by Brian DeChesare Comments (173)

From Analyst Monkey to King of the Jungle MD: The Investment Banking Hierarchy

From Analyst Monkey to King of the Jungle MD: The Investment Banking Hierarchy

“This is not a fraternity house,” my staffer explained as he hauled me into a small conference room.

“Some of the MDs have complained about how messy your desk is, so clean it up.”

Genuinely curious, I replied, “Were you referring to the empty Red Bull cans or to all the papers too?”

Not a good start to your 3rd week on the job.

I told this story to a few co-workers afterward and they all laughed and responded the same way:

“He’s lying, a bank is exactly like a frat house.”

They were right – just like a fraternity, there’s hazing, a hierarchy, and certain rituals you must go through to advance.

While this site has been analyst-focused in the past, today you’re going to learn all about this hierarchy, how much you get paid at each level, how the work differs, the average age range, and the possible exit opportunities.

And if you’re curious about hours please stop reading this site right now.

Footnotes & Starting Assumptions

As with the analysis of where your paycheck goes, here I’m starting with the assumption that you’re in a developed country in a major financial hub like New York, London, or Hong Kong.

At the end you’ll learn how this hierarchy might differ outside banking, outside those cities, and in other countries.

These pay figures are not exact – I used recent salary and bonus figures, data from the Careers-in-Finance compensation listings, and other sources like that to get numbers.

So yes, there are exceptions and sometimes you see more pay or less pay – these are rough averages.

Let’s dive right in and start with the bottom of the hierarchy: the analyst monkey.

Analyst

What You Do: You’re a monkey, and your chief responsibility is to collect bananas for the bigger monkeys higher up in the food chain.

You do most of the Excel and PowerPoint work, take notes, send emails and call people, and even take care of random tasks like fixing printers and picking up dry cleaning.

Most of this site has been focused on what analysts do, so see all the day in the life and week in the life posts for more.

How You Get In: You’re recruited from a top undergraduate or Master’s program, or you network like a ninja and get in from a lesser-known school. Once you go beyond a few years of full-time work experience, you won’t get in as an analyst because you’re overqualified.

Yes, some people pull this off anyway but it gets exponentially harder the longer you’ve been working.

Age Range: Most analysts are just out of school, so 22-27; in countries with military service or with 5-year undergraduate programs (Europe) the upper end of the range is more common.

Pay: This varies by region and the state of the economy, but most 1st year analysts make at least $100K USD all-in (base salary + bonus) and that may go up to $150K or more if the economy is good.

2nd and 3rd year analysts see increased pay, usually closer to $200K in a good year for a 3rd year analyst, and maybe $150K or a bit less on the lower end in a bad year.

Time to Get Promoted: Usually it takes 3 years to become an associate.

Possible Exit Opps: See our comprehensive article on IB exit opportunities.

Analysts have the most exit opportunities out of all bankers because they’re young and haven’t had “too much” experience in a certain field yet.

Associate

What You Do: If the analyst is the monkey, you’re a bigger and better-groomed monkey who’s much smoother in social situations.

You may still do Excel work if the model is complex, but mostly you are checking the analyst’s work and making sure he doesn’t screw up. You spend most of your time managing the analysts and making sure the VP’s orders get executed.

Much of your time is spent talking to clients and seeing what they need when you’re working on deals; analysts are too busy cranking away to have much client interaction, at least at large banks.

You get to attend more meetings and pitches than the analyst, but you will always have a non-speaking role unless the MD needs a number from you.

How You Get In: You either work as an analyst for 3 years and get promoted, or you get recruited out of a top MBA program after working full-time for 3-5 years in another industry.

Theoretically you could get recruited for an associate position if you’ve already graduated from an MBA program and have been working in industry for a while, but this is rare – your chances are 100x better when you’re still in school.

Age Range: This one varies more than the analyst age range because associates come from more diverse backgrounds; 25-35 is the safest estimate because some associates are promoted directly from the analyst pool while others get recruited out of business school.

Getting in when you’re under 25 would be virtually impossible unless you graduated college early, and having 10+ years of experience pre-MBA makes you overqualified.

Pay: Again, there’s more variation here than with analyst pay because the bonus takes up the bulk of an associate’s compensation and that’s heavily dependent on the economy.

In a bad year, a 1st year associate might get between $150K and $200K USD all-in, while more senior associates (3rd and 4th years) might get closer to $400K or $500K all-in in a great year.

If your group is just OK and the economy is neither great nor terrible, your pay will be in the middle of that range.

