How long do you want to work in banking for? And how much can you expect to earn after tax if you stick with it for a decade, maybe more?
The reality is that if you want to amass money from a banking career, you need to stay well beyond the five-year mark. In a 20-year career, you can still take home $12m+ if you're lucky - but your long-term net earnings will diverge hugely depending upon where in the world you're based.
No two banking careers are the same and the past is no predictor of the future with regards to bonuses and total banking compensation. However, in investment banking divisions (IBD) (where the M&A, equity capital market and debt capital markets bankers work), pay is typically quite uniform - at least to begin with. On this basis, it's possible to predict with some certainty what you might earn in the first five years of your career as you rise from being an analyst and associate to a junior vice president. After that, things become a bit more subjective and there's less uniformity of pay from one year to the next.
Nonethess, using average total compensation data for investment bankers from analyst to managing director (MD) level in the Americas, APAC and EMEA from recruitment firm Pinpoint Partners, we've plotted how much you might reasonably expect to take home over a successful 20 year investment banking career in London, New York and Hong Kong. Once you hit MD level (around 15 years in), we've presumed for simplicity that your pay just plateaus.
As the charts show, if you want to make the really big money, you need to hang around long term. The difference in cumulative net pay between a 5,10, 15 and 20 year front-office banking career is frankly huge. Therefore, you need to work your way up to managing director (which will take you around 15 years) and to hang on in there for as long as possible. If you drop out after just five or 10 years, your cumulative earnings will take a huge hit.
You'll also take a big hit if you're a banker based in London instead of New York or Hong Kong. Not only does Pinpoint suggest that pay is lower in European cities, but taxes in London are considerably higher than in the other major financial cities. This double whammy leaves London bankers considerably worse off than their counterparts in the Americas and Asia. For the really, really, big money after tax you need to be a managing director in Hong Kong for a few years at the end of your career - although the current instability there might be enough to outweigh the monetary advantages, however large.
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