While investment banking grabs prestige on university campuses, specialized finance roles like private equity, hedge funds, VC and asset management frequently offer superior income potential over the long run. Let’s explore this lucrative landscape.
In the UK, salaries average 35% less than the US at junior levels. Yet for driven professionals who gain a seat directing global capital flows, the rewards will leave even banking bonuses behind. Essentially, once you’ve made it to a spot where you can access carried interest – the share of profits from investment gains – investment banker’s salaries will seem almost negligible compared to the sums you stand to take home.
Top hedge fund managers make billions from performance fees tied to assets under management and annual returns. Senior private equity partners can clear £100 million+ on a single lucrative exit. The sky is truly the limit when you reach the upper echelons of finance and get a seat allocating serious global capital. The key is surviving the very tough first decade of 80–100-hour weeks and extreme volatility before breaking through to capital allocation glory.
Private wealth management offers more modest but steady rewards for carefully growing assets under management (AUM). It’s not uncommon for senior wealth managers at top firms in London to net £500k+ annually from stable 1% management fees on a £100 million portfolio.
But make no mistake, wealth management early on is no cushy joyride. Expect years meeting prospective clients, relentlessly networking, mastering markets and investments. With patience and grit, AUM and pay-outs rise. Remember, less than 10% of advisors ever break £5 million in AUM. Don’t expect to quickly gain a nine-figure book.
To put it simply: You need to consistently gather assets and your take home pay compounds.
Finance skills via banking, FP&A, accounting, or consulting will all serve you before delving into this career. The learning curve is long. But the upside for those who embrace the grind: wealth management provides a path to seven-figure careers and ownership equity at firms.
At eminent UK private equity firms, base pay frequently starts around £100k for newly graduated MBAs and Postgrads. Bonuses can tack on another £65k+ in year one. Further up the ranks, senior PE associates net £150k-£200k annually. Profit sharing and carry percentages create huge upside, routinely throwing managing directors into 8 figure career earnings.
Over at hedge funds, remuneration also dwarfs banking. Performance fees tied to assets under management and annual returns enable enormous windfalls. The top 25 hedge fund managers collectively took home over $30 billion in 2020 alone! While average UK salaries land around £95k, established achievers building multi-billion funds earn astronomically more from incentives.
Obviously not everyone becomes a hedge fund titan, but get into a sales manager role, tech manager, any managerial position – and you will get a taste of that sweet carry. Stampedes of students have pivoted to business schools to enter this space. But you are not alone – flocks from philosophy, history, politics, even literature majors somehow all seem to coalesce here. With enough drive and the right connections, carry can turn even the most unrelated undergrad degree into a ticket to the top.
Venture capital similarly offers substantial rewards for spotting the next unicorn start-up. It’s not uncommon for senior VCs at top London firms to secure £200 million+ paydays from a single blockbuster IPO. In essence: With great risk comes great reward – successful investments in start-ups that scale rapidly can produce extraordinarily high returns, though early stage investing carries significant risk of loss.
However, do not be fooled, starting out in VC is nothing glamorous. Expect years of hustle attending networking events, putting in the time to become an expert in your niche, competing with hundreds of other VCs to back that elusive 100X return start-up. Remember that only 2.5% of venture-backed seed-stage start-ups become unicorns, and it takes on average 7 years to hit that status. Don’t tell yourself you’ll easily pick a unicorn as a rookie.
It’s also highly recommended to gain start-up, investment banking, or consulting experience before entering this arena. The learning curve is steep. But if you are willing to put in the sweat equity and make the right connections early on, venture capital offers a high velocity path to serious wealth.
While demanding, finance offers staggering income potential across specialties to those who prove themselves indispensable navigating dizzying complexity at the highest levels.
So, beyond the headline-grabbing world of investment banking lie niches that ultimately pay far more over the long haul. For those obsessed with high stakes dealmaking, few careers can compete with private equity and alternatives once you survive the turbulence and escalate the ranks.
The key is gaining that initial foothold through demonstrated analytical brilliance, flawless modelling skills and nerves of steel. But for those few who make it, the ride upwards holds unmatched monetary rewards.
Aurelian Tran is the founder of Alpha Lane and an ex-Goldman Sachs analyst who has spent 4+ years working in the investment banking industry.
He founded Alpha Lane to help students and young professionals achieve their highest professional ambitions, by securing offers at top-tier financial institutions.
@2022 Alpha-Lane. All rights reserved.
