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Is 68k the new normal for banking pay?

It may not sound much if you have children to put through school and a high maintenance spouse/ big mortgage to service, but 70k could be just about all the average front office banker can expect in future.

Research published last month by academics at NYU Stern and the University of Virginia found that banking pay rises rapidly compared to the norm during periods of deregulation, creativity and innovation, and falls just as rapidly thereafter.

Accordingly, relative compensation in financial services soared between 1920 and 1933, and soared again from 1990 until very recently.

Last week, Financial Times columnist Tony Jackson described own his experience of the broadening discrepancy –

In 1982 I switched jobs from broking analyst to financial journalist, and quite soon my pay at the FT was the same as what I was earning before. In 2000 I reversed the switch, and my pay almost tripled.

If past experience is anything to go by, financial services remuneration now looks set to return to trend.

How far will it fall? In 2007, however, average compensation across JPMorgan (investment bank), Merrill Lynch, Morgan Stanley and Goldman Sachs was $441k, or 311k at today’s exchange rates.

By comparison, mean annual earnings for men working full time in the 20 best professions in the UK in 2008 were just 68k.

Comments (26)

Comments
  1. Obviously that 68k’s just the basic salary, avoiding the bonus that will even after the restructuring of the banking space be MULTIPLE times the basic salary in the front office?

    What’s the point in all these surveys banging on about salary? Salary is completely irrelevant in an industry where bonus is paramount. It makes us look unimpressive / bad, fooling outsiders that that’s all we earn when reality can be 3, 5, 10 times more.

  2. Henry: if banking pay were to gravitate towards the average for other high paid professions, the implication is that 68k would be the total all in, bonuses included.

    Sarah, Editor, eFinancialCareers Reply
     
  3. i doubt the average bouns can exceed 100% in the next few years, given the dire ECM, DCM and structured credit products. Everything back to basic = drastic fall in bonus to an equivalent of few months worth

  4. Henry, good to have you back again.

  5. 68k you got to be joking, maybe p/m

  6. Henry needs to wake up to the new reality!

  7. 70k is a lot of money and people should think themself lucky to earn such a sum. Greed and out of control capitalism in the banking sector is why we are in this mess in the first place.

  8. guess salary comes into play only if you still have a banking job left ! with so many bankers and so few jobs in circulation, it’s good ol’ law of demand and supply coming into play….

  9. Good, far too many people in the city for the money rather than because they find the work interesting. I enjoy the challenge of investing and would be content earning a lot less than what is the current pay level. Of course I make a far amount of money on my private account but I am sure the competent ones can do so too and if you can’t perhaps you should find something you are good at?

  10. well said danielmoon, we have grown accustomed to a neverending wealth when in deep in our hearts we knew the music would stop one day.

  11. people shoud realise that following the financial services super bubble bursting their salaries will revert to their actual value added to the economic system – and that unlevered too. I wouldnt guess thats a very high figure – about as much as accountants or lawyers.

    A further rude awakening is due and will be delivered in the coming years (not to mention that the pound’s collapse has already reduced earnings by 30%).

  12. As a headhunter I forecast that many people will actually be on higher base salaries….

    This is not intuitive at first, is it ?
    But there is a strong attack on “bonus culture”. It seems realistic to assume that this will at least in part succeed.

    Thus I believe that total renumeration will include a larger fixed element when the floating part is decreased. With governments owning large chunks of banks I forsee a complex game where bankers try to get money in more politically acceptable ways. Once times get better I see a larger % of income being in benefits and other less visible (and efficient) forms of paying people.

  13. OK people 70k total for a FO job is a joke, quite simply NOT WORTH IT, not worth the stress, the hours and the idiots you have to deal with. I am oof to a HF or to an academic career and be happy to skip all the MBA types

  14. The point of salary forecasting on eFC is as much a crystal ball as the weather forecast. Maybe the overall trend is right, but on an individual level I cannot see why anyone with some savings of 500k+ would stay in banking if all they can extract is a gross income of 70k. Basically you ruin your life and marriage, work 100+ hours and have a debatable work environment to earn the historic average of treasuries on your savings? you might as well not and just invest in corp bonds – ends up at the same result without the consequences to your health through such a job. This obviously only holds true for the IBs.

    As for the value added – it’s an interesting, rather academic discussion. If a mobile phone salesman brings home a killer contract which will earn the company 1m+ p.a., he will be efficiently rewarded to reflect his addition to the top or – depending on his contract = bottom line of the overall p&l. A very similar correlation exists on the trading floor, as long as your bonus is based on commission. Unfortunately, banks have been not disciplined enough to cut bonus to 0 for the slackers in the industry.

  15. amused: though you make some good points, i always smile to myself when people write on this site about the “100+ hour” weeks!

    this may be true in Corp Fin or similar, but trading floor people do nothing like this, and they earn more. i work closer to 50h per week. the lifestyle is actually very good, and very flexible. agree with you on the stress though. AT TIMES this can be unpleasant, but if you’re good, it is typically the exception.

    (i am VP at large European IB)

  16. Don’t be so ridiculous. 68k all-in in the front office? I know the restructuring of the investment banking space, the less risk that will be taken on, the curbing, the municipal intervention, the restructuring of bonuses, you’re still nowhere near 68k. Don’t be so ridiculous, that’s what people with a few years experience in IT, or newly qualified lawyers get! I will continue to get a nice 6 figure pay packet for every year I stay in this wonderful game.

  17. Poor old Henry, still desparately trying to cling to the past “glory days” like so many passengers clinging to the sinking Titanic after she hit an iceberg and sank in icy waters. No chance, Henry. You are accountable to the public now, and you are being watched like a hawk after proving yourselves uttely incapable of managing money and doing your job. Why should you be rewarded for helping to destroy the economy? Dream on.

  18. Peter123, how have I destroyed the economy? I’m in FX, and 2008 was my record, and my bank’s record year. How ignorant of you. And there’s no government intervention where I am either. Nobody is watching me, we just enjoyed stellar bonuses not much less than last year (thank god for the recent /$ move) and will continue the glory days, even happier than before because my peers are suffering.

  19. Henry is right. I am in FX and similar story:

    -Does not harm the economy whatsoever (indeed on the contrary; fx traders pay their taxes)

    -MOST FX business is short date; what i mean is that it is NOT credit-intensive, or heavy on balance sheet usage. So has NOT been to blame for much of the leveraged risk built up over the last decade

    Guess you must work for a US bank though, Henry, with you alluding to the cable move….!

    Currencies rock.

  20. Come to Dubai and 68K can be tax free………..then the cost of living will kill all the tax benefits. Roll on next month, the tax free bonus will be required to pay school fees, rent………………..!

  21. 68k is a lot- Either the data used for this analysis was inadequate or incomprehensive . Where will the previously fat bonuses come from in the face of these appalling financial results? I think that avg will plunge drastically further.

  22. I’m a retail banking manager with a global bank who has some personal experience of trading FX on spreadbetting sites. Surely this can’t be difficult can it? What qualifications do you FX traders have over mortals to make the kind of money you do? Are you saying you’re worth it? Have a bit of humility and admit you’re just lucky. Right place, right time, right school, right friends!
    Gimme a job!

  23. I cannot understand how one could work for a US bulge bracket bank where there is no government intervention…

  24. Huh?, You making money for your private account during office hours? Let me call your head of desk and tell him he doesn’t work you out hard enough for the firm.

  25. Normal distribution of pay, or just more skew?

    If you’re good, you’ll earn. The only thing that will change is mediocre won’t be tolerated, and underperformers will be weeded out. If your boss doesn’t look after you and you’re good enough to get other offers, walk.

  26. Banking has to reinvent itself in order to survive and that obviously includes the comp packs. The party is over, interesting times ahead.

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