IB increasing base salary by ~17%: Time to push up Biglaw base?? Forum

[Anonymous User]

Investment banking (starting from BofA) just announced to increase IBD associate base salary by 25K (up 17% from previous 150K base for 1st year associates) for associates and above. Given their 100% bonus for associates level (on average), it'd be ~50K increase in total comp.

Any movement in biglaw?? Salary gap between banking and biglaw is widening. We just saw the glorious special bonus boosted by Davis Polk, but I believe it's time for base increase, some permanent/meaningful increase on $$$ (especially for the major markets with high COL).

Given our bonus is tiny compared to banking, we should demand AT LEAST $40K base increase in major cities, moving up to $230K. Let's start making some noise and push biglaw partners.

What do you guys think

[Anonymous User]

Heard there was a rumor that NY biglaw considered pushing starting base salary to 210~220K couple years ago. Given that it was in the past, 40~50K increase to 230~240K now is not too unrealistic. But convincing the biglaw partners is another thing I assume.

[Anonymous User]

Even after $50K increase to $240K base, we're still behind banking associates from the start. And the gap is going to be bigger and bigger as their total comp increases at a much faster rate. Biglaw is paying not enough money to associates, that's for sure.

[Anonymous User]

In theory, I totally agree. But in practice, these two markets aren’t closely linked — only a relative handful of JD/MBAs actually choose between banking and biglaw each year.

Meanwhile, there’s still plenty of talent left in the law school pool...biglaw could easily dip a bit lower into each class and find ton of willing students if there was a need for that. Biglaw is the highest paying entry-level option for the vast majority of JDs, and I don’t really see any external sources of pressure. (Internal competition among firms for the best talent is a separate thing).

[Anonymous User]

Now 1st year IB associates are making +$350K ($175K base + 100% bonus), which is equivalent to 5~6th year biglaw associate. 2nd year IB associates will be making +$400K ($200K base +100% bonus), which is at 8th year biglaw associate.

The pay gap between banking and biglaw is WIDE af guys...

[Anonymous User]

Now 1st year IB associates are making +$350K ($175K base + 100% bonus), which is equivalent to 5~6th year biglaw associate. 2nd year IB associates will be making +$400K ($200K base +100% bonus), which is at 8th year biglaw associate.

The pay gap between banking and biglaw is WIDE af guys...

Yes, well... they're different jobs in different industries...? Why would law firms compensate JDs like banks compensate IB associates?

[Anonymous User]

Is this for IB associates (hired after MBA programs), right? not for analysts (hired after undergrad)?

[kaiser]

Why would the salaries of IB associates have any effect or in any way drive the salaries of biglaw associates? Its not like new law school grads could just coin flip between one or the other. They largely draw from different pools and aren't really competing for the same talent. While it makes sense for one biglaw firm to match the salary structure of another, since they compete for the same talent pool, there is no reason why biglaw's salary structure would need to keep pace with IB.

[Anonymous User]

Now 1st year IB associates are making +$350K ($175K base + 100% bonus), which is equivalent to 5~6th year biglaw associate. 2nd year IB associates will be making +$400K ($200K base +100% bonus), which is at 8th year biglaw associate.

The pay gap between banking and biglaw is WIDE af guys...

Yes, well... they're different jobs in different industries...? Why would law firms compensate JDs like banks compensate IB associates?

I understand where you're coming from but this mindset is not really helping. They should be comparable in a sense that they are two of the top professional careers. The only difference in terms of career between the two is that lawyers require 3 additional years of education (+150K debt) and foregone salaries during that time. Such a big gap in total comp between the two jobs will only discourage people to go to law school and capable undergrads will rather go with finance route or MBA. This will only hurt legal career reputation as less and less competitive students will pursue. Let's stop selling our profession short.

[Anonymous User]

Is this for IB associates (hired after MBA programs), right? not for analysts (hired after undergrad)?

25K base up for associates and above.

15K base up for analysts (out of undergrade).

Probably the impact on total comps is likely double (50K up for associates+ and 30K up for analysts)

[kaiser]

Now 1st year IB associates are making +$350K ($175K base + 100% bonus), which is equivalent to 5~6th year biglaw associate. 2nd year IB associates will be making +$400K ($200K base +100% bonus), which is at 8th year biglaw associate.

The pay gap between banking and biglaw is WIDE af guys...

Yes, well... they're different jobs in different industries...? Why would law firms compensate JDs like banks compensate IB associates?

I understand where you're coming from but this mindset is not really helping. They should be comparable in a sense that they are two of the top professional careers. The only difference in terms of career between the two is that lawyers require 3 additional years of education (+150K debt) and foregone salaries during that time. Such a big gap in total comp between the two jobs will only discourage people to go to law school and capable undergrads will rather go with finance route or MBA. This will only hurt legal career reputation as less and less competitive students will pursue. Let's stop selling our profession short.

