Sales and Trading Salary and Bonuses 2022

For those not yet in the sales and trading industry, there's a lot of confusion and misinformation about the salary and bonus structure.

Some are under the impression that sales and trading operates under an entirely variable compensation structure. The so-called "eat what you kill" model. Others think that sales and trading operates under a similar compensation structure to investment banking, where everyone more or less moves in lock step and where there are "bonus buckets" that you are placed into.

The reality is that the true compensation structure resides somewhere in-between these two - depending on how senior you are - but that at the junior levels it's most closer to the latter than the former. 

However, there are clear distinctions that need to be understood. Just to be clear, what I'll be discussing in this post is not the kind of compensation structure you'd have at a proprietary trading shop like Jane Street or Jump. Rather, it reflects the bulge brackets I've worked in (like Goldman Sachs). 

2023 Update: While 2022 saw a sharp reduction in investment banking (i.e., M&A and capital markets) revenue, there was a sharp uptick in sales and trading revenue at almost all banks (across both FICC and equities).

In the end, this is why bulge brackets have both sales and trading and investment banking divisions -- because sales and trading revenues tend to increase during times of heightened volatility whereas the opposite is true of investment banking. Therefore, S&T has the effect of smoothing out a bank's overall revenue and acting as a counter-cyclical buffer during times of stress.

Practically, from a compensation perspective, those in banking have or are going to see sharply reduced bonus pools whereas those in sales and trading will see them largely flat or slightly up. While this will cause grumbling among those in sales and trading who think they should be rewarded for having heightened revenue and ensuring the bank's overall revenue didn't decline too much, ultimately bonuses are partly a factor of a bank's overall performance.

Sales and Trading Base Salary (2022)

Within any large investment bank, your total annual compensation will be composed of a base salary and then a year end bonus. Your base salary will be predictable and will rise in lock step over time.

Whether you're in a trading, sales, structuring, or quant role your base salary will never be reduced or go away. This stands in contrast to other roles - like private wealth management, proprietary trading, or sales roles outside of high finance - where you'll be given a base salary for your first few years before moving to an entirely variable-based compensation structure. 

One of the things you'll be told by more senior people as soon as you enter the trading floor is that you should always live off of your base salary, and try to save your bonus. This is because your bonus will be quite variable (although probably less variable than you may imagine until you hit the MD level). 

Note: Bonuses can be contentious too. As demonstrated by the case of a former Goldman Sachs trader who sued because his over eight million dollar bonus wasn't big enough (to be fair, he actually had a good case to be irritated over it).

Unlike in other industries, the base salary within sales and trading does not really cap out at a low number either. While it can become a bit more variable as you enter into the vice president (VP) years, it will normally go up to at least $500,000 a year when you get around the MD stage.

Further, your base salary is quite predictable and rises in lock step. During the VP years it can get a bit more variable, but before then everyone across the floor will more or less earn the same base amount based on their title (e.g., analyst 1, associate 2, etc.).

So when you go into your compensation meeting - where MDs sit around a table, tell you how valuable you are, and give you your total compensation figure - you know what your base salary will be this year and what it will be next year based on your rank. What you won't know until the end of the meeting is your bonus.

One interesting wrinkle thrown into the mix this year - that will have ramifications for years into the future - is that base pay across many bulge bracket firms for those in IB, S&T, and equity research was raised significantly. This was largely in response to how much attrition there was (due to long hours, etc.) throughout 2021.

However, not all firms raised the base amount for analysts and associates in lock-step. Further, for those that raised the base salary of analysts and associates by a significant amount - like Goldman did, going from $85,000 to $110,000 in year one - there is the obvious question of whether or not bonuses in the future will make up a smaller amount of the total compensation mix to offset this base salary rise. 

Note: Morgan Stanley also bumped up compensation to the same levels as Goldman did, while JPMorgan and most other banks only raised the base salary level to $100,000 (which is still a very healthy increase from the previous level).

So, needless to say moving forward we'll likely see permanently higher total compensation in sales and trading relative to years past. But the exact mix of base and bonus that makes up the total compensation may change quite a bit.

