There are a lot of myths about Wall Street pay. Stories of hedge funders earning $1 billion a year, while true, have set expectations absurdly high, and the reality of how much starting analysts make is often quite shocking—and humbling.
In part, this is a vestige of the 2008 crisis, which severely cut compensation (or “comp”) in the finance world. Wall Street still hasn’t recovered. And although pay has begun ticking upwards for some positions since the lows of 2013, we’re still nowhere near what we were seeing back during the housing bubble.
So how much can you expect to make, starting out in the finance world?
As a general rule of thumb, if you’re based in London or New York (these numbers will be lower in Hong Kong and Singapore, and lower still in many other non-finance centers, but likely higher in places like Zurich or Lichtenstein), you can use $100,000 as your guide. First-year analysts at large investment banks will earn about that much, while first-year analysts on the buy side at hedge funds and some mutual fund companies can expect slightly more. Smaller, boutique firms will likely pay a bit less.
Salaries will tend to grow quickly, however. Within 4-5 years and a promotion or a shift to another company, a junior analyst turned senior analyst at an investment bank or mutual fund can expect to be earning above $150,000, but pay can swell quickly to over $250,000 if one is working at a large and successful hedge fund or private equity specialty shop.
Comp will grow from there, but the range is massive. Portfolio managers at very small funds may earn $200,000, while the large funds will earn over $1 million as a base salary. But no matter where you are, the base salary is just the start of your compensation.
Most people get into finance not for the salary, but the bonus. And bonuses can range tremendously. Small boutique firms may offer bonuses of less than $10,000 for first-year analysts, while bonuses will likely start at $20,000 and go as high as $80,000 in rare cases for first-year analysts at investment banks. Hedge funds and private equity firms will offer much higher bonuses—in those places, bonuses are generally within the range of 1x to 4x of your base pay.
How long does one have to stay in finance to earn over $1 million a year? While 99% of people will never earn that much, the few that do have one thing in common: a tremendous track record that has attracted a loyal following. Achieving that pay level is hard, and it’s only done through creating a network of people who find deep value in your work and demonstrating that value by providing top notch services, whether in the form of research, deal making, or trading.
In reality, the answer to how much you can make on Wall Street is: it depends. Pay is very high for entrants to the industry when compared to most other industries, but isn’t at all higher than what many earn in tech. And that’s in part why many smart young students have been leaving Wall Street for Silicon Valley in recent years.
But that doesn’t mean earning a very good living in finance is impossible—but it does mean that it’s a lot harder than it used to be.