I don't think biglaw firms are suddenly going to become scared that their talent pool will dry up because everyone is choosing the MBA route over JD due to inflated IB salaries. Even if less people go to law school overall (which wouldn't be a bad thing), the top schools that the biglaw firms draw from will still be there producing an ample pool of talent for them to draw from. So biglaw firms have essentially no incentive to want to match or track IB salaries.

[Anonymous User]

Why would the salaries of IB associates have any effect or in any way drive the salaries of biglaw associates? Its not like new law school grads could just coin flip between one or the other. They largely draw from different pools and aren't really competing for the same talent. While it makes sense for one biglaw firm to match the salary structure of another, since they compete for the same talent pool, there is no reason why biglaw's salary structure would need to keep pace with IB.

Like another anon said above, let's think long-term.

I remember back in undergrad, my friends (and I) considered both legal and finance careers; some ended up going to IBs and some (including me) chose to go to law school. Even back then, banking paid more, and of course if my top priority was money, I would not choose to go to law. But compensation was part of my decision and the difference in comp back then was not enough for me to pursue finance career.

But now, the difference in comp is huge. 2nd year IBD associates (5 years out from undergrad) get paid at 8th year biglaw associates (11 years out from undergrad, assuming K-JD). This is huge enough to convince undergrad students not to pursue law.

After all, banking and biglaw are both in professional service career. They all try to attract top talents. Please guys. Think longterm, and let's not simply accept what's given to us. Let's stop thinking that biglaw pays enough money and banking pays ridiculously. Banking juniors (analysts and associates) get paid more than us because they've made lots of fuss and asked for it. It's just that biglaw pays not enough.

[Anonymous User]

Why would the salaries of IB associates have any effect or in any way drive the salaries of biglaw associates? Its not like new law school grads could just coin flip between one or the other. They largely draw from different pools and aren't really competing for the same talent. While it makes sense for one biglaw firm to match the salary structure of another, since they compete for the same talent pool, there is no reason why biglaw's salary structure would need to keep pace with IB.

Like another anon said above, let's think long-term.

I remember back in undergrad, my friends (and I) considered both legal and finance careers; some ended up going to IBs and some (including me) chose to go to law school. Even back then, banking paid more, and of course if my top priority was money, I would not choose to go to law. But compensation was part of my decision and the difference in comp back then was not enough for me to pursue finance career.

But now, the difference in comp is huge. 2nd year IBD associates (5 years out from undergrad) get paid at 8th year biglaw associates (11 years out from undergrad, assuming K-JD). This is huge enough to convince undergrad students not to pursue law.

After all, banking and biglaw are both in professional service career. They all try to attract top talents. Please guys. Think longterm, and let's not simply accept what's given to us. Let's stop thinking that biglaw pays enough money and banking pays ridiculously. Banking juniors (analysts and associates) get paid more than us because they've made lots of fuss and asked for it. It's just that biglaw pays not enough.

You’re fundamentally missing how different the talent pools are even if you and all your friends sat around and decided on either going into finance or law (which seems weird and uncommon). If I think back on who did ib from my undergrad and who I know in biglaw, the groups are generally not too similar.

Be a banker if you want to be compensated like a banker. Big law associates are compensated better than 99.9% of the world the moment they get their first direct deposit, so comparing your industry to a completely different one that pays a handful of people marginally better is fruitless. Is it fair that the best WNBA player in the world makes less than a first year associate at Norton Rose Fulbright? Of course it isn’t. But the market dictates what we’re worth and the market tells us that associate is worth more.

[Anonymous User]

Also IB hours are significantly worse than big law.

Big law: 60-80 hrs in typical week
IB: 80-100 hrs in typical week

It's less pay but I'll accept that tradeoff. Not to mention that it is significantly easier to coast in biglaw while IB is very much you're out after 2-3 years

[Anonymous User]

Now 1st year IB associates are making +$350K ($175K base + 100% bonus), which is equivalent to 5~6th year biglaw associate. 2nd year IB associates will be making +$400K ($200K base +100% bonus), which is at 8th year biglaw associate.

The pay gap between banking and biglaw is WIDE af guys...

Yes, well... they're different jobs in different industries...? Why would law firms compensate JDs like banks compensate IB associates?

I understand where you're coming from but this mindset is not really helping.

You think having a mindset is what helps move salaries, and not actual market conditions? Weird take.

They should be comparable in a sense that they are two of the top professional careers. The only difference in terms of career between the two is that lawyers require 3 additional years of education (+150K debt) and foregone salaries during that time.

Another "top professional career" is doctor, which requires an additional year above and beyond the 3 additional years lawyers have to put in. And do you know how much the average resident makes out of med school? They won't crack six figures for years until they're an attending (or maybe a fellow). Just because a job is a "top professional career" doesn't mean it needs to be compensated comparably to other "top professional careers" at every stage of employment. Law, finance, and medicine are all different professions that do different work, utilize different skillsets, attract different people, have different barriers to entry, have different career trajectories, involve different subsets of the economy, have different lifestyles, and, yes, have very different compensation models. Some associate at BoA making some extra cash has almost zero impact on what an associate at DPW makes.