Time to Get Promoted: Usually it takes 3-4 years to reach Vice President, and it’s harder to get that promotion than it is to go from analyst to associate – you need to show more leadership and client management skills.

Possible Exit Opps: It is more difficult at this level, but the same exit options that exist for Analysts also exist for Associates.

There’s less of a structured process, and you have to be far more proactive in reaching out to recruiters and networking.

Beyond buy-side roles, other common destinations include corporate development at a normal company or corporate finance.

Vice President

What You Do: Moving up the pyramid once again, you are an even larger and more intimidating monkey, and you’ve got lots of barrels to throw down at the chimps below you climbing up the ladder.

You make sure that deals and pitch books get done – you interpret what the MDs and Directors want, and ensure that whatever pops out of your analyst’s cubicle resembles it.

You get a lot more client interaction, and may call buyers and directly pitch a company that you’re selling.

And as you move up, you have to start shifting over to relationship development and winning clients – which is incredibly tough and one of the most difficult transitions to make.

How You Get In: You get promoted after working as an associate for 3-4 years.

It’s extremely rare to break in as a VP coming from outside banking, and I’ve never seen it happen. To have the skills required to run deals and win clients you need to have been in banking for a long time.

Age Range: Since you must have been an associate first, we could say the age range is 28-40, with the average somewhere in the middle.

Pay: There’s even more variability since the bonus takes up such a high percentage of your compensation; base salaries do not increase that much as you move up (even MDs might see only around $150K-$200K base).

Most VPs will earn between $300K and $1MM USD, with the upper-end of that range for more senior VPs in a good year and the lower end for more junior VPs in a bad year.

Time to Get Promoted: Probably another 3-4 years to reach Director / Principal / SVP, though it varies and you may do it more quickly depending on performance.

Possible Exit Opps: Even more limited than associates – either stay in banking or go to a normal company in corporate development.

Moving into PE from this level would be “challenging” to say the least, and even in other fields of finance you would have too much experience to have a good shot.

NOTE: Again, though, in practice people can and do move around – so exit opportunities do still exist even at this level

Director / Senior Vice President / Principal

What You Do: This one is a mix between what VPs and MDs do, and the role differs depending on the bank and group.

Sometimes you focus more on developing relationships and winning clients, and other times you do more execution work and project management like VPs.

But no matter what your role is, you will have to move closer to winning clients if you want to advance to the next level – Managing Director.

How You Get In: You’ve already been an associate and a VP, and you get promoted to this level after a few years of being a VP. I challenge you to find a single example of someone who was not already in investment banking and entered the industry at this level – it doesn’t happen.

Age Range: Sometimes you could get promoted more quickly (2 years rather than 3-4), so we’ll say 30-45. 45 is on the high end and you’d see that only if the person did something else for many years before getting into business school and then investment banking.

Pay: This one’s hard to pinpoint because it’s somewhere in between VP and MD in terms of pay; we’ll say $400K – $1.5MM USD to reflect that range.

As with the other pay numbers here, you should expect the lower end of the range in a bad economy if you haven’t performed well (your closed deal count is low or nonexistent) and the higher end of the range in a good year.

Time to Get Promoted: Similar to the others, a few years to go from here to the next level: Managing Director. We’ll say 2-3 years to get a specific number.

Possible Exit Opps: Imagine a blank screen with no visible life forms. Now imagine seeing this every day after you quit or get fired.

In all seriousness, you could always move over to the corporate side but it would be tough to move into other fields of finance from this position unless you happen to be a serious rainmaker and you have enough contacts to make yourself useful to a PE firm or other buy-side firm.

Managing Director

What You Do: You’re King of the Jungle. All the other chimps answer to you, and you move them around much like a chess grandmaster would move around pawns, bishops, and knights.

90% of your time as an MD is spent winning clients, meeting companies, and developing relationships – you fly around to conferences, meet with PE and VC firms, and position yourself to advise CEOs and win deals.

Occasionally if there’s a massive deal and it’s too big to fail, you get involved with the negotiations. Or if you have a special relationship with an investor or buyer, you may pitch a client to them.

But otherwise, you are sitting back and bringing in new business while everyone below you executes.

How You Get In: Most of the time, you’ve been a banker for life (or close to it) and you’ve worked at all levels in IB before – often across many different banks.

Sometimes you do see MDs who get into the industry from other fields (e.g. a Partner at a law firm that focuses on corporate and securities law, or a PE Partner who has lost his sanity and wants to move back to the sell-side).