Below is an approximation of what you'll earn throughout your analyst and associate years in the form of base salary. The low end reflects some bulge brackets that didn't move up their base salary too much (like JPM), and the high end reflects those that have (like Goldman and Morgan Stanley).

Sales and Trading Bonuses (2022)

In investment banking, generally a bonus bucket system is utilized whereby you have bottom, mid, and top-tier buckets. Across coverage groups (e.g., TMT, Healthcare, Industrials, etc.) there's generally very little variability in the size of the bonus  buckets. So, if you're a top performer in TMT you'll get $xx,xxx and if you're a top performer in industrials you'll get the same amount (even if TMT had much more deal flow).

Of course, as you get more senior there can be greater dispersion between coverage groups, but generally speaking the buckets are relatively standardized.

In sales and trading, this is less the case. At the analyst level a bonus bucket system is still utilized, but generally buckets will be quite variable across groups. So you can think about the size of your bonus as being a function of:

• How valuable you are to your desk (individual performance)
• How well your desk did in the last year
• How well the S&T division did overall
• How well the firm did overall

Generally, the way things work is that there will be a kind of "compensation bucket" per desk that then needs to be divided up to everyone on that desk. A lot of internal politics are involved in how large this compensation bucket is and how equitably (or not) compensation is spread out between everyone on the desk.

You'll often hear war stories of MDs and Partners battling with the heads of the sales and trading division on how much they should be paying folks on their desk. Ultimately, the firm wants to keep as much of the profits as possible and the MDs/Partners want as much of the profits as possible dispersed as compensation.

Further, if the sales and trading division or firm as a whole did poorly, even if your desk had great performance and you yourself did as well, that can still result in a lackluster bonus.

This was the case in 2021 because 2021 was a banner year within sales and trading - one of the best ever - and so battles took place whereby leaders of firms said that this performance was an anomaly so folks in sales and trading shouldn't get outsized bonuses. Then those within sales and trading (predictably) said they should get bonuses for their outsized performance irrespective of the environment they were operating in.

Ultimately, you need to always operate under the assumption that you'll only end up being paid the minimum necessary to keep you at the firm. So you should always try to join desks that will have reasonable levels of mobility across firms so that if you get a poor bonus, you can go to another firm that promises to pay you more (you can then take this offer to your bosses to try to get it matched if you want to stay within the firm you're at).

So, obviously bonuses can be variable. This will be even more true moving forward given the significant bump in base salary that occurred last year. But below is a rough approximation of what you can expect. Generally analyst bonuses are quite predictable, and things begin to get more variable as you move into the associate territory.

Note: Most people will be "mid-bucket" which means they'll normally get a bonus somewhere in between the bottom- and top-bucket ranges above.

Thus far I also haven't mentioned the distinction between either being a trader or a sales person. Generally up through the associate ranks you won't have that much PnL tied directly to your name, so your "individual performance" means more how helpful and well-liked you are.

VP and MD Total S&T Compensation

When we arrive at the VP and MD level things get much more variable based on the bank we're talking about, how senior you are within these ranks, what desk you are on, and what position you hold (whether in sales, trading, structuring, or quant).

Generally at the VP level is when a meaningful amount of your bonus compensation will be predicated on what you've brought into the firm. You will still be getting a base salary that will begin at around $200,000 for a first-year VP and can go up to high six-figures at the MD level. Generally, in my experience, the base salary for VPs will top out around $400,000 at most after five years or more.

So, while at the analyst and associate level your bonus is almost always less than your base compensation, at the VP and MD level your bonus will progressively become a larger percentage of your total compensation (not because your base salary is going down, but just because your bonus increases in good years will be outpacing your base salary increases).

As mentioned, your bonus will no longer be based just on how helpful or well-liked you are on the desk. Rather it will reflect what you're bringing into the firm (PnL).

