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Harsher reality for analysts and associates?

Payday is fast approaching for analysts and associates. Will this be the first year for a while that junior bankers are left high and dry?

If yesterday’s comments from John Whitehead, a retired co-chairman of Goldman Sachs, are anything to go by, it may well be. Whitehead told Bloomberg that investment banking compensation has reached “shocking” proportions and advised securities firms to curb bonuses – even if employees quit for better-paying hedge funds as a result.

Whitehead’s comments were directed at the industry’s highest earners, rather than banking juniors. But the sentiment doesn’t augur well for analysts and associates, whose bonuses are typically announced in May and June. Like senior colleagues, they’ve done well in recent years – bonuses paid to second and third-year analysts in corporate finance have tripled since 2005, according to recruitment firm Morgan McKinley.

Will pay rise again? A salary survey from recruitment firm EM Financial, which takes into consideration expectations of the approaching payouts, suggests corporate finance juniors definitely think it will. This time last year, the survey says, first-year analysts were anticipating bonuses of up to 35% of salary; this year the upper limit is expected to hit 100%.

EM Financial managing director David Howell predicts bonuses will be nudged higher by banks’ need to prevent juniors defecting to hedge funds and private equity. Adam Cairns, a director at recruiter Fennemore Banks, is also optimistic: “M&A pipelines are still full and banks are well aware of the problems they’ll face if they lose numbers of people in July and August due to paying inadequate bonuses.”

But Cairns also says banks are apprehensive about the possibility of a downturn in M&A in 2008 and junior bankers are increasingly cautious about moving. As a result, he predicts any increases in analyst and associate bonuses this year will be reserved for top performers.

2007 salary and bonus expectations: corporate finance

1st year analyst: Salary 35k to 41k; Bonus 50% to 100%

2nd year analyst: Salary 41k to 46k; Bonus 60% to 110%

3rd year analyst: Salary 45k to 50k; Bonus 80% to 150%

1st year associate: Salary 55k to 60k; Bonus 100% to 180%

2nd year associate: Salary 58k to 64k; Bonus 100% to 200%

3rd year associate: Salary 60k to 70k; Bonus 150% to 250%

· Source: EM Finance

Comments (11)

  1. I am just finishing my PhD and about to start as a quant associate in asset management. I will be earning at the bottom of the range quoted for a 1st year associate. Given that I will not be adding much value for the first few months, what sort of bonus will I get (I guess this is the sort of question that would apply to a new grad starting as an analyst…)?

    I mean that a bonus of 100% to 180% would be nice, but I don’t really believe I would get anything like this (and I am asset man, not IB).

    Any ideas?

  2. wish i had a job like yours.

  3. ~ 50% of salary. pro rata’d if you start mid year

  4. I’m starting an analyst position in derivatives structuring at a top derivatives bank. Is the expected salary/bonus progression likely to be similar to that above?

  5. Dear Bobo, I have a friend who was a first year structurer in a similarly prestigious bank. His guidance is GBP 40-45K, plus matching bonus if you can hold your own on the first year. Nobody really expects you to be a superstar right out of the gate, but it helps if you can carve yourself out a niche and tackle some of the new structures hitting the markets (and so bring large spreads for your company).

  6. OMG we operations are lowest of low any idea about guidance salary and bonus in our field?

  7. Capital markets. 1sy year analyst.

    My base salary 1st year was 36k + 36k bonus
    2nd year 45 base + 75k bonus

    Lehman Brothers

  8. A Starting Salary For A PhD Quant is 45-60k.

    The bonus is likley to be around 15-50% depending on how will you perform.

  9. Hi all,

    What would be starting salary + any bonus (if applicable) for Operations division for a top bank.

    Many Thanks.

  10. samsandhu,

    You are looking at probably 33K salary + standard 4K bonus.

  11. What would a derivative analyst (1st year) working at an office outside of London, say in Edinburgh or Glasgow for instance, expect to earn when she joins Morgan Stanley?

    What would the expected salary increments be as she moves into her 2nd year etc and finally an associate role?


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