Nearly $300,000 Wall Street Paycheck Not What It Seems

Oct. 20, 2006 — -- An average compensation of $289,644 sounds pretty good for the population not working within a mile of the New York Stock Exchange.

But according to New York State Comptroller Alan Hevesi in a new study, that is what the average salary is on Wall Street.

To be clear, that doesn't mean that all bankers make this much. It means that there is a large army of men and a few women who make much less -- and a few very, very wealthy individuals who make an astronomical sum of more.

First, this not the average salary -- it's the average compensation, which includes a bonus.

Most of the investment banks, asset managers and hedge funds structure their overall compensation on relatively low salaries and bonuses proportioned to the revenue generated by the employee.

For example, if you work on a team that helps one Fortune 500 company merge with another and that acquisition brings in $25 million in business for your firm, you can expect your bonus in January to include a small slice of that.

If you manage a portfolio of a billion dollars of someone else's money, you will likely share a percentage of the profit that you bring to that billion.

"It has been a good year for investment bankers. There have been a lot of mergers and acquisitions fueled by a rise in equity," said Andrew Barber, associate editor at Trader magazine.

Trader is a lifestyle magazine geared toward professional traders who Barber says likely bring home much more than the average from the recent study.

According to the report, compensation on Wall Street increased almost 22 percent in 2004 and an additional 11.8 percent in 2005.

Barber says part of the reason for the increase is that when business is good, competition for top talent gets ferocious.

"Large Wall Street banks have been a magnet for top traders and top investment bankers," Barber said.

"Places like Morgan Stanley and Goldman Sachs have had to work hard to keep their best employees," he said.