The past few years have seen technology automating many functions and major investment banks under pressure to cut costs have been laying-off their traders resulting in many moving to brokerage firms. How much do banks pay compared to trading firms and is it worth the extra hours and stress?
Benchmark your salary here!
Emolument.com analysed 830 entries in trading and research roles in London both in investment banks and brokerage firms. As expected, banks pay better for both functions. However the remuneration gap shrinks dramatically from 70% for associates to only 18% for VPs: if considering a move to a brokerage firm, hold off until you make it to VP level!
| Trading | Research | |||
| Bank | Broker/Trading House | Bank | Broker/Trading House | |
| Salary | £ 75,000 | £ 50,000 | £ 75,000 | £ 47,000 |
| Bonus | £ 30,000 | £ 12,000 | £ 20,000 | £ 6,000 |
Graph 1. & Table 1. Showing median salary and bonus for trading and research associates in banks and brokerage firms.
Banks win by a large margin. At associate level, banks pay better than brokerage firms. Base salary is 50% higher in banks, both for trading and research jobs. Zooming in on trading, a banking associate earns 70% more than a broker.
Banks = bonus culture. On top of a larger base salary, bankers earn much larger bonuses as well. For traders at banks, bonuses make up 30% of total compensation compared to 20% only for brokers. The same observation can be made for research associates with bonuses representing 20% of total compensation at banks, versus 10% at brokerage firms.
| Trading | Research | |||
| Bank | Broker/Trading House | Bank | Broker/Trading House | |
| Salary | £ 115,000 | £ 90,000 | £ 105,000 | £ 78,000 |
| Bonus | £ 55,000 | £ 54,000 | £ 40,000 | £ 12,000 |
Graph 2. & Table 2. Showing median salary and bonus for trading and research VPs in banks and brokerage firms.
Brokers attack! In trading, there’s a significant decrease in the total compensation differential between banks and brokerage firms for VPs: from 70% for associates it drops to 18% for VPs. This is because brokers see an 80% increase in base salary on VP level (when the increase for traders is ‘only’ 50%) and their bonus jumps to 38% of total compensation from 19% for associates (while for traders bonus remains to around 30% of total compensation).
In banking, research competes with trading. Research VPs in banks earn 60% more than their peers in trading houses. Whilst not being a direct revenue-generation function, research analysts at banks are highly regarded (and rewarded accordingly – 80% more than those working for brokerage firms), reflecting the importance of research as a key tool for nurturing banks’ client relationships.
‘B’ for Bonus, ‘B’ for Bank. The bonus remains a constant proportion of the compensation package in brokerage firms for research employees (11% for associates and 13% for VPs). In banks however, the bonus received by senior research employees is a larger proportion of their earnings (21% for associates vs 28% for VPs).
Alice Leguay, Co-Founder & COO at Emolument.com said: ‘Throughout the financial crisis, bankers have been flowing from the banks to brokerage firms – sometimes they are forced to after being made redundant, or compelled by less regulatory pressure, more transparent performance-related pay bonuses, and better working hours. As the prestige of working for an investment bank has waned, professionals have found brokerage a sensible alternative with attractive financial rewards.’
Benchmark your salary here!
