We live and work in an industry where it’s all about markets and market value. We know – or think we know – the value of everything. But all too often we don’t know the value of individuals. How much are you really worth?
There are four main dimensions which will determine how much you can command. They are: Bank pedigree, product focus, region and role.
1. Bank pedigree:
The leaders on the street are a well recognised group. Broadly, if you’ve worked at
– and, to a lesser extent, UBS, you will be able to command a larger package than if you haven’t.
2. Product focus
As a rule of thumb, you can now earn more working in markets than in advisory and capital markets businesses (although this may yet change).
In descending order, I would say credit markets professionals earn the most, followed by rates, equities, M&A, commodities, FX, ECM, and finally money markets.
This order generally reflects how much the respective professionals contribute, adjusted for revenue quality i.e. at-risk versus non-risk. There is further distinction on the markets side with derivatives generally higher than cash and structured generally higher than flow.
The US usually pays the most, followed by London, followed by Hong Kong, followed by Singapore, followed by Japan.
You will usually earn most in trading, followed by coverage, followed by investment banking execution (in M&A/capital markets), followed by research, followed by other front office roles (business management and strategy).
Over the past few years, you would therefore have earned the most in derivatives trading at a leading US institution, base din New York.
However, the highest market value areas are also typically the most volatile – there is no escaping the risk return equation. Compensation from year-to-year can drop to zero (or worse these days) and market value declines may soon follow.
CDO traders are a fine example. Trading in general is the most volatile from a compensation perspective. Sales is less so because client relationships held by sales people are the chief driver of their value and these are long term and portable value contributors. Structuring has a high intellectual capital component, which provides a floor in tough times. Similarly, for research there are deep domain expertise, public rankings and client relationships to provide a floor.