Investment Banking Associate Salary
Whether you are in the Finance Industry or you are 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. 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 and each level gets paid with some handsome salary.
In these articles, we are going to focus on the Investment Banking Associate salary in particular.
Following are the points that we are going to cover in-depth:
Investment Banking Functions
An Investment Banker is an individual who works in a financial institution called an Investment Bank. Investment Bank typically is involved in raising capital for its Clients. Clients can be various Companies, Government or other entities. It is also involved in giving advisory services with respect to Mergers & Acquisitions, Initial Public Offerings, Underwriting of stocks, bonds, etc.
Following are the major 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. listed:
- 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.). and Associates carry out research activities on various companies and sectors.
- A lot of detailed analysis is required for these research activities.
- Analysis is done through Financial Modeling techniquesFinancial 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. and Valuation techniques and a recommendation report are prepared which ultimately provides a Buy or Sell Recommendation.
Sales & Trading:
- Investment Banks have Trading departments that are involved in the execution of the Bonds and Stocks transaction for their clients.
- Investment Banks manage Portfolios for insurance companies, Pension funds or any other clients.
- These investment banks have their own Asset Management department, which selects the right mix of Portfolio (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., etc.) for their Clients.
- Structuring has been a relatively recent division as derivatives have come into play.
- There are highly technical and numerate employees working on creating complex structured products.
- Here the aim is to offer much greater margins and returns than the underlying cash securities.
Who is an Investment Banking Associate?
- Investment Banking Associate works in an Investment Bank. An Associate can be an Analyst promoted after 3 or 4 years or he may be directly recruited from a good Business school.
- Associates work for 80 to 100 hour weeks; 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. spreadsheets.
- The Associate’s role is similar to an Analyst’s role.
- He may have the additional responsibility of serving as a link between junior and senior bankers. At some occasions, he may work directly with clients.
- It is very common for an associate to work well over 80 hours per week. They often work late nights and sometimes till early morning.
Everyday Job of an Investment Banking Associate:
Working with Analysts
- Most of the work concerned with the presentations and M&A deals are done by the Analysts.
- Associates come into the picture with respect to editing and quality control. They check the final prepared financial models, presentation slides, grammatical mistakes, and spelling errors.
- To get the majority of the task done, Associates rely on the analysts and hence they spend the majority of their time training them.
Delegating Tasks and Following up
- Directors, Vice-Presidents and Managing Directors are the ones who are in contact with the Associates.
- So whenever a new task comes, it is the duty of the Associate to allocate and divide the tasks between the Analysts and themselves.
- Majority of their time is spent on the phone and sending and receiving emails.
- Associates require everything to be done on time, hence they are constantly chasing everyone to get the job done.
Getting Complex Financial Models done
- Apart from doing most of the Analyst work like preparing presentation slides or financial analysis, Associates are also involved with handling the complex Financial Models and other critical tasks.
- This is specifically during the major Transactions where the VP’s are involved in reviewing the work.
Dealing with Clients
- Associate’s major job is to deal with their Clients. They mostly discuss the numbers or any other Financial Modeling issue.
Handling the Admin Tasks
- Associates are involved in recruiting Analysts. They deal with the compliance and internal legal teams when there is a Live transaction taking place.
- They also communicate with other banks, lawyers, accountants, advisors, etc.
Investment Banking Associate Salaries Explained
Formula to Pay:
- The formula for paying salaries to the bankers varies from firm to firm.
- Some follow rigid formulas that are based on how much business a banker brought in while others pay salaries based on a subjective allocation of corporate finance profits.
- 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 always remember that at the entry-level, the quality of experience you get and the company and strength of the people that you will work with are far more important than your initial salary.
How much money does an Investment Banking Associate make annually?
A typical Investment Banking Associate salary range from $75,000 to $250,000 in a year.
Associates make more money if they are working for a larger investment firm, generally a ‘Bulge- bracket’ firm.
The Table below shows the figures for Investment Banking Associate’s 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’s now see some Actual Salary figures of some leading Investment Banks. (For the Year-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|
Why are Bonuses of Investment Bankers variable?
You can say that the bonus component is influenced by these two things:
- Individual performance
- Group/firm performance.
This implies that even if you have performed more than 100%, your Bonus will suffer if your firm is not closing the deals & bringing Business.
In scenarios where there are not so many deals, the workload still remains the same. This may bring down your morale as you are not getting paid even though your performance is top-notch.
Job Requirements of Investment Banking Associate
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..
- Finding Comparable companies.
- Advanced Excel Expertise.
- Getting the Logistics right.
- Arranging client meetings.
- Skill to network within the firm and befriend key people like Lawyers, IT people, and Compliance people.
In Equity and Debt Capital Markets:
- Pricing up new deals for bonds, convertibles or any other instruments.
- Tracking past deals and pricing to know where the market is going.
- Due diligence coordination.
- Preparing Documents on debt and equity deals.
- Generating Pitch books.
- Checking and generating 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 includes
- Working in a chaotic environment and getting things done.
- Taking Initiatives and working on how the job could be done in a better way.
- Maintaining a good work relationship with Clients as they 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 making your boss look good!
Following Skills are must for working in an Investment Bank
- Investment banks want employees with a combination of strong, interpersonal skills, Sales skills, Communication skills, Analytical skills, Ability to synthesize, 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 high expectations for targets are set. The investment banking industry is strongly connected to the economy. Thus job availability and the number of job losses fluctuate depending on how healthy the economy is.
- 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 have to be Geniuses and in fact, they are due to all the math, finance and other challenging subjects they learn in college.
- Most of the Associates have their Master’s degree in Business administration, finance or statistics.
- Some may even have a doctorate in Business, Finance or Economics.
- Investment Banking is not just a cup of tea. And that is why the Associates have to be smart, quick and often have to undergo training sessions to keep their knowledge updated.
Investment Banking Associate 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 BankingCareer 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. Industry?
- What do you know about our Firm?
- What about our Culture and Firm appeals to you?
Following are the resume related questions which may be asked:
- Your strengths and weaknesses with proper justification and examples of the same.
- Application/Use of your Strength to Investment Banking?
- Your greatest accomplishment?
- How would you describe Failure? Your 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 describe you?
- What is your Leadership style?
Pros & Cons of an Investment Banking Job:
Investment Banking Jobs Upsides
- Good pay
- Opportunity to interact & work with really smart people
- Awesome 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.
- 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 24*7
- Stressful Environment
- Rocky Personal Life
- No Social Life
Investment Banking Associates enjoy the increasing Salary numbers but so do they fear the increasing working hours. Such is the Glory and the Agony of working in an Investment Bank. I hope that you got a glimpse of who these Investment Banking Associates are, and how much they are paid for working in an Investment Bank.