But those scenarios are rare even at this level and you don’t see them much at large banks.

Age Range: This one is impossible to define precisely because some MDs really do stay in it for life, or at least until retirement age – for most bankers it is the highest they’ll ever go.

We’ll say early 30’s is the minimum age here, but on the upper end of the range there’s no limit – you rarely find MDs who are past their 50’s, though, so maybe that’s the limit.

By that time they are either burned out and retired on a beach somewhere in Thailand, or they’ve advanced further within the bank (see below).

Pay: This is where compensation has the highest “beta” (this is a finance site, so I am allowed to whip out finance jargon when convenient).

In a bad year with no closed deals, an MD might not make much more than his base salary – maybe the $200K – $300K USD range.

In a good year, they might make in the low millions USD ($1MM – $3MM) depending on how the group is set up, how many deals they’ve closed, and how well they’re playing the office politics game.

Time to Get Promoted: Yes, there are levels beyond MD at large banks (Group Head, C-level executives) but there’s no set path to reach them – you could get lucky and get there in a few years, or you might be there for a decade and never see the light at the end of the tunnel.

Unlike other levels of the banking hierarchy, it’s not “up or out” at the MD-level – it’s more like “make lots of money for us or out.”

So as long as you keep producing, your position will remain intact.

Possible Exit Opps: If you’ve been a lifelong banker, it will be very difficult to move into a completely different field – but you do sometimes see financiers at the top moving around to other high-level positions in the industry.

Some MDs may also just retire and do something completely different – business coaching, angel investing, writing, and so on – especially if they are worth tens of millions of dollars and don’t have a pressing need for cash.

Wait, What About Other Levels?

Note that in some regions and at some banks these levels have different names – VP might be labeled “Director” and SVP might be “Executive Director,” for example.

At firms with a partnership still in place (Goldman Sachs), there is also a difference between normal MDs and Partnership MDs – the Partnership ones make a lot more money.

And then beyond MD, there are Group Heads (e.g. Head of M&A Europe or Head of Capital Markets Asia) and the C-level executives at firms.

With those, the potential compensation is even more variable and could range into the tens of millions (or higher for C-level in a good year) – or the bank might slash its CEO’s pay to $0 in a symbolic gesture if they’ve had a bad year and caused economic Armageddon.

Differences at Boutiques?

Boutiques tend to have fewer levels than bulge bracket banks, so you might not see as many VPs and Directors/SVPs.

Advancement may be faster depending on the firm’s size, but pay will also be lower since the deal sizes are smaller – regional boutiques might pay 50% of the bonus that bulge brackets do (very rough estimate).

This does not apply to the “elite boutiques” (Evercore, Lazard, etc.) which pay more in-line with bulge brackets.

What About Trading?

On the trading side there is a flatter hierarchy and you may reach the MD level more quickly.

Pay is also extremely variable and the top traders might make tens of millions even if they never advance beyond the MD-level (ok, it’s questionable how true that will be post-crisis and financial regulation).

The Buy-Side: Private Equity and Hedge Funds

This one is impossible to cover fully here (maybe in a separate article if someone has good data), but let’s give it a shot:

The private equity side is similar to banking, but you will make more at each level; as a Partner in PE you could make significantly more than MDs in banking (hundreds of millions if you’re Henry Kravis), but at smaller firms you’ll see compensation closer to what banking MDs earn.

The main difference is that you get carry at the Partner-level as well, so that opens up the possibility of earning into the stratosphere if you’ve invested well over the years.

On the hedge fund side, there’s so little reliable information that it’s hard to say anything concrete.

You hear stories about people making hundreds of thousands or millions at young ages, but the average case is probably closer to the compensation levels above for banking.

And while hedge fund managers making billions of dollars a year get a lot of attention, that is far from the average case: the majority of funds out there are much smaller ($100M – $1B AUM) and it’s impossible to earn anywhere near that amount.

In short: hedge fund pay has the highest ceiling of anything here, but there is a massive difference between the founder or the portfolio manager and everyone else in the fund, and pay is almost 100% dependent on fund size and returns.

Other Countries

Developed countries (Western Europe, Hong Kong, Japan, Australia, etc.) see similar pay levels and have the same sort of promotion timelines.

In emerging markets, it’s more chaotic and you might advance far more quickly – but also make less in absolute dollars, even if you have your own palace and a harem or two.

The investment banking culture is not as well developed in the BRICS of the world, so you will see many deviations from the hierarchy above.

