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19/15 MIT 2005 graduates went to Google/Microsoft. What about Stanford?

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Replies to: 19/15 MIT 2005 graduates went to Google/Microsoft. What about Stanford?

  • sakkysakky - Posts: 14,759 Senior Member
    Because the facts are greatly greatly misleading. The SALARIES of consulting and banking are roughly equivalent. In fact, the salaries of consulting are probably slightly better than the banking salaries. The major difference is that the BONUSES of banking are far far higher. This is particularly so as you get into the upper ranks of banking, where the salary you get as a banker becomes inconsequential because you make almost all of your money off the year-end bonus.

    At the upper levels, there is no comparison between the pay packages of banking vs. consulting. For example, a consulting partner, which is the highest level you can attain in consulting, might make 7 figures a year in total pay. But that kind of pay can be surpassed by even a mid-level banker such as a vice president. If you can make MD or partner in a bank, then you are easily pulling in 8 figures, maybe even 9 figures.

    The problem with bonuses is that nobody ever really knows what they are going to get. It depends on the general economy, on the value of the deals you have worked on, and a wide variety of other factors. For example, a managing director of a bank might make "only" 600k in salary - but could easily make $25million in bonus. Very very few consultants can ever make that kind of money. In fact, this is why so many consultants eventually jump ship to a normal company - because at the upper management ranks, you can almost always make more money as an upper manager at a normal company than you can as a consultant. For example, Larry Ellison was able to coax Ray Lane into resigning his partnership position at Booz Allen Hamilton and to become President and COO of Oracle in a very simple way - through lots of money, in the form of a big dollop of Oracle stock options.

    But hey, don't take my word for it. Read about it yourself, and then you tell me what the facts say.

    http://newyorkmetro.com/nymetro/news/bizfinance/biz/features/15197/index3.html
    http://www.careers-in-business.com/consulting/mcsal.htm
    http://www.careers-in-finance.com/ibsal.htm
  • vampirovampiro Registered User Posts: 1,753 Senior Member
    but sakky i just meant to say that i read the B school surveys at Harvard,Penn and Dartmouth and columbia...and these people like take into account all bonusses too...even then some the highest salaries for consulting was coming out more than banking..but yes i think that the facts are jumbled up or maybe (its obvious) that a banker cant really predict his bonus to the B school at the start of a job and just told them the guaranteed bonus...
    So basically the thing is that while a banker can make lot more money than it reported to the B school depending on the bonus, the consultant's salary will stay as it is irrespective of profits....


    P.S. Dude does anyone really get a 9 figure salary in banking...thats just too much (i mean in 100's of millions)....Also is it better to take up consulting and move to Corporate Management in order to earn more in the long run or does ibanking even pay higher than that....is it also possible to go into corporate management from Ibanks...
  • sakkysakky - Posts: 14,759 Senior Member
    but sakky i just meant to say that i read the B school surveys at Harvard,Penn and Dartmouth and columbia...and these people like take into account all bonusses too...even then some the highest salaries for consulting was coming out more than banking..but yes i think that the facts are jumbled up or maybe (its obvious) that a banker cant really predict his bonus to the B school at the start of a job and just told them the guaranteed bonus...

    No, the surveys are completely completely unclear. In fact, I was just talking to somebody about this at length.

    What the surveys measure is the PREDICTABLE parts of your compensation, for example, your signing bonus, your tuition reimbursement, your guaranteed bonus, etc. These are all things that you know for certain you are going to get (as long as you don't get fired or quit in your first year). So, really, this is just "salary" by another name.

    However, the point about banking is that much of the compensation is UNpredictable. You just can't be certain about just how much your year-end bonus is going to be. So the surveys tend to not report it at all, or if they do report it, only report the 'gauranteed' part of the bonus (which is akin to salary).
    So basically the thing is that while a banker can make lot more money than it reported to the B school depending on the bonus, the consultant's salary will stay as it is irrespective of profits....

    Well, the truth is, this is not an entirely fair statement, because the fact is, if you as a banker or consultant are not pulling in enough profit for the firm, you will be fired. So it's not really that the consulting salary is that much safer. In bad economic times, they are both going to be making zero because they will both be unemployed. The difference is that when the times are good, the banker will be making far more than the consultant will. In other words, the downside for both is the same (in that both will out on the streets), but the upside is clearly better in banking.

    During the economic downturn of 2001-2002, thousands and thousands of bankers and consultants got laid off.

    P.S. Dude does anyone really get a 9 figure salary in banking...thats just too much (i mean in 100's of millions)....

