When we last met, I was crowing about having paid off $52,050.74 in student loan principal.
I’m still mighty proud of that particular achievement, but this morning, an article from Ignites, an electronic publication available to corporate subscribers only, crossed my path and completely changed my perspective.
Banking Deal: Earn 1.75% APY on an FDIC-insured money market account at CIT Bank.
The article? Average Portfolio Manager Pay Tops $450K.
At $450,000-some a year, it seems I could have paid off my loans in about ten minutes, instead of ten years. Alas, it’s a long, hard road for those of us who are math-averse.
But maybe there’s a message in this for some of you out there, those of you who have enough of an interest in financial topics to regularly read blogs like this one.
In doing some research, I happened across a Boston-based job listing which shows the sheer earning potential of this type of career. A full-time position requiring a Ph.D in Math or Physics and 7 to 10 years of relevant work experience, it offers $450-600K in total compensation. There are lots more such jobs out there, too, but this one openly lists its salary range. I’ll repost here so you can see what’s involved:
Leading Asset Management Firm in Boston seeks a Sr. Fixed Income Quantitative Analyst. On a daily basis the successful candidate will recommend specific relative value strategies to the PM. Additional responsibilities include: implementation and development of pricing and risk models for cash and derivative products, interaction with Currency and Structured Credit Products analysts and PM’s, and programming in C++ and/or VB. Requires a minimum of 7 years experience in F.I. as a Quantitative analyst on the buyside. Also requires a PhD in Math or Physics in addition to strong communication and leadership skills.
Now there’s a nice payback for a Ph.D! I’m amused because I recall my math-genius brother (someone had to get all the analytical skills in my family) dropping his Physics major in college because he felt there wasn’t much income potential with such a high-flown degree, and university jobs seemed scarce. He switched over to Computer Science, which seemed more lucrative. But I don’t know any CS majors earning over $450K unless they’ve founded their own companies. Sorry, big brother! