Investment Banker Salaries Vs. McDonald’s: Hourly Pay
“I’m talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.”
-Gordon Gekko, Wall Street
Everyone knows you make tons of money in investment banking, right?
That’s common knowledge – but what no one ever thinks about is how much you make per hour.
Yes, making six-figures as a 23-year old is nice – but not if you work 120 hours per week to get there.
So how much do you make on an hourly basis – and is it more than a McDonald’s employee?
The Best of Times…
For entry-level investment banking analysts, the best-case scenario happened way back in 2007.
Base salaries were $60,000 and bonuses for “top-tier” analysts were $90,000, for a grand total of $150,000 in compensation. Not bad for a 23-year old.
On average, investment bankers work around 90-100 hours per week in their first year.
That might be a bit high or a bit low (!) depending on the bank and group, but we’ll go with it for now.
With 52 weeks of work per year (there’s no vacation, thank you very much) and 90 hours per week, you would have earned $32.05 per hour ($150,000/(52*90)) in 2007.
At 100 hours, that drops to $28.85 per hour.
Even if, hypothetically, you worked 140 hours per week every single week and somehow survived for 1 year, you’d still be at $20.60 per hour.
The Worst of Times
Of course, long before 2007 and immediately after 2007, bonus numbers fell substantially.
In 2001-2002, for example, Analysts were lucky to get $10,000 bonuses – and sometimes they just received lumps of coal or IOU notes.
And they still worked like crazy – only they created pitch books constantly rather than working on actual M&A deals.
A $10,000 bonus and $60,000 salary implies $14.96 per hour at 90 hours a week.
So you’d be in administrative assistant range, but still not quite at McDonald’s level.
But what if you did absolutely nothing but create pitch books for 140 hours per week, every week, and got a bonus of $0?
$8.24 per hour.
Ouch.
What Happened After 2007 and Beyond
In the midst of the financial crisis, bonuses dropped quite a bit from 2007 levels – though not quite as much as people expected.
In 2008, the top-tier 1st year analyst bonus was down to $65K, and in 2009 it was down to $45K.
While these numbers do represent a huge drop, you’d still make significantly more than a McDonald’s employee on a per-hour basis.
…Vs. McDonald’s
At the time of this article, the hourly rate of a cashier at McDonald’s is $7.56 per hour according to Glassdoor.com.
So the only way you’d actually make less than you would at McDonald’s is if you earned a $0 bonus and worked at least 153 hours per week.
Which, um, isn’t possible.
Or Could You?
Hypothetically if we had deflation and investment banking base salaries dropped and you simultaneously got a ridiculous workload, and McDonald’s wages rose, then maybe you could make more at McDonald’s.
Here’s a handy sensitivity table showing you all the possibilities:
And yes, I know Steve Schwarzman makes a lot more than $41. 21 per hour – I just put his picture there because it seemed appropriate.
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I love this post.
It is interesting to see the numbers. I use to see people who tracked their hours each week religiously then ran all kinds of analysis on it at the end of the first year. Most were very disappointed with the hourly rate they saw.
Yeah the hourly rate is pretty depressing. The interesting thing is even as you get much higher up, the hourly rate never becomes mind-blowing. The average MD, for example, makes around $1,000 per hour… that’s really good, but not 100x better than analysts or anything.
Still, McDonald’s has far worse exit opportunities. :)
You forgot about being in the highest tax bracket. If taxes are included, you make less than a McD worker.
IRS: Yeah, I purposely did not include income taxes because everyone’s tax situation is different and because for the first half your first year, you are actually not in the highest tax bracket since you only work for half the year without receiving a bonus or anything.
But you’re right, at certain levels the tax differential would drop you to below a McD salary.
LOL, obviously you don;t know how taxes work….only a certain part of your income will be taxed at 45%……it is impossible for the investment banker to make less…..the first 40k might be taxed at 35% then the next 40 at 40% not all of the salary will be taxed at one rate:):):)
LOL, you obviously don’t understand how to calculate PER HOUR compensation. While it is impossible for the I banker to make less in total, it is possible for him to make less per hour.
Don’t forget, McD’s workers get paid overtime after 40 hours.
Depending on the location, it could be 1.5x or 2x hourly pay!
Argh*&^#*%@#$
GoGators: Very true, and yet another reason to consider McDonald’s vs. banking. :) Tax-wise it might be better too…
Back in 1994, FI analysts were paid $34k and $5-10k bonus for 95 hour weeks.
So, about $8/hr, or less than a McD employee who would get overtime.
$34K and $5-10K bonus? OMG. Did anyone even do finance back then?
After adjusting for a few errors: i.e. in 1994, McDonald’s pay was more like $4.50, in 2001 IB Analysts were starting at considerably less, but let’s peg it at $50,000, and in 2007 IB Analysts are being re-org’d so some only receive half their base and no bonus.
After making those adjustments, the takeaway is that the spread grew tremendously up until 2007, reversed sharply in late 2007 and early 2008 and hopefully temporarily, and will likely bounce back. For instance, in 1994, burger flipper was making around 50-60% of the IB Analyst pay using the high low estimates above, in 2001 that had dropped to somewhere in the 40% handle, and by 2007 it was just 25%!! So, if you had just saved all your money and skipped that silly 4-year degree followed by an MBA, you’d be ahead (at least at the end of your Analyst program, and especially if you just got re-org’d).
True, the spread has really come down lately. Believe me I’ve thought about employment at McDonald’s if I get fired anytime soon…
Here I am reading all this which I never in my thought in my wildest… (my father is smiling down on these irisheyes!) Now I’m in the know! I’ve been in a union for 19 years, paid all my dues, was a department head making 48,000.00 a year, Janurary 2010 union did not back me and was put to part time, earing only 20,000.00 a year. I am going for the McD management job, I need to pay my way though life! I hate working part time and need to feel satisfied in making money!
Oh no!!! What about models n’ bottles?? You mean you have to be moderately attractive and have game to get laid? Meaning… you can’t spend $300 on a $20 bottle of Absolut and have a coked out model chic give you a few cheap lap dances in VIP and tell you she’s on the rag minutes after last call? Haha. I see something terribly wrong with all of this. First, instead of a coked out model girl with STD’s, I’d go for a fine college girl whose dad is the editor of a major ski magazine. Next, I’d have her buy ME whatever I want. It seems that Investment Banking has become a bastion for D & D fans and avid X Box players. It’s a far cry from the pimped-out, glutinous 80′s.
Yeah things aren’t what they used to be. There are certainly some nerdier people in the field these days. :)
Are you still an investment banker?
Analyst? Associate?
If you get a gig as an Analyst, do you need to do an MBA or MFin or an MFE to steadily move up?
How long does it take to go from Analyst to Associate and up to even higher levels?
How good of a peion do you have to be? What if you’re a bit cocky due to a modest upbringing?
Is I-Banking the epitomy of corporate?…as in cubicle cultures, lame employee parties, lifers??
By the time I’m thirty-five, going in to the game at 26, ceteris parabis, how much cash could I have amassed by the time I’m 35?
How the helllllllllll do you not go insane with such a psycho schedule?
Thanks. Sorry for the ridiculously large set of questions, however, it’s my life and any advice from a bard like yourself is useful in the end….
No I am no longer in the industry.
You “need” no degrees to move up in finance except an MBA can be helpful for senior-track positions, depending on the firm in question (some make you get it, others do not).
Analyst-Associate – 3 years. Higher levels – VP takes 3-4 years, then VP to MD could take 4-5 years or more.
Uh it’s hard to answer your question specifically but if you start at 26, have no outside interests or anything else until you’re 35 you can probably save up $2-3 million.
Not going insane: Well, there’s a reason why I left…
My next BIG question… What are the exit opportunities? Do you learn anything valuable that will seal up a nice deal afterwards? The actuary gig sounds much better. Even at a consulting firm where you don’t work the average 40 hrs, 60 hours or more is absolutely unheard of. My math degree might be a lot more useful in that arena. I don’t want to jinx myself, but I’m pretty sure I have a dope internship waiting just about anywhere next summer. it appears you can make beaucoup dough. Furthermore, when I spoke to one of the senior level actuaries at a major consulting firm, he said he clocks in the 200k range and since he lives in Denver, real estate is new, nice, and CHEAP compared to NYC or San Fagsisco. He has definite job security (assuming liberals don’t try to push soc. health care), and since the company is not publicly traded, the profits are distributed in bonus. He will be a principal next year which means he will be of 30 people who take most of the bounty when bonuses hit. That’s when you cash in at those places. It seems like a nice path to a risk management gig too…. The truth is, I enjoy doing math and love prob and stat. At investment banking, it seems like theres not much of a quantitative side.
What do you think of that shpeel? As in actuaries.. What do you know about them?
Yes, you can definitely get much higher paying jobs (as in $500K+) afterwards. Nothing else really compares in terms of exit opportunities, actuarial work is not even close.
Just as a point of comparison, partners at PE firms often make from a few million to tens of millions per year… and the ones at the biggest firms can make hundreds of millions in cash.
Of course, very few people get that far and it takes 20+ years to reach that. Also, there are diminishing returns to money once you get to that level.
However, if you really do like math then banking is NOT for you, it’s a joke quantitatively.
I am currently in dire need of outside advice…I am 2 days away from having to make a decision between an analyst position in FIG capital markets at B of A Merrill, and a risk management position at RBS (bear in mind that RBS would be open to having me move to a different group after my first year if I desired…I was thinking loan and high yield as it is the remnants of the lev fin group, this group was originally my first choice but they are not taking on any new analysts this year as all of their summer analysts signed on). My internal battle is essentially does the internal mobility and mentoring/exposure that I will receive at RBS outweigh the name of B of A Merrill that will be cemeted on my resume. I would appreciate your thoughts especially with regards to possible exit opportunities from each of the firms and which position would better prepare me if I had a desire to move towards PE/Hedge funds after my 2 years was up. Thank you in advance for any thoughts you have;.
Um, go to BoAML – no matter what they say at RBS, it’s risky to take a middle-office position there. Capital markets at a bulge bracket bank is a much better bet.
Hey i checked on the BAML website…is the FIG capital markets programme u are referring to the Corporate financial institutions Debt Programme?
How is a stockbroker typically compensated? How would you compare the lifestyle/work week of the two?
Usually its based more on commission even at junior levels. I don’t know much about it but overall the lifestyle, similar to sales/trading, is probably better.
“How is a stockbroker typically compensated? How would you compare the lifestyle/work week of the two?”
Typically a broker is compensated via a commission payout grid. This grid is used to calculate the portion of their gross revenue that becomes their payout. It’s important to remember that different products have different commission schemes, for example, the payout on a FA/VA will be different than the markup on a bond, the commission on a structured note and even a straight stock sale…so it’s a very product oriented process. Also, it depends on how the firm handles trails vs straight commission. Often times, and I know this was the case when I was with Morgan Stanley, you’ll find it beneficial to annuitize your revenue stream. If you do a mix of advisory business with a mix of transactional…you’ll be able to weather the rough times.
As for lifestyle: I know a few people on the IB side. They work extraordinarily long hours which, “would be worth it if I got the bonus I was told I’d get”. The glory of sales/trading is that if you’re making money…well…you’re king sh#t. No one wants to get in your way. The down side is that fact that to get any kind of reasonable client base/reputation, you’re going to have to put in IB hours for the first few years without the IB pay. You’ve got to build a rep while building a client base and manage to eat while avoiding a FINRA violation.
Much like IB, if you ride out the first few years, the rewards are great. Many people don’t, so it goes. Hope that helps.
Ahem, that should read “The glory of it, much like sales/trading, is that if you’re making money…well…you’re king sh#t.”
How does your math work with the record bonuses we’re going to see again in 2009? Not really looking to be that bleak from what i’ve read? 20+ Billion for Goldman Sachs ….
Or maybe not….
http://thehill.com/blogs/blog-briefing-room/news/75459-dem-congressman-introduced-50-tax-on-bonuses
Do partners at smaller PE firms (AUM <$1bn) make millions?
I think it would really depend on the deal exits right?
Even at small firms they still make millions, just from management fees… 2% of $1B = $20MM
Associate make more than analyst correct? And what would be the salary of an associate after say 3 to 6 years?
Yes. Maybe $500K – $1MM a lot depends on the bank/group
If an analyst’s annual salary is 70k for a 40 hour workweek or roughly $33.50 an hour, with overtime at 1.5 times this rate, averaging 70 hours workweek would the analyst’s potential salary be up 150k? How is overtime factored in at BB banks?
There is no overtime whatsoever at investment banks. You get the same base salary no matter how much or how little you work, and then a highly variable bonus depending on the economy
working 90-140 hours/week? That’s about 13-20 hours/day.
What would a day looks like?
See the Day in the Life / Week in the Life series under On The Job at the top
Are there higher salaries in General Management Degrees vs. Finance (or whatever leads to IB)?Or is it too far fetched to become a CEO of even medium prestige?
Unless you are the CEO of a very large company – think Google, General Electric, etc. – you will not be making more than you would in finance in most cases.
It looks like this article is pretty popular, someone mentioned it in a national newspaper:
http://www.timesonline.co.uk/tol/life_and_style/education/article6832285.ece?token=null&offset=12&page=2 (8th paragraph)