Why Do Investment Bankers Make So Much Money? (2024)

FAQs

Why do investment bankers get paid so much? ›

Investment banks often compete to attract and retain top talent, which drives up salaries. 2. High Levels of Responsibility: Investment bankers handle complex financial transactions, such as mergers and acquisitions, initial public offerings (IPOs), and large capital raising deals.

Investment bankers make money through the fees charged to their clients. As discussed above, this includes underwriting fees for arranging the sale of securities and advisory fees for providing strategic guidance.

According to the BLS, the lowest earners for bankers and related professions earned about $40,206 per year in 2022. Meanwhile, at the other end of the spectrum, the highest earners made about $189,613 annually. As mentioned previously, the median salary for bankers in the United States in 2022 was $67,475.

Total compensation is often in the $150K – $250K range (as of 2022). Investment Banking Analyst Hours: You'll be in the office for 70-85 hours per week, but you won't be working for that entire time. Investment banking hours are long, but there's also significant “downtime.”

1. Goldman Sachs is the highest paying bank overall - $398k in combined salaries and bonuses, on average. Goldman Sachs, which paid average salaries of $200k and average bonuses of $199k for 2023, was the highest paying bank we polled. It took top position by virtue a leap in bonus payments.

Successful mid-career investment bankers can make tens of millions of dollars a year.

Ways to make a lot of money in this world

Sure, anybody can make a good living being a doctor or a lawyer or an investment banker where you can make ~$200-500K per year a few years after you finish with your studies, but you hit a ceiling very quickly unless you start your own practice (aka start your own business).

From my experience - and I spent 8 years in the industry, many of my friends are investment bankers - most are indeed deeply unhappy. Saying that, many will be happy once they're out. Most dislike their job, it's a grind, it's hard work, it's soulless. I mean everyone is frustrated at some level.

Some generic themes to draw on for your answer to “Why Investment Banking” could include: Fast-paced environment. Exposure to high profile transactions. Surround myself with intelligent and motivated people.

Why is investment banking a good career? ›

Investment bankers are typically the highest-paid workers in the finance industry—high salaries are most prevalent even among younger employees. The starting salary for the typical investment banker exceeds that of most other finance positions, but working in this field has its challenges.

In general, investment banks assist clients with large and complex financial transactions. This includes underwriting new debt and equity securities, aiding in the sale of securities, and helping to facilitate mergers and acquisitions, reorganizations, and broker trades.

Highly unlikely if you remain an investment banker. It is fairly common for front-office investment bankers to be earning over US$1m after 8 years in the industry. But it caps out at around US$20m, which is how much a top-performing investment banking CEO gets.

That said, investment banking is a highly competitive field. Because the pay is so high and the job is so prestigious, particularly in cities such as New York, applicants far outnumber job openings every year.