As an investment banking analyst I am paid a salary that I can live on and not feel like I have to penny pinch. Many people my age don’t earn this much, but many people my age don’t work as many hours. Paralegals get paid time and a half for working after a certain time. Investment bankers on the other hand get a bonus that in a good year is over half of their compensation. The bonus is not guaranteed, but has grown significantly over the past 5 years, and many have come to expect the trend to continue. While this is probably a pipe dream given the bad condition of the markets, many analysts spend beyond their base salary in anticipation of the bonus. Not wise since even analysts can be laid off during the worst of times.
The bonus paid every summer to investment banking analysts isn’t just about the money. It’s about where you rank. All throughout our lives we have been ranked by GPA and usually knew where we stood up against our peers. The SATs gave another numerical way to separate high school students. This trend continues as an investment banking analyst in that analysts in a group are ranked against each other by the higher ups of the group, and these ranks will determine who gets the top “bucket” bonus and who gets the bottom tier. Well, the problem with this ranking system is that there is no way for our bosses to judge us based on some simple number, such as GPA. And, if we are in a large group, we may not even work with the same bosses, so when it comes time to rank us, they are basing the rankings on subjective views of different people. The bosses with more time or have formed a better relationship with an analyst, can mean the difference between top bucket and bottom bucket.
For analysts, bonuses are a huge deal because it means our bank accounts spike up from hovering above $0. Bonuses are the talk of the Street throughout the year and as spring turns into summer, the rumors start flying around. “I heard bonuses are being cut from 80k to 40k.” “Bill always leaves first, he better not get a higher bonus than me.” What started as a teamwork situation with all of the analysts wanting to help each other out, turns into a dog-eat-dog world where each analyst is just looking to show his/her own goods. The difference between $50,000 and $60,000 is huge for someone who doesn’t even have $10,000 in his bank account. The sad part is, no matter which size bonus I get, it will still be much more than I had. So why break my back to fight for a few more dollars, when I’d much rather work fewer hours and lead a happier, healthier life style than always be in the office after midnight. So enjoy your extra money bonus money Analyst X, while I sleep with your girlfriend who said you wouldn’t be back for another few hours…