For most financial services firms in banking and asset management, 2021 will be close to a record year. But the extent of the past year’s bounty depends on which department you worked in. A big theme throughout the year has been the industry’s attempts to recruit and retain junior talent, particularly at banks where, in the words of an associate at a big investment bank, “I’ve been working non-stop for the last 18 months.”
Banks, hedge funds and private equity firms have responded by hiking pay and despite the workload and pressures, the financial services sector remains an attractive one to work in going into 2021, providing some of the highest paid positions for new graduate applicants.
So which jobs pay the most when you’re starting out?
Hedge fund, entry level, $167k-350k (£124-261k)
Hedge funds are increasingly keen on developing talent in-house but they still prefer to hire people with two- or three years’ experience. According to Wall Street Oasis, for those who do join as an undergraduate, there’s a big variation in pay depending on performance, culture, the manager, and much more. Typically, base compensation is anywhere from $70k-100k with a 0-100% bonus. A junior analyst with two years of experience after university can command a base salary of between $100K and $150k, with a bonus of up to 100% on top of that. eFinancialCareers’ own salary and bonus survey suggests average total compensation for an analyst in a hedge fund is $284k.
Private equity analyst, $117k (£87k)
The best way to get into private equity is still through the analyst program at an investment bank, because private equity firms know they are getting the best-trained talent. Some PE firms have started offering their own graduate programs, although that tends to be limited to the biggest firms like Blackstone. Private equity salaries remain robust, and 2021 will be a big year for private equity as funds race to deploy capital on deals. eFinancialCareers’ salary survey suggests that total compensation for an analyst at a big private equity fund typically starts around $85k, rising to $167k for an associate. In the UK, starting salaries for analysts and associates range from £50k to 55k at the smaller firms to £65 to £85k at the big firms.
Private equity firms have boosted their salaries in 2021, taking their lead from banks. But private equity firms are a bigger draw for junior bankers because they offer shorter working hours and also the prospect of carried interest (“carry”), which is earned from the profits that are made on the LP’s original investment, and is typically 20%. But carry is earned by deal originators, and can take 10 to 15 years to rise to that level.
Sales and trading, investment bank, $110-145k+ (£82k-108k+)
In 2021, sales and trading divisions failed to match 2020’s bumper revenues, which were boosted by record levels of volatility at the height of the pandemic. Unfortunately, 2020’s boom didn’t necessarily translate into record bonuses as banks were urged to show restraint – and now it seems that fixed income traders (at least) will have their bonuses cut in 2021.
Pay in sales and trading can be difficult to predict though, even at a junior level. Bonuses here vary considearbly depending on performance, which can fluctuate wildly. An analyst at a big investment bank working on a desk that did well can earn total compensation of around $145K at the top end. Away from the investment banks, traders at hedge funds can earn more – or much less, as base salaries tend to be lower.
Investment banking division, first year analyst, up to $120k (£90K) salary plus a bonus
Since the onset of the Covid-19 pandemic, corporate finance activity has been running at record levels. In 2020, capital markets bankers were the best paid but in 2021 it’s all been about mergers and acquisitions (M&A) and initial public offerings (IPOs), with both running at or near record levels. People working in M&A, equity capital markets (ECM) and debt capital markets (DCM) are said to work in the investment banking division (IBD).
The pandemic-induced boom led to grueling hours and exposed labour shortages in the engine rooms of all banks, which responded by raising both fixed and variable pay (salaries and bonuses). According to London recruitment firm Dartmouth Partners, every big bank has increased base salaries by between £5K and £15K across the analyst class. “Not only that, buy many analysts have also been paid higher bonuses this year (with the sole exception of UBS, which this year moved to a two-part bonus payment six months apart, and these increases have been well-received by analysts,” Dartmouth said.
Our eFinancialCareers salary and bonus survey puts average analyst compensation in London at £88k when salaries and bonuses are factored in. However, top performing analysts can receive a lot more. In the U.S., the average is $141k.
Quantitative risk analyst, $70-100k (£52-£75k)
Risk management salaries within investment banking and the broader financial services market have been on the up in recent years, although at the junior end, however, quantitative risk analysis is in danger of becoming commoditised. It is still a well-paid job, however. Our salary and bonus survey says that first year analysts in quant jobs – many of which are quant risk jobs – earn an average of $78k (£59k).
Regulatory reporting accountant, newly-qualified, $92k (£74k)
“Entry level” for accounting jobs tends to correspond to “newly qualified”, so it depends on whether you consider the first three years of an accountancy career to be work experience or the equivalent of a postgraduate qualification. Starting salaries for accountants vary depending on the location, sector, size and type of firm. The average starting salary for a graduate in accounting and professional service in the UK is £31k, according to the Institute of Chartered Accountants for England and Wales (ICAEW). The global average salary for a newly-qualified ICAEW chartered accountant with up to two years experience is £51k, while £132k is the average global ICAEW member salary for those working in business. But in financial services, this is much higher. Qualified regulatory reporting accountants start on salaries of at £60K.
Internal auditor, financial services, $81k (£61K)
Accountants are in demand as internal auditors at the biggest banks. In New York, our own salary and bonus survey suggests entry level pay for accountants in banks is around $81k.
Private banking analyst, New York, $94k (£70k)
Demand for private banking talent has rocketed as banks woo rich individuals with assets to invest. Market leaders Credit Suisse and UBS are continuing to allocate more capital to these businesses, while banks from HSBC to Deutsche are looking to expand their presence as they respond to the growing global pools of private capital being raised. Analysts salaries start at $94K in New York, according to Glass Door, while in London they range from £40K to £80K.
Compliance, product advisory, $55-79k (£41-60k)
Starting salaries for middle office employees like those in compliance have generally lagged those in the front office, but they remain stable and banks are continuing to beef up their control functions. In London, our salary and bonus survey suggests that by the time you reach your second year in a compliance job you can expect to earn around £53k in total.
Actuary, $85-150k (£65-120k)
The path to becoming an actuary is a grueling one, with training typically taking anything from three to six years. People who become actuaries are usually some of best and brightest mathematics graduates. Starting salaries are relatively modest, in the range of £34k to £36k, but they rise every time you pass an exam.
Algorithmic trading, $550k
Lastly, and as we’ve noted a lot before, the very best paying junior jobs in finance are for technologists and traders at electronic market making firms like Jane Street, Citadel Securities and G-Research. Jane Street’s 2020 graduate hires straight from college were paid up to $550k (£387k), including a $200k annual base salary, a $100k sign-on bonus, and a $100k-$150k guaranteed performance bonus.
These jobs are not easy to get into. Jane Street likes to hire mathematicians who graduated top of their year at Cambridge University.
David Rothnie – Read more on efinancialcareers.com