Such a big gap in total comp between the two jobs will only discourage people to go to law school and capable undergrads will rather go with finance route or MBA.

I guarantee you very, very few college students are sitting around doing a discounted cash flow analysis of the ten year total comp of a big law associate versus a bulge bracket IBD associate. And if they are, it would include things like how much that bulge bracket IBD associate is going to make after they bail on BoA after their two years there for a PE fund and get even more cash there. Those college kid's decision will be far likelier to be made on the basis of factors like "can I actually do math" and "will any investment bank actually hire me" rather than "in five years when I'm actually in a position to benefit from it, will law firms have matched the latest base comp move by ibanks?"

This will only hurt legal career reputation as less and less competitive students will pursue. Let's stop selling our profession short.

Thanks, I needed a laugh.

[nealric]

People are absolutely right that IB salaries don't directly mean anything to biglaw. But if IB is feeling bullish enough to give raises to their associates, it's indicative of the same robust deal flow that is also driving law firms to hand out special bonuses.

One thing I think you will see is further distinction between firm bands. The firms handling the big M&A deals will march higher, but the second tier firms are less like to match than they were back in 2007 when salaries went to 160k (a bit over $200k in 2021 dollars).

[Anonymous User]

So I see lots of pessimistic views here. Just curious, anyone here thinks fxck I should've gone to finance? Well, I had an offer from top IBD job out there but decided to go to law school and I regret it now.

[Anonymous User]

Mega PE funds are starting to raise salary at all levels, one just announced 30% increase in both base + bonus. The pay gap between finance and law is getting bigger. Biglaw is obviously not one of the most attractive career paths for top undergrad students now.

[jotarokujo]

law school was always only for people who actually want to be a lawyer more than a consultant or banker

though i will say, particularly at lower T14s, there may be some people who couldn't have gone into certain consultant or banking jobs but could go to a T14

[NoLongerALurker]

It can be simultaneously true that (a) IBD and law firms aren't competing for the same employees, so there's no real direct reason law firms would respond to this; (b) lawyers like to think they are competing with IBD, so maybe enough discontent will push firms to increase salaries; (c) the go-to line of firms of "we can't increase salaries because clients get mad" is not really believable, but at least even less believable now that IBD is giving salary increases and (d) in any event, if you are going to sit here and defend getting paid less then you're being a bit of a bootlicker.

tl;dr: I don't see why the IBD raises should mean that I would get a raise, but my general ethos is that I want one and fuck you pay me.

[Anonymous User]

So I see lots of pessimistic views here. Just curious, anyone here thinks fxck I should've gone to finance? Well, I had an offer from top IBD job out there but decided to go to law school and I regret it now.

I mean, if your goal was to make as much money as possible, then yeah you made the wrong choice.

Surely you must have had a reason for turning down that top IB job for law school - see if that still resonates with you. If not, turn back to networking & re-recruit for banking

[nealric]

law school was always only for people who actually want to be a lawyer more than a consultant or banker

though i will say, particularly at lower T14s, there may be some people who couldn't have gone into certain consultant or banking jobs but could go to a T14

Even at HYS law, there will be a decent number of people who went to undergrads that aren't IBD target schools. Nobody my undergrad was doing investment banking- I don't think I even knew what it was or how I would go about applying. I suppose I could have quit law after a few years in practice and probably gotten into a decent MBA program had I really wanted to go that route.

[Iowahawk]

Mega PE funds are starting to raise salary at all levels, one just announced 30% increase in both base + bonus. The pay gap between finance and law is getting bigger. Biglaw is obviously not one of the most attractive career paths for top undergrad students now.

The circle of people who actually choose between law and finance based on earnings is tiny. The attractiveness of career paths to undergrads has much more to do with what kind of work you want to do than the marginal dollar. Especially when you're comparing a niche career that only exists in a few major cities (finance) with a far broader profession most of which is not remotely finance-adjacent (law).

[Anonymous User]

So nobody here at biglaw feels like i don't care if biglaw is comparable to banking but fuck you and pay me more? well I for starter feel biglaw pays shit and I should get paid more.

Pissed 3rd year biglaw.

[Anonymous User]

So I see lots of pessimistic views here. Just curious, anyone here thinks fxck I should've gone to finance? Well, I had an offer from top IBD job out there but decided to go to law school and I regret it now.

I mean, if your goal was to make as much money as possible, then yeah you made the wrong choice.

Surely you must have had a reason for turning down that top IB job for law school - see if that still resonates with you. If not, turn back to networking & re-recruit for banking

Obviously, if I was only interested in maximizing money, I would have gone banking, not taking on more debt in law school of course. I had my own reasons and compensation was part of that equation (which I believe same for you guys, at least for those in biglaw). I'm not talking about people pursuing public defenders/non-profit jobs. I feel like the pay gap now is just too wide to justify anything to pursue biglaw if/when you have choice.