Maybe you should’ve gone into law? Life in a law firm might not be as exciting as in banking, but it still pays. If you make partner, you’ll make big money, and you’ll make it sooner than in an investment bank.
Several of London’s magic circle law firms have reported the levels of profit they paid their equity partners in the past week. You can see these in the chart below. You will also see that pay is rising and that there’s a surprising degree of uniformity: if you make it to partner in a magic circle law firm, you’re going to earn approximately £1.5m ($1.9m).
This is a lot money, particularly when you consider that it takes an average of around 10 or 11 years post-qualification to make partner at a top law firm in London. Qualifying takes two years, so newly promoted partners who join out of university are likely to be around aged 33 to 34. By comparison, becoming a managing director (MD) in an investment bank typically takes around 18 years to achieve. Moreover, IF you make MD in banking, you’ll typically be paid less than these partners in law firms: Emolument.com, the real time salary benchmarking company puts median total compensation for MDs investment banks in London at just under £500k.
Suddenly, a career in law looks rather appealing.
Except, there’s no guarantee that your magic circle law career will culminate in a partnership. Law firms are just as fussy about promoting partners as banks are about promoting managing directors. Analysis last year by The Lawyer magazine found that only 37 people out of an intake of 1,000 were promoted to partner between 2009 and 2016. That’s a success rate of just 3.7%. By comparison, if you can survive in banking your chances of becoming an MD are thought to be as high as 20%.
This isn’t all that banks have going for them. Although you’ll make a packet if you make partner in a law firm, if you don’t make partner, you’ll earn more in a bank. Emolument says pay for the two professions evolves as in the chart below. If you ride the peak of banking pay and stay employed until the bitter end, Emolument suggests you can expect to earn a cumulative £2.3m. Do the same in law and you’ll walk away with £1.2m.
“The mindset in law is very different to the mindset in banking,” says one recruiter. “There’s an intellectual superiority with lawyers – but at the end of the day, very few of them become properly rich.”
This superiority is echoed by lawyers when they talk about their jobs. “Law is an intellectual challenge,” says one senior lawyer. “I look across to banking and think I might have been financially better off if I’d taken that career path, but I don’t wish I was a banker in terms of the work that’s involved.”
There are also similarities between the two industries, however. Whether you go into law or into banking, you’ll need to have an appetite for the grind. “Law is comparable with banking in terms of hours,” says one counsel at a US law firm. “Bankers and lawyers work hand-in-hand. When a deal is going through, they’ll both be working all night and at weekends.”
One lawyer told us he loves his job because of the thrill of, “being part of a close-knit high calibre team, working on high value cross-border deals that take place under a lot of pressure and stress, with no two transactions ever the same.” Bankers describe their oeuvre in strangely similar terms.