But in most of these places you have a 0.0% chance of breaking in as a foreigner with no connections: they are looking for locals who have studied or worked abroad and who are now returning to their home countries.

How Do You Move Up the Ladder?

Please see this article on investment banking promotion.

Key Takeaways

So, what does all of this mean?

Stop Assuming That Investment Banking / Finance in General are Guaranteed Paychecks

Especially as you move up, your pay is based almost entirely on your performance and the economy. A VP who has several closed deals may make more money than an MD who has nothing and gets a bonus of $0.

I’ve attempted to estimate pay ranges above, but to get there in the first place you’ll have to work 80-hour weeks for years and sacrifice your social life and maybe your first-born son or daughter.

Most MDs are Not Mega-Wealthy

Look at the Forbes list of richest people in the world, and you’ll see that there are very few (no?) banker-types on there, unless you count Warren Buffett as a banker (he’s not).

After you’ve taken into account taxes, recessions, the cost of living, and so on, a 10-15 year veteran MD might have $10 million or more saved up.

That is an enormous amount of money to most people, but you will not become a billionaire in finance unless you’re on the buy-side and you’re one of the best in the world like John Paulson.

Forget About Breaking Into Banking in the “Middle Years”

You either get in as an analyst or associate, and if not, you’ve missed your chance unless you have highly relevant experience, the market is frothy, and you trade down (i.e. go from a F500 to a boutique).

Even getting in at the top from other industries is uncommon – you see it more often in VC or PE where operational skill sets are valued.

If you’re in this position, you’re better off looking at other industries or starting your own business.

Expect Your Role to Change Gradually, Not Rapidly

Even though banking has a rigid hierarchy, what you do at each level is not as narrowly defined.

When you move from analyst to associate, you won’t instantly start dating super models or get your own reality TV show – sorry.

Your hours might improve slightly and you won’t have to do as much grunt work, but the pressure to perform will be greater than ever as well.

And…

Oh yes, and please reduce your expectations of $10 million and that beach in Thailand.

By the time you get there as a banker, you’ll be old and wrinkly and probably can’t stay out in the sun for very long anyway.

A frat house, on the other hand, might be well within your reach long before that.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (34)

Investment Banking Interview Ju-Jutsu: How to Spin Your Weaknesses Into Strengths and Answer the Tough Questions

jujitsu“So, what exactly have you been doing since graduation? Did you go through recruiting last year and just not get any offers?”

“Can you tell me with a straight face that you’d really prefer working here in Idaho rather than New York?”

Sometimes you get questions you just can’t answer truthfully. It’s like your interviewer has you pressed up against a wall and he’s about to finish you off with a fatality.

So how do you get out of it and still land the offer?

You use ju-jutsu to turn your perceived weakness into a strength, and unleash a fierce counter-attack on your interviewer.

The Questions You Can’t Answer

There are a few categories of questions that make you want to hide in a corner:

  1. What have you been doing… / Why no finance work experience? / Why are you so old?
  2. Why this second-rate group / location? What’s your REAL first choice?
  3. Why are you grades so bad? / Why did you do something else questionable in the past?

Sometimes interviewers will be direct: “I see you have a 3.2 GPA. Why is it so low?”

Other times they’ll mask a “Why are you so old?”-type question with something more charitable: “I see you have 15 years of work experience… so why the sudden interest in finance now?”

But no matter how they phrase they question, you need to be prepared with your counter-attack.

The Art of Interview Ju-Jutsu

Ju-jutsu is a martial art developed in Japan where a small fighter takes out an armored opponent by using the attacker’s energy against him, rather than directly opposing it.

Interview ju-jutsu follows a similar strategy: rather than directly “refuting” the interviewer’s claim, you acknowledge it and use it against him.

You can’t do much to change an interviewer’s existing beliefs – so instead, accept them and then make new points he hasn’t thought of to show how your “weakness” is actually a strength.

To see how to do this, let’s look at 6 examples of interview questions you can’t answer and see how you can use ju-jutsu, combined with a good helping of spin, to answer them anyway.

Tough Question #1: I see you graduated last year and have nothing on your resume between then and now (9 months). What have you been doing?

What Really Happened: You went through full-time recruiting last year but didn’t receive any offers. You kept looking for jobs after graduation and had a few small internships, but nothing worth mentioning in an interview or on your resume. You’re recruiting again in hopes of landing something this time around.

