What Is An Investment Banking Associate Salary?
Whether you are in the finance industry or planning to enter one, get ready to hear a lot about investment banks. You will be amazed to know how these investment banks work and the magnitude with which they work.
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Pay here is amazing, but the number of working hours is grilling. Many of us are unaware of how these investment bankers work. There are various hierarchical levels. Each level gets paid a handsome salary. In these articles, we will focus on particular investment banking associate salaries.
Table of contents
- What Is An Investment Banking Associate Salary ?
- Investment Banking Associate Salaries Explained
- Investment Banking Functions
- Who Is An Investment Banking Associate?
- Everyday Job:
- How Much Money Does An Investment Banking Associate Make Annually?
- Why Are Bonuses Of Investment Bankers Variable?
- Job Requirements
- Key Success Factors
- Skills
- Educational Qualification of an Investment Banking Associate
- Interview Questions
- Frequently Asked Questions (FAQs)
- Recommended Articles
Key Takeaways
- Being an investment banking associate offers good pay, the opportunity to communicate with intelligent people, an excellent lifestyle, and office spaces.
- An investment banker is a person who works in a financial institution called an investment bank.
- Typically, investment banks raise capital for their clients, companies, governments, or other entities that provide advisory services related to mergers and acquisitions, underwriting stocks, bonds, etc.
- The disadvantages of being an investment banking associate include long working hours, lack of sleep, routine, and health hazards. Moreover, it expects 24×7 availability, a stressful environment, a rough personal life, and an absence of social life.
Investment Banking Associate Salaries Explained
An investment banking associate is the one who has the required skill and knowledge to work in the financial market in terms of helping institutions raise capital, provide financial advisory services or execute transactions related to merger or acquisitions. They earn a very lucrative salary which comes with a lot of professional commitment and stress. Let us learn more about the average investment banking associate salary structure.
Formula To Pay:
- The formula for paying salaries to bankers varies from firm to firm.
- Some follow rigid formulas based on how much business a banker brings in, while others pay salaries based on a subjective allocation of corporate finance profits.
Compensation Structure:
- Furthermore, no matter how compensation is structured when business is slow, bonuses taper off swiftly.
- Some investment banking firms tend to pay less than others because they can get away with it.
- But remember that the quality of experience you get at the entry-level and the company and the strength of the people you will work with are far more important than your initial average investment banking associate salary.
Investment banking associates enjoy increasing salary numbers but fear the growing working hours. But such is the glory and the agony of working in an investment bank. We hope we have given you a glimpse of these investment banking associates and how much they paid for working in an investment bank.
Investment Banking Functions
An investment banker is an individual who works in a financial institution called an investment bank. Investment banks typically are involved in raising capital for their clients. Clients can be various companies, governments, or other entities that also give advisory services concerning mergers & acquisitions, initial public offerings, underwriting stocks, bonds, etc.
Following are the primary investment banking responsibilities Investment Banking Responsibilities Investment bankers play diverse roles and responsibilities in a company as analysts, associates, vice president and managing director. They handle the front, middle, and back-office responsibilities to cater to the clients with all sort of financial services.read more listed:
Research:
- Investment Banking AnalystsInvestment Banking AnalystsInvestment Banking Analyst works with investment banking team and expertise in the area of Accounting, Financial Modeling, Project financing, Project Valuation, and Financial statement Analysis. These analyst has deep knowledge in Excel and they are good at VBA to analyze the market data and financial modeling. The analytic work consists of building a financial model for different projects like Infrastructure projects (i.e. Power projects, real estate, etc.).read more and associates conduct research activities on various companies and sectors.
- A lot of detailed analysis requires for these research activities.
- An analysis undertaken through financial modeling Financial Modeling TechniquesFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact.read more and valuation techniques and a recommendation report are prepared, ultimately providing a buy or sell recommendation.
Sales & Trading:
- Investment banks have trading departments to execute their clients’ bonds and stock transactions.
Asset Management:
- Investment banks manage insurance companies, pension funds, or other clients.
- These investment banks have their asset management department, which selects the right mix of portfolios (stocks, debt instrumentsDebt InstrumentsDebt instruments provide finance for the company's growth, investments, and future planning and agree to repay the same within the stipulated time. Long-term instruments include debentures, bonds, GDRs from foreign investors. Short-term instruments include working capital loans, short-term loans.read more, etc.) for their clients.
Structuring
- Structuring has been a relatively recent division as derivatives have come into play.
- There are highly technical and numerate employees who create complex structured productsStructured ProductsStructured products in Finance refer to a set of two or more assets or securities with a combination of an interest rate and single or multiple derivatives. These pre-packaged investments may include traditional financial instruments, such as equities, options, investment-grade bonds, indices, commodities, mutual funds, exchange-traded funds, or currency pairs, with non-traditional payoffs.read more.
- Here, the aim is to offer much greater margins and returns than the underlying cash securities.
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Who Is An Investment Banking Associate?
- An investment banking associate works in an investment bank. An associate can be an analyst promoted after 3 or 4 years or directly recruited from a good business school.
