All I Want for Christmas is my Broker’s Bonus

All I want for Christmas is my two front teeth. Not! Forget the holiday platitudes, Wall Street’s busy little elves want their big, fat, obscene bonuses for Christmas. Those enviable elves reportedly earned bonuses of $100,000 to $1 million this year, and that’s up 10-25% over last year (according to pay consultants Johnson Associates Inc.).

Chief executives and chief financial officers (CFO) at leading investment banking firms lead the way, earning bonuses of as much as $14 million.

Investment bankers at large private equity firms earned $5-$7 million bonuses. Managing Directors earned $2-$5 million bonuses. And, rounding out this lucky bunch are fixed-income and debt-structuring specialists, who command five and six- figure bonuses because they are in great demand.

According to Bloomberg, Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns will together award $36 billion in bonuses to their 173,000 employees.

Armstrong International, an international executive recruiting firm, publishes an annual bonus survey. This year’s survey yielded some eye-popping results for top bonus-earners in a variety of financial services sectors:
Structured Credit

Correlation credit traders: $1million +
Junior structurers:: $700,000

Debt Capital Markets

Director-level originators: $500,000 to $1 million
Managing directors (without significant management responsibility): $1.2 - $1.5 million

Interest Rate Derivative Sales to Hedge Funds

Managing directors: $2 - $3 million

Equity Research

Top managing directors: $1 million+
Directors: $700,000
Vice presidents: $500,000

Corporate Finance

Managing directors: $1 million - $3 million
Directors: $1.5 million for overperformers, $1.2 - $1. 3 million for others

So, you’re probably wondering if everyone gets the big bucks come bonustime. Well, unfortunately (for the low-level broker types), the big bonus bucks generally stop up top. That’s not to say that all of the hard-working junior elves (less experienced stock brokers, analysts and associates) get a lump of coal; they simply get the more pedestrian bonuses that you and I might expect.

If you’re motivated by moola, a career in financial services do(es)n’t suck. It’s too late for this year’s bonanza, but analysts and recruiters alike believe the trend will continue, barring no unexpected downturns in the market.

On a sector-by-sector basis, Johnson foresees these increases:

Investment Banking: up 20 percent
Prime Brokerage: up 15 percent
Equities: up 15 percent
Asset Management: up 10 - 15 percent
Senior Firm Management: up 10 - 15 percent
Corporate Staff: up 10 - 15 percent
High Net Worth: up 10 - 15 percent
Fixed Income: up 10 percent
Commercial Banking: 10 percent
Retail Banking: up 5 - 10 percent

So, how do you break in?

Get into the financial services field -If you’re in a different field, and you don’t have a business, banking or finance background, all’s not lost. It will certainly be challenging to get into a bonus-eligible position if you have little or no experience in the field. Happily, it’s not impossible given that there are plenty of internships and training positions in stock brokerages, banks, investment banking firms and other financial services firms. Many of these firms will accept new college grads as well as career changers with no experience. They’ll teach you the ropes, help you prepare for the licensing exams, help you to build your portfolio or practice, and even help you get into a top-tier business school. The catch, of course, is that you’ll be paid precious little.

You can skip ahead in line, especially if you are a good test-taker and already have a knack and interest in a job(s) in the financial services sector. Get licensed and apply for entry-level positions. You’ll make more money, though $1 million dollar bonuses are still a few years off.

Couple your licenses with an MBA and a few years of working experience, especially in sales or in some other high-profile senior management role that allowed you to build a healthy rolodex of well-heeled friends, and you’ll get closer to the pot of gold.

Resources:

Books on Finance & Banking Careers

Internships

Current job openings (entry level)

Current job openings (management/executive)