Investment banks have scrambled to offer better pay, bonuses and incentives.
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The Wall Street Journal reported recent college graduates are receiving $100,000 starting salaries at big investment banks and “not everybody is happy about it.”
Milly Wang earned around $85,000 when she joined an investment bank out of Harvard University in 2016 and said about the new pay grade for new graduates, “I’ve definitely heard a lot of disgruntlement from my fellow bankers.”
This isn’t new. The compensation at Wall Street banks, fintech firms, cryptocurrency exchanges and other financial institutions have been skyrocketing during the pandemic. It’s not just the securities industry. Tech talent earns small fortunes, as companies can’t find enough qualified applicants. The race for software engineers is so fierce that businesses are recruiting remote workers around the world. They are also offering upskilling and coding bootcamps to provide the tools for people to gain access to the tech ecosystem.
The compensation is highly competitive at cryptocurrency exchanges. They also tend to offer remote work options and other great benefits. Typical total compensation packages at bitcoin and cryptocurrency exchanges usually offer employees equity, stock options and restricted stock units, which could result in future windfalls if the firm does well. According to self-reported salary data listed on Blind, software engineers and technologists have reported job offers as high as $900,000 a year. The nearly $1-million pay package for a senior staff software engineer includes stock-based compensation of $450,000 a year, plus cash bonuses that range from 5% to 15% of an employee’s base salary. These professionals can easily command total compensation packages earning more than $1.5 million.
An increase in trading activities, the launching of SPACs and other capital markets activities kept bankers busy and produced outsized revenue gains and profits for the companies. The financial firms need to keep their people working and motivated to take advantage of the sweet spot they’re going through.
The financial industry needs to cater to Gen-Z workers, who are in their early 20s. They have a different mindset compared to the prior generations. They want a healthy work-life balance. They’ve seen how their Baby Boomer and Gen-X parents spent the better part of their lives toiling away at jobs that they didn’t like. Many young adults witnessed their mothers and fathers unceremoniously laid off during the financial crisis and pandemic, have their jobs relocated or failed to be promoted.
Watching this happen, they’ve learned the game. There’s no loyalty on the part of corporations, so it’s time for them to become free agents and navigate their own futures. This includes finding companies that treat their employees with respect and dignity. The young adults seek out organizations that offer meaningful jobs that serve a greater purpose. It’s also important for them to work at a firm that stands for the same social and political issues that they champion. This cohort also wants to get paid well for their efforts.
Securing a job in investment banking has historically been a big goal of university students for generations. It was viewed as the ticket to building incredible wealth and achieving a high level of social status. The profession, dealing with mergers and acquisitions, taking companies public with IPOs or trading stocks and bonds, appears to be an attractive and exciting career from the outside perspective.
As Silicon Valley and tech companies boomed, it stole some of the thunder from Wall Street, as young people wanted to ditch the confining suits and ties, in favor of jeans and hoodies. Hot startups and jobs with big-name companies, like Twitter, Apple, Meta and Amazon, offer intellectually challenging jobs and the chance to receive stock and options that could earn a windfall for workers who were in the right place at the right time.
With the ascension of crypto, cool new fintech companies, like Robinhood and other newly emerging types of sectors, like the cannabis industry, have also attracted potential would-be bankers.
The image of Wall Street firms and investment bankers has lost some of its luster. A prior report of “inhumane” 100-hour workweeks has further tarnished the banker brand. High-end investment bank Goldman Sachs was accused by junior employees of having to endure terrible work conditions.
A group of 13 disgruntled first-year analysts at Goldman Sachs made waves by assembling a professional-looking presentation in the company’s style about their experiences at the investment bank. The resulting “Working Conditions Survey” (polling the 13 analysts who created the slide deck) that circulated on social media said that they worked an average of around 100 hours per week.
The young analysts said they suffered from “workplace abuse,” which adversely affected their mental and physical health. It also took a toll on their personal relationships. There were also claims of “excessive monitoring or micromanagement” and a high level of dissatisfaction in their jobs.
This prompted change, including higher pay, along with empathetic benefits. For example, Goldman Sachs sweetened employee benefits, in an effort to attract and retain their employees. The top-tier investment bank is offering paid leave for pregnancy loss, expanding the amount of time employees can take for bereavement leave, introducing an unpaid sabbatical for longtime employees, increasing its retirement fund matching contributions for U.S. employees and eliminating the one-year waiting period before matching employee contributions. Goldman’s head of human resources, Bentley de Beyer, said about the program, “We wanted to offer a compelling value proposition to current and prospective employees, and wanted to make sure we’re leading, not just competing.”
Investment banks scrambled to offer better pay, bonuses and incentives. Jefferies Financial Group, a midsized investment bank, graciously offered its over 1,000 junior bankers the option of a “Peloton bike with a one-year subscription, a Mirror home workout system with a one-year subscription or a package featuring an Apple Watch SE, an iPad Air and AirPod Pros with AppleCare+,” according to Fortune.
International Swiss-based bank Credit Suisse informed investment bankers that they will receive $20,000 bonuses. This would be for entry and mid-level bankers. There will be increases to the salary of workers who are below the “managing director” level. The bank will also allow casual dress attire when people return to the office.
In an effort to keep associates happy and staying at private equity giant Apollo Global Management, the company is offering six-figure retention-type bonuses. In a hot market, Apollo plans to make about $100,000 to $200,000 awards, predicated upon the recipients remaining with the private equity firm up until September 2022. The company will also provide the option for employees to work remotely for two days a week for the remainder of the year.
For her 210,000 employees, Citigroup CEO Jane Fraser banned internal video calls on Fridays. The move was part of a larger program to set boundaries and help her people have a healthier work-life balance. Fraser also called for a new companywide holiday, called “Citi Reset Day.” It’s considered a day of decompressing, as the pandemic has taken a toll on the psyche of workers.
There may also be wage growth across all sectors. As inflation is raging at the highest rate in decades, the costs of nearly everything is going through the roof. If the Biden administration or the Federal Reserve Bank can’t stop this, the current inflationary spiral will ultimately lead to higher prices.
The higher prices will cause workers to press their bosses for more money just to keep up with the alarming costs of food, gas, clothing and everything else. If they don’t receive a cost of inflation adjustment, they’ll quit and find a job elsewhere. The scary part is that as people demand more pay, companies raise the prices on goods and services. This could become a vicious upward spiral in wages and prices.
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