- Associates work 80-100 hours a week; they work on pitch books and models all night and become experts with financial modeling using ExcelFinancial Modeling Using ExcelFinancial modeling in Excel refers to a tool used for preparing the expected financial statements predicting the company's financial performance in a future period using the assumptions and historical performance information.read more spreadsheets.
- The associate’s role is similar to an analyst’s role.
- He may be responsible for serving as a link between junior and senior bankers. On some occasions, he may work directly with clients.
- It is common for an associate to work over 80 hours per week. They often work late nights and sometimes till early morning.
Thus, the above are some of the important points to remember about an associate level job in the field of investment banking.
Everyday Job:
The details below will give a detailed view of everyday job requirements in the role.
Working with Analysts
- The analysts do most of the work concerning presentations and M&A deals.
- Associates come into the picture concerning editing and quality control. They check the final prepared financial models, presentation slides, and grammatical and spelling errors.
- To get most of the tasks done, associates rely on analysts. Hence, they spend the majority of their time training them.
Delegating Tasks and Following up
- Directors, Vice Presidents, and Managing Directors contact the associates.
- So, whenever a new task comes, the associate must allocate and divide the tasks between the analysts and themselves.
- Most of their time is spent on the phone and sending and receiving emails.
- Associates require everything to do on time. Hence, they are constantly chasing everyone to get the job done.
Getting Complex Financial Models done
- Apart from doing most analyst work like preparing presentation slides or financial analysisFinancial AnalysisFinancial analysis is an analysis of finance-related projects/activities, company's financial statements (balance sheet, income statement, and notes to accounts) or financial ratios to evaluate the company's results, performance, and trends, which is useful for making significant decisions such as investment, project planning and financing activities.read more, associates also handle complex economic models and other critical tasks.
- That is precise during the significant transactions where the Vice Presidents review the work.
Dealing with Clients
- Associate’s main job is to deal with their clients. They mostly discuss the numbers or any other financial modeling issue. They are required to prepare materials for pitching in line with the client’s requirements so that they can easily attract potential investors of clients. It helps them to connect with people who need their services.
- They also try to maintain good contact and relationship with clients. This is extremely important and associates ensure to do so because they act as a bridge between the client and the investment banking team.
Handling the Admin Tasks
- Associates are involved in recruiting analysts. They deal with the compliance and internal legal teams when a live transaction occurs.
- They communicate with other banks, lawyers, accountants, advisors, etc.
- They should also take care of adherence to rules and regulations and ensure that all transactions are carried out within the legal boundaries.
How Much Money Does An Investment Banking Associate Make Annually?
A typical investment banking associate’s salary ranges from $75,000 to $250,000 annually.
Associates make more money if they work for a larger investment firm, generally a ‘bulge-bracket’ firm.
The table below shows the figures for investment banking associates’ salaries. (Averaged over the last few years)
| Position | Base Salary | Bonus Range | Total Compensation |
|---|---|---|---|
| 1st Year Associate | $110K-$125K | $60K-$135K | $170K-$260K |
| 2nd Year Associate | $120K-$135K | $80K-$160K | $200K-$295K |
| 3rd Year Associate | $130K-$160K | $90K-190K | $220K-$350K |
Let us now see some actual salary figures of some leading Investment Banks. (2015)
| Rank | Investment Bank | 1st Year Associate Salary & Bonus |
|---|---|---|
| 1 | Blackstone Group | $213,250 Base: $109K Bonus: $100K |
| 2 | Evercore | $230,666 Base: $130K Bonus: $116K |
| 3 | Harris Williams & Company | $208,399 Base: $120K Bonus: $100K |
| 4 | JPMorgan Chase | $156,269 Base: $100K Bonus: $35K |
| 5 | Goldman Sachs | $181,778 Base: $110K Bonus: $70K |
| 6 | BMO Capital Markets | $205,938 Base: $125K Bonus: $90K |
| 7 | Piper Jaffray | $183,044 Base: $100K Bonus: $125K |
| 8 | CIBC World Markets | $179,500 Base: $98K Bonus: $47K |
| 9 | William Blair | $125,000 Base: $85K Bonus: $35K |
| 10 | Citigroup | $157,292 Base: $100K Bonus: $40K |
Source: www.poetsandquants.com
Thus, the above data gives us a good idea about the pay package drawn by professional working in this designation is the companies mentioned above.
Why Are Bonuses Of Investment Bankers Variable?
You can say that these two things influence the bonus component: –
- Individual performance
- Group/firm performance.
It implies that even if you have performed more than 100%, your bonus will suffer if your firm is not closing the deals and bringing business.
In scenarios where there are few deals, the workload remains the same. That may bring down your morale as you are not getting paid even though your performance is top-notch.
Job Requirements
In Investment banking, Corporate Finance, and M&A:
- Ability to perform DCF valuationsDCF ValuationsDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company's future performance.read more.
- Finding comparable companiesComparable CompaniesComparable comps are nothing but identifying relative valuations like an expert to find the firm's fair value. The comparable comp process starts with identifying the comparable companies, then selecting the right valuation tools, and finally preparing a table that can provide easy inferences about the fair valuation of the industry and the company.read more.
