Quantitative Analyst – Quantitative analyst is the rocket scientist of the finance world. The most important task of a quantitative analyst is to design and create financial models that allow financial corporations to price and trade securities. Without knowledge of computer programming, it would be impossible to design and create financial models.
It’s not enough to have an MBA degree from a top-notch B-School. You need to have multiple skills, and you need to have what they call the “right stuff” to get an entry in this world of repute. There is a high demand for quantitative analysts, but very low supply, as only a few can fit the bill.
So what you need to have to succeed as a quantitative analyst or “quants”? First of all, you need to have the right degree. Only a master’s degree won’t do. Companies that hire quants prefer Ph.D. candidates. So you need to go and get a Ph.D. in Quantitative Finance. Once you have the degree, you need to have the right skills. Only finance knowledge will not do. You need to be an expert in computer programming as well. Once you acquire the right skills, you need to have the right experience to understand the secret of the trade. And if you’re able to achieve all these, you will become the “rocket scientist of the wall street.”
However, in this article, we will talk more about how much “quants” earn and a brief about what they actually do in the finance corporations. Why is this relevant? Because everybody who dreams of becoming a quantitative analyst wants to know whether it’s worthy of putting in so much of input or not!
This article is structured as per below –
- About Quantitative Analyst
- Salary / Compensation
- Effect of Experience on Salary
- Quantitative Analyst Salary Breakup
- Best Paymasters for Quantitative Analysts
- Skills and Effect on Salaries
- Job Satisfaction
- Quantitative Analyst vs. similar job profiles
- Salary Trends
- The bottom line
About Quantitative Analyst
Before discussing the compensation of a quantitative analyst, you need to get acquainted with the profession. What quantitative analyst has to do in the financial corporations? What are the responsibilities he needs to perform?
Here’s a brief overview –
- The most important task of a quantitative analyst is to design and create financial models that allow financial corporations to price and trade securities. Without knowledge of computer programming, it would be impossible to design and create financial models.
- There are two types. The “front office” quants are those who deal directly with traders, providing them the tools and pricing required to trade. The “back office” quants are those who would be validating models, conducting research, and would create new strategies.
- If you are wondering which type of analyst you should become, it’s totally up to you. Normally the jobs of front office quants are very stressful and compensated well. Whereas, jobs of back-office quants are less stressful and compensated less.
- Usually, quants are appointed in investment banks and hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.. But other than, they are also employed in commercial banks, management consultancies, and insurance companies.
Read more on – Quantitative Financial Analyst
Quantitative Analyst Salary / Compensation
In this section, we will go into detail about the salary of quantitative analysts, and we will analyze each part of the compensation. Let’s have a look.
If you want to be a quantitative analyst and would like to know the range of compensation you would get as a result of working so hard, here’s the deal. According to PayScale.com, the median salary per annum is the US $83,249.
Effect of Experience on Quantitative Analyst Salary
There’s an interesting conclusion that has come out from PayScale.com’s analysis. It has been seen that people who are employed as quantitative analysts don’t have more than 10 years of experience (in most cases, few exceptions are there). That means to earn great compensation, and you don’t need to so long. If you have the required degree and skill, you would earn a great salary in the mid-range of your career. Let’s have a look at the chart –
But one thing you need to consider. As a fresher, you wouldn’t make that much money as a quantitative researchQuantitative ResearchQuantitative Research refers to the systematic investigation in which a person collects the data from the different respondents based on numerical figures. Data obtained is then analyzed to get the results using various mathematical, statistical, and computational tools. analyst. So you need to think long term if you are in a lookout for great compensation.
Quantitative Research Analyst Salary Breakup
Let’s look at the break-up of the salary in more detail –
Other than the above (bonus and profit sharing), they also receive common health benefits. Have a look at the chart below –
It is being seen that most quantitative analysts get medical benefits and dental benefits. 69% receive emoluments for vision. Only 7% don’t receive any common health benefits. So as an aspirant, your chances of receiving health benefits are good enough.
Best Paymasters for Quantitative Analysts
Now you may be thinking which employers are good paymasters for quantitative analysts! As per PayScale.com, here are two companies that are the most popular paymasters. Have a look –
According to the chart above, it’s being seen that Bank of America Corp. (BOFA) paid the most salary to quantitative analysts. The average salary they paid to their analysts is around the US $120,000 per annum. The Goldman Sachs Group, Inc. paid the second best. The median compensation they paid to their quantitative analysts is around the US $105,000 per annum. However, the conclusion we’re making here is not exhaustive. Because compensation of analysts depends upon many factors that we can’t ignore! It may happen that all the respondents who reported to work with these groups of companies are experienced and have more than 10 years of industry experience. So let’s say that the salary of quantitative analysts will increase gradually as you get more experience and acquire more skills.
Quantitative Analyst Skills
Let’s look at the skill sets required for being a great quantitative analyst and how these skills affect the compensation.
If you have a better grasp of C++, Matlab, Python, Financial Analysis, and Financial Modeling, then you will be able to increase your pay by multi-fold.
As per the chart, the skills that have most positively affected the salary of quantitative analysts are C++, Python, Matlab, Financial ModelingFinancial ModelingFinancial 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., VBA, and Financial Analysis. It is also seen that what skills like SAS, Data Sensitivity AnalysisSensitivity AnalysisSensitivity analysis is a type of analysis that is based on what-if analysis, which examines how independent factors influence the dependent aspect and predicts the outcome when an analysis is performed under certain conditions., Statistical Analysis, and Microsoft Excel are losing their relevance. It means that only having these skills is not enough. You also need to acquire skills like C++, Python, Matlab, Financial Modeling, VBA, and Financial Analysis.
As you can understand, without acquiring a toolbox of skill-sets, your chance of success as quantitative analysts is bleak. So better that you start working on the skill-sets that are shown in the chart below. According to PayScale.com, these are the most popular skills for quantitative analysts.
It’s being seen that there are five most important skills that are the most popular. Previously we have seen a few of these skills mentioned above are losing their relevance. So having all these skills together is what will make you prepared for becoming a great quantitative analyst.
Quantitative Analyst Skills and Effect on Salaries
Let’s look at each popular skill and the median salary quantitative analysts receive as a result of having this particular skill.
According to the chart, if you have SAS skill (as per the 99 respondents reported), your median salary as a quantitative analyst would be around the US $86,000 per annum.
Microsoft Excel is a very basic skill. But according to 125 respondents, if you know Microsoft Excel, it may help you earn a median salary of US $80,000 per annum.
According to 109 respondents, if you have SQL skills, you would be able to fetch a median salary of around US $88,000 per annum.
According to 195 respondents, if you have Data Analysis skills, you would be able to earn a median compensation of around US $84,000 per annum.
Data ModelingData ModelingA data model in Excel is a data table in which two or more tables are linked together by a common or many data series. Data from several sheets is combined to create a unique table in data model tables. as skills fetches the highest median salary among all. It is around the US $91,000 per annum. But the most popular skill in data analysis as 195 respondents chose this to be their favorite.
The irony is the skills that are most important to grasp like C++, Python, Financial Analysis, VBA, R, and Financial Modeling are not chosen by participants as their favorites because they are tougher skills to master than the favorite skills mentioned in the “most popular” chart!
So instead of preparing to build popular skills, develop skills that pay more money. It’s said that there’s no crowd along the extra miles. Run-on some extra miles, and your chance of getting a huge compensation will increase by multi-fold.
Now let’s see how satisfied quantitative analysts feel after being employed for 5, 10, 15 years. And in the chart below, we will also be able to see the gender composition which goes for the quantitative analyst profession.
Let’s have a look –
It is being seen in the chart that the job satisfaction of the respondents, according to PayScale.com, is 100%. So we can assume you will able to enjoy the same level of job satisfaction once you join as a quantitative analyst.
Secondly, as per the gender composition is shown in the chart, we can see that the quantitative analyst profile is male dominant, as 75% of the respondents are male. Only 25% of respondents are female, according to the survey.
Quantitative Analyst vs. similar Job Profiles
So, where the compensation of a quantitative analyst stands compared to other similar job profiles.
Let’s have a look, and then we will analyze the whole scenario.
From the comparison, it’s found that only 2 profiles can be compared with this profile. They are – the financial analyst and senior financial analyst. It can be easily said that if you go for a quantitative analyst profile, you will get much better compensation that being a financial analyst or an experienced financial analyst.
We feel that only one overview is not enough. So we will look at what Indeed.com has to say in regards to compensation of quantitative analyst.
According to Indeed.com, it was found that the average compensation of quantitative analysts is the US $77,000 per annum. This median compensation is almost US $6,249 less than what PayScale.com portrayed.
Let’s look at the salary trend of quantitative analysts between July 2012 to April 2014 to get an idea of how compensation of quantitative analysts over the years.
The trend of compensation looks interesting. From July 2012 to November 2012, there is a steady drop in compensation. In December 2012, the compensation remained the same. From January 2013 to February 2013, the salary experienced slight growth. From March 2013, there is again a steady drop in the curve. And it stayed the same during June 2013. From July 2013, the salary suddenly started reaching the second best peak and slightly dropped from September to October 2013. It dropped again in November 2013. From December 2013, the curve has reached upward again in January 2014 and dropped in February 2014, and it dropped again. In March 2014, it went higher again, and finally, in April 2014, it reached the highest peak, i.e., around the US $105,000.
From the trend, it can be clearly said that the compensation of quantitative analysts would vary every month. As there is a huge demand for these professionals and not enough supply, often with good skills and experience, quantitative analysts can bargain for a higher salary. But if they lack in skill even with the years of experience, their compensation may drop. As this is the calculation of the average salary we take into account, we can’t take this trend as the most exhaustive conclusion.
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The substance of this entire discussion is this – tougher to acquire skills you have, better would be your pay as a quantitative analyst. If you want to make your mark as a quantitative analyst, you should start working on C++, Python, Matlab, R, Financial Analysis, Financial Modeling, and VBA. If you don’t have these skills, expect an average compensation of around US $80,000 per annum. But if you have these skills, the salary per annum would go beyond six figures. The choice is really up to you. You can choose to develop popular skills and become an average quantitative analyst, or you can get a Ph.D., acquire all these hardest skills, and get paid as the top 1% of the whole quantitative analyst domain.