As I've discussed in longer posts on sales and trading and the sales role, many think that sales is somehow abstract from PnL. That's simply not the case. Within sales you will have a defined universe of clients - with more and larger clients as you get more senior - and when you bring clients in to do singular trades you will "ticket" those trades and earn "sales credits". Your bonus compensation will be tied to how much of these sales credits you have at the end of the year.

The MD/Partner on the desk will also consider how essential you are to bringing in that business. In other words, are these clients coming to trade with us at J.P. Morgan or Morgan Stanley because of the platform so would do so irrespective of who the sales person is, or are they coming in due to the efforts of the sales person. Of course, it's always a mixture of both and the role of a sales person is to argue at the end of the year that clients came in because of them.

Likewise, at the end of the year the PnL of a trader - based on the book they manage - will be looked at. Even in a market-making desk, as I've discussed at length, there is a lot of positioning that can take place that can either earn or lose an individual quite a bit of money.

The MD/Partner on the desk will consider how essential the individual trader was to their overall PnL. This works both ways. So, if a trader holds a book of bonds and bonds across the board rally (prices up, yields down) the MD/Partner will likely take that into consideration (as the trader benefited from the rally). On the other hand, if the trader has negative PnL for the year, due to bonds selling off, you should't expect a bonus of zero. Instead, consideration will be paid to how bad things could have been without the maneuvers of the trader to make the book look as good as possible.

Ultimately when you're in the market-making business - which is more or less all desks in modern sales and trading - you have to hold inventory. Even if you think the market you're trading is going to tank, you need to have inventory to make markets! So you're not just being compensated on raw PnL - the way you would at a proprietary trading firm - but rather based on your perceived "value add", which is incredibly hard to determine (and leads to lots of arguments!). 

Compensation Trends

As I mentioned earlier, sales and trading has had a very interesting past few years. On the one hand, early 2020 was a very rough portion of the year with nearly everything selling off. About the only people who did well were those who happened to be on desks that are market neutral and are involved in selling volatility (although a few individual traders blew up their books trying to position them well).

On the other hand, late 2020 and all of 2021 were incredibly busy periods. Chances are you heard about the record-setting revenue across fixed income, FX, and equity derivatives trading observed across most bulge bracket banks (commodities trading was a bit more hit and miss).

Generally speaking bonuses across S&T were up in 2021 and will likely be replicated in 2022. However, for analysts and associates 2022 bonuses may stagnate or even decrease to reflect the large increase in base salary that has occurred.  Further, bonuses are always somewhat forward looking indicators and many leaders of banks are a bit pessimistic that the record levels of sales and trading activity we saw in 2021 can persist into 2022.

Overall, volatility is almost always good for sales and trading. Of course, some people will end up blowing up their books. But generally the more trading that occurs, the more market making desks will benefit.

The events of the past roughly two years have added some new lift into sales and trading and bonuses are reflecting that on most desks (although everyone, of course, wishes they captured more of the upside!). 

Further, keep in mind that there are always large outliers. Folks who make millions in a given year because they can prove that they did something that any other trader or sales person could not have done (which is always hard to prove definitively, of course, as illustrated by the former Goldman Sachs trader aforementioned).

Here are a few more articles to read. Keep in mind, compensation is always held close to the vest so take these broad articles with a grain of salt:

• Wall Street Tempers Bonus Expectations in Year of Pandemic (Bloomberg)
• Goldman Trading Bonus May Jump Nearly 20%
• JPMorgan to Increase Bonuses for Traders
• Goldman Boosts Junior Pay Beyond Investment Banking, FN Reports
• Morgan Stanley Boosts Banker Pay a Month After Last Raise
• JPMorgan Boosts Pay for More Staff as Talent Battle Deepens

Ultimately, it's hard to give a picture of total compensation across S&T given the number of banks, desks, and positions involved. However, what I've written above I believe is the most accurate discussion I've seen for 2022.

If you're gearing up for sales and trading interviews, be sure to check out all the sales and trading interview questions I've posted. Alternatively, you can get access to all the questions and desk guides I've created here. I get a kick out of writing them so I hope they're helpful.