- Advanced Excel expertise.
- Getting the logistics right.
- Arranging client meetings.
- Skills to network within the firm and befriend key people like lawyers, IT individuals, and compliance experts.
In Equity and Debt Capital Markets:
- Pricing up new deals for bonds, convertibles, or any other instruments
- Tracking past trades and pricing to know where the market is going
- Due diligence coordination.
- Preparing documents on debt and equity deals
- Generating pitch books Pitch BooksPitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm's main attributes and valuation analysis, which helps them decide whether or not to invest in the client's business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm's sales department to help them sell products and services to a client.read more.
- Checking and developing weekly newsletters in some cases
In Sales and Trading:
- Knowing where prices are!
- Working with options pricing models
- Making clients feel comfortable
Key Success Factors
The following are some important factors that these professionals need to keep in mind if they wish to become successful in this field.
- Working in a chaotic environment and getting things done.
- Taking the initiative and working on doing the job better.
- Maintaining a good work relationship with clients may bring you more business.
- Having an excellent network within the firm.
- Being a computer wizard.
- Good dressing sense.
- And last but not least: Always make your boss look good!
Skills
The following are some important skills that the associates are required to possess so as to put their skills and knowledge to optimum usage in this field.
- Investment banks want employees with a combination of strong interpersonal skills, sales skills, communication skills, analytical skills, ability to synthesize, and creative ability.
- Hours are regularly long and often unsocial. Weekend work is common as deals approach crucial stages.
- Fifteen-hour days are not unusual at an investment bank. Investment bankers work up to 100 hours a week.
- The working environment can be extremely stressful as it sets high targets. The investment banking industry is connected strongly to the economy. Thus, job availability and losses fluctuate depending on the economy’s health.
- Many investment banks have global offices and offer trainees the chance to work overseas within the first two years. Once qualified, an investment banker may spend substantial time working overseas.
Educational Qualification of an Investment Banking Associate
- Investment banking associates must be geniuses due to the math, finance, and other challenging subjects they learn in college.
- They should have a very strong approach to analytical and quantitative skills. They should be comfortable in dealing with numbers.
- Most associates have master’s degrees in business administration, finance, or statistics.
- Some may even have a doctorate in business, finance, or economics.
- Having proficiency in Microsoft excel, being thorough with its various functions and other forms of databases, is an added advantage.
- They should have a great attention to detail which will help them in identifying any loopholes or discrepancies in various processes and deals that will be handled in the job.
- Investment banking is not just a cup of tea. And that is why the associates must be smart and quick. They often have to undergo training sessions to keep their knowledge updated.
Interview Questions
These will be the general question that you may expect during your interview:
- What do you know about investment banking and this industry?
- Why are you interested in a career in investment banking Career In Investment BankingAn investment banking personnel is a motivated professional who aims to help their clients reach their financial goals and objectives. The top four investment banking careers are - Analyst, Associate, Vice president, Managing director. read more industry?
- What do you know about our firm?
- What about our culture and company appeals to you?
Following are the resume-related questions that one may ask:
- Your strengths and weaknesses with proper justification and examples of the same.
- Application/use of your power to investment banking
- Your greatest accomplishment
- How would you describe failure? Experience, if any, and what did you learn from it?
- What qualities can you bring to your team? Examples for the same.
- How would your colleagues describe you?
- How would your manager at a previous job define you?
- What is your leadership style?
Pros & Cons of an Investment Banking Job:
Investment Banking Jobs Upsides
- Good pay
- Opportunity to interact and work with really smart people
- Excellent investment banking lifestyleInvestment Banking LifestyleLong working hours, weekend work, a lot of hard work, and little sleep are all part of an investment banker's life. Life as an investment banker is described as hectic, but for those who want to live a life of dedication, competition, and risk while also performing well, investment banking is the appropriate choice.read more
- Great office spaces
Investment Banking Jobs Downsides
- Long working hours
- Lack of sleep, lack of routine, and health hazards associated with it
- Expectation to be available 24X7
- Stressful environment
- Rocky personal life
- No social life
Frequently Asked Questions (FAQs)
An investment banking associate works in an investment bank. They may be promoted as analysts after 3 or 4 years or get directly hired from a good business school. Moreover, these professionals must work 80-100 hours a week. Their work includes working on pitch books and models and becoming specialists in financial modeling using Excel.
Investment banking is considered one of the world’s most prestigious jobs. One may obtain an opportunity to reside in the best cities in the world, such as New York, London, Mumbai, and Singapore. Moreover, they may also expect a hefty cheque every month.
The average salary for an Investment Banking Associate in the United States is $1,48,104.
Investment banking associates create cash flow models, draft memorandums, and other communications with clients and investors. They must possess at least a bachelor’s degree in accounting, business, or finance.
Recommended Articles
Guide to what is Investment Banking Associate Salary. We explain the functions of investment banking, who is an associate & everyday job.
Dheeraj Sir, thanks for your contribution to core Finance related posts. They are amazing. Talking about the Investment Banking Associates, is it really true that they work more than 70-80 hours per week?
Hi Nitesh, unfortunately, 70-80 hours work week is very common!