What is the recipe for achieving a fixed compensation of $ 200,000 in the first year in investment banking, even if you have no previous banking experience?
It turns out that it pays to spend $ 78,000 for a top MBA, and about that much for living expenses.
Three major US MBA schools have now released their employment reports for 2021-2022: Wharton, MIT and Chicago Newsstand. They suggest that in the current year of employment, the going rate for a new MBA becoming an investment banking associate is a median salary of around $ 150,000 (Wharton and MIT), plus may -be an additional signing bonus of $ 52,000. At Chicago Booth, the median starting salary for an MBA in banking is mysteriously $ 175,000 higher. Bonuses will be paid on top of that.
This is not bad, when we know that the average age of MBAs who leave these schools is around 29 years old and that a significant proportion have never worked in finance. A recent ex-analyst at JPMorgan said that many of the MBAs the bank hired into its industry team know next to nothing about financial modeling and need to be trained by the analysts below them. He said the only advantage of new MBAs is that they can have direct industry experience and tend to be more loyal than analysts, who typically want leave for private equity.
While $ 200,000 was the going rate for this year’s MBA bundle, the salary will likely be even higher next year. – Most banks increase in associate salaries to at least $ 175,000 this summer. The chart below, based on data from Wharton, suggests that a pay rise was behind schedule. Entry-level MBA salaries hadn’t increased for three years in banking (as well as hedge funds and various other industries).
While MBAs entering investment banking pay well, some of the best entry-level pay in finance goes to a handful of private equity MBAs instead. – At Chicago Booth, an MBA in Private Equity achieved a salary of $ 225,000 this year; at MIT, an MBA entering PE received $ 250,000.