What You DON’T Want to Say: The truth – because you’ll sound like “damaged goods” if you say that you went through recruiting but didn’t get any offers.

Your Counter-Attack: Don’t directly “oppose” your interviewer by making up a story about being productive with something else, or about not going through recruiting before.

Instead, acknowledge that you did some recruiting but were not 100% focused on it due to a serious family issue at the time, and that you then spent a few months afterward attending to that.

You took some time off as a result, but since then you’ve been working / studying independently and are even more excited about finance.

Tough Question #2: Is Chicago/Houston/San Francisco really your first choice? Why not New York/London?

What Really Happened: This is your “Plan B.” You want to be in New York/London/elsewhere, but you got an interview here and figured you might use it as a backup plan.

What You DON’T Want to Say: No one wants to be your “Plan B,” so don’t say that directly. And giving a vague answer like, “Anywhere is fine with me, as long as I enjoy the work!” also sounds bad, because you’re dodging the question.

Your Counter-Attack: Agree with the interviewer and acknowledge that New York is better in some ways… but then make up a story and say that despite that, you are still drawn to this location due to friends/family/industry focus/cost of living.

Your #1 concern needs to be getting the offer – not getting the perfect offer in the perfect place. If you want to move elsewhere, wait until you get the offer first and then speak with someone else at the bank (who doesn’t know your location preferences) and push for the change.

Tough Question #3: Why are you so old? Don’t you know only young people can do investment banking?

Ok, they usually say this one a bit more tactfully.

What Really Happened: You had a quarter-life or mid-life crisis, realized you hated your current job and wanted to do something else – even if it meant defying the odds and getting into investment banking even though you’re 10 years older than everyone else.

What You DON’T Want to Say: Go into your life story, or get defensive about your age and argue that you’re not “too old.”

Your Counter-Attack: Start by acknowledging that you are “more experienced” than the average Analyst/Associate, and that you are coming from a non-traditional background.

But then point out that how you’re actually better for the job than fresh graduates because you have more perspective, understand the world better, and it has been 100x as difficult to get interviews in the first place.

If they press you on your ability to handle the hours / workload, give examples of past work experience when you had to burn the midnight oil over an extended period.

Tough Question #4: “I see you have a 3.2 GPA. Why should we hire you over someone with a 4.0 from Harvard?”

What Really Happened: You spent your entire first 2 years at school drinking and failed all your classes. Or maybe there’s no particular reason why your GPA is so low. Or maybe your grades actually declined over the past few years.

What You DON’T Want to Say: Attempt to justify your GPA by saying your classes were hard, or that your school was too difficult. This is the “kung fu” method of interviews – we want to use ju-jutsu instead.

Your Counter-Attack: If they don’t have your transcript, anything goes. Say that you did poorly your first year, but then you became a lot more focused and improved your performance since then.

If they do have your transcript in front of them and/or they start asking about specific classes, you need to get more creative. In those cases you’re better off saying that you focused more on work experience / internships and pointing to the stellar recommendations you have.

Tough Question #5: Why were you a liberal arts major? Don’t you know that’s useless? Do you really think you know anything about math or finance?

What You DON’T Want to Say: Admit that you like reading/writing more, or get defensive and say that it’s still highly relevant.

Your Counter-Attack: You realize you’re not from the usual economics/finance background – but you were really interested in whatever you did study, and that gave you time to complete finance classes or do independent study on the side.

If you have a good reason for picking your major, you can also turn this into something “interesting” about your background and answer the third, and most important, interview question correctly.

Tough Question #6: Why are you interviewing for this IT/risk management/other back office position? Didn’t you have front office positions before? Are we just your backup plan?

What Really Happened: Yes, they are just your Plan B. Who on earth would want to go from front office to back office?

What You DON’T Want to Say: Say you want to learn more about what it’s like “behind the scenes” at a bank, or that you didn’t enjoy client work. No one will believe you.

Your Counter-Attack: Your only chance of spinning this is to say that you’re interested in working at a large bank rather than the smaller bank you were at before, or at a bank vs. whatever you worked at before.

This is one of the most difficult situations to spin and no matter what you do, you probably won’t convince them that they’re not just a backup plan.

But you have to try.

Getting Your Black Belt

Go through your resume, think about your previous interviews, and the group/bank/location you’re interviewing with and figure out what your toughest questions will be – the ones that make you want to shrivel up and hide in a corner.

Then, think about how you can acknowledge their objection and then spin it to turn your weakness into a strength.

Oh, and think about some martial arts classes while you’re at it.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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