asset management or prop trading, but often with a more relaxed work schedule. After getting the initial job, the firm has to continue to do well, and the employee has to do well in the firm. But if both are true, the money rolls in.
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And the desire to walk away from something where unless you loved it, the chances of making partner are much diminished. The people I know who have walked away in their late 30s/early 40s (including someone who made hundreds of millions from a FAANG company) seem much less happy (often divorced) compared to those who found something else to keep them busy.
Sometimes the cause effect are hard to disentangle in situations like this. And the time spent away from home in the 80-100 hour professions puts significant stress on relationships.
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