    Very funny you should ask, because I was just reading Trader Monthly magazine, and they just published their Trader Monthly 100 List of the estimated 100 highest paid bankers/financiers in 2005. #1 on the list was the legendary financier and corporate raider T. Boone Pickens who made at least $1.5 billion last year, and almost certainly more as part of his company BP Capital (an equity firm that he owns).

    Then there is Steve Cohen and his eponymous hedge firm SAC Capital Advisors, who made at least a $1 billion, Jim Simons who made about a billion from his hedge fund, Renaissance Technology Ventures, etc. Heck, #10 on this list made an estimated $300-350 million.

    Now of course one might say that these aren't "really" bankers, but are really founders and owners of hedge funds and private equity firms and whatnot. That's true. But then the question is, how do you get to be the founder of a highly successful hedge fund or equity firm? The answer for many people is to have a stint as a highly successful banker. That's how you can build your network and build credibility in the industry such that investors will want to put money in your firm. For example, Cohen, after getting his MBA at Wharton, started off as a Wall Street options trader at Gruntal (now part of BankAtlantic Bancorp).
    Also is it better to take up consulting and move to Corporate Management in order to earn more in the long run or does ibanking even pay higher than that....is it also possible to go into corporate management from Ibanks...

    There is no doubt that banking (broadly defined) pays far better than even corporate management. When it comes to money, the only thing that can beat banking is pure entrepreneurship, ala Bill Gates style or Brin/Page style.

    Is it possible to go into corporate management from banking? Of course. Many do. Obviously most of them go to the corporate finance department. But if you do well there, you can go almost anywhere in the company. The CFO position is often times the 2nd most powerful position in any company.

    For example, take Oracle. The co-President and CFO of Oracle is Safra Catz. She was former MD at Credit Suisse. The other co-President of Oracle is Charles Phillips, who was a former MD at Morgan Stanley.

    http://www.oracle.com/corporate/pressroom/html/scatz.html
    http://www.oracle.com/corporate/pressroom/html/pressportal/exec/cphillips.html
  • vampirovampiro Registered User Posts: 1,753 Senior Member
    thanks for the replies...
    and very true...seems that the only way to beat a banking salary is entrepreneurship....

    hey i saw goldmans site...and there you know Equities,Finance,Investment managment and investment banking are all different fields...so when we discuss all this money are we taking all of banking in general..or is there a specific field which pays more than others....also do people change their fields once in the banking business....
    Say for eg, we all know its tough to get into Private Equity and usually they recruit at B-schools so obviously the applicant has had some work experience (obviously in some other field of banking)...so is such a transition wasy for a banker...
    I am in doubt whether that info^^ i have is correct..but i just said that because in general i did not see VC's or Private Equities recruit at UG level...
  • sakkysakky - Posts: 14,759 Senior Member
    Vc's and private equity almost never recruit at the UG level. And in fact, they hardly ever recruit even at the MBA level. They barely ever recruit at all. You basically have to go out and find them. They usually tend to hire through a network of personal contacts, which is why obtaining work experience in the finance industry and building a networking are so crucial.

    We also have to do be careful to define our terms carefully. Many people (including myself) have casually flung around the term 'investment banking' when we actually mean high-finance jobs in general, as opposed to commercial banking jobs which are far lower paying. However, the term investment banking, strictly speaking, is a well-defined job that only has to do with advising and executions of large securitizations and capitalization deals, i.e. IPO's, M&A, bond issuances, and so forth. Other functions that have fallen into the loose and casual definition of 'investment banking', such as sales&trading, asset management, and risk arbitrage, do not strictly belong to the field of true investment banking.

    Investment banking (the strict definition) has historically been, and still is, the most prestigious of all of the fields. However, many reports indicate that the big money is now made in sales & trading. People can move around functions when they start in their career, but generally somebody will find something that they really like and just stay there.

    However, I would also point out that most of the money in any of these banking functions are made by the stars. Most people will not be stars, and while they will still make very good money, it clearly pales in comparison to the kind of money that the stars will make. The pay scale is akin to professional sports where the superstars make gargantuan pay but the bench players make comparatively far less. For example, you may, as a novice banker, be working, on a daily basis, with people who are making 10, or even 100 times more money than you are making. This almost never happens at a normal company. For example, if you are a regular worker making say, 40k at a normal company, you will probably never even see the guys in the company who are making $4 million (if these guys even exist). This is a big reason why the banking industry tends to breed people with such large egos and casualness towards money.
  • vampirovampiro Registered User Posts: 1,753 Senior Member
    hmmm....is investment banking really the biggest...coz i mean usually the suggestion is that Private Equities and Investment management will pay a lot (and the latter will teach you about good investments all throughout and can make you earn more through your own investments) in this case then these avenues do offer a lot of cash.....

    And what exactly is a hedge fund???/
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