It’s become a cliché to say that finance jobs pay well, but not as well as they used to. Seven years ago, 25 year-olds in finance were gratefully receiving £1m bonuses and 33 year-old heads of divisions were on £4m. In 2014, it’s become standard for someone in their late 20s in banking to make a ‘mere’ £150k, which is a lot of money but won’t pay for an early retirement. Nowadays, average compensation in finance only approaches £500k as your fourth decade nears an end.
Emolument.com, the real time salary checker, confirms the demise of finance as the get-rich-quick career. According to its own data, just 1% of front office London finance professionals aged 28 are paid £500k ($800k) nowadays. This might be because Emolument’s data is London and Europe-centric and because most Continental European graduates only enter the industry when they’re aged 25+, meaning they’d only have three years’ experience. It might be because the highest paid bankers aren’t submitting their pay data. But it may also be the way of the new world: “People are getting far less of their profits as compensation,” says Jason Kennedy, chief executive officer of the Kennedy Group. “In the past, a trader who made $10m for a bank would keep $1m. Today they’ll keep $500k.”
However, both Emolument and London’s top headhunters are in agreement that there are still jobs out there which will make you £500k a year when you’ve barely left the family home. However, they’re not common and you’ll need to excel if you’re going to get anything near that.
1. Trading in banks
It’s no coincidence that all the 20-somethings promoted to managing director (MD) roles at Goldman Sachs work in the markets business and that almost all of them work in trading. Take Kunal Shah, the Cambridge University maths graduate who made MD at Goldman aged 27 by virtue of his aptitude for trading emerging markets. Or take Andrew Silverman, another maths graduate (from Harvard) turned- distressed debt trader, who was promoted to MD at Goldman at just 28 years old.
The handful of highly paid late 20-somethings in banking are almost all in trading jobs, agrees Kennedy. “If you make money as a trader, you’ll get paid no matter how old you are,” he says. “You’ll have to make a lot more for the bank than before, but you will still get your cut.”
“The real superstars are going to be in trading rather than sales,” confirms an equity derivatives headhunter, speaking on condition of anonymity . “Sales people might make that kind of money if they’ve had a spectacular year, but it takes longer to build a good book of clients if you’re in a sales role.”
Emolument’s data suggests that 30% of the 28 year-olds on £500k are in trading – more than any other single category.
“You do come across 28 year-old traders on that kind of money, but a lot less than you used to,” says a fixed income trader, speaking on condition of anonymity. “It all depends whether your product area is doing well,” he adds. “This year the high earners are going to be trading credit rather than rates.”
Only some banks will pay big money to top young traders, say headhunters. US investment banks are the prime payers (bar Morgan Stanley). Deutsche Bank has also been a big payer in the past. Headhunters say French banks like BNP Paribas and SocGen will almost certainly not pay you this kind of money when you’re less than eight years out of university.
2. Trading or analysis roles in asset management and hedge funds
35% of Emolument’s 28 year-olds on £500k are working on the buyside. High pay in hedge funds is well-documented, with traders like Ross Turner, founder of hedge fund Pelham International, becoming a partner at hedge fund Landsdowne partners in his 20s. However, high pay in slower moving long-only asset management firms is harder to come by.
If you want to make big money working for a traditional asset management firm, you need to choose somewhere like Blackrock, which has a reputation for paying on a par with top investment banks and just hiked its compensation bill by 13%.
3. Sales jobs in banks
While it’s harder to make big money young in sales than it is in trading, it’s still easier than in other areas of banking like M&A. “There’s a saleswoman at JPMorgan who’s around 28 years old and who got paid $2m a couple of years ago,” says the fixed income headhunter. “If you’re in sales, your earning ability depends upon your product and clients,” he adds. “In 2010, 2011 and 2012, people were making a lot of money in hedge fund sales, but that’s become a lot harder now. Your best bet today is something like solutions sales, or focusing on a particular geography like Scandinavia or Holland, where the supply of good salespeople is very tight.
“Even so, you’re more likely to make £300k than £500k in your late 20s,” he adds.
Emolument’s figures suggest 23% of the 28 year-olds on £500k are in sales. They also highlight how impossible it is to get rich quick in M&A and origination – only 5% of 20-something high-earners are based there. Pay in investment banking divisions (IBD) tends to be very closely prescribed with IBD analysts and associates receiving pay increases for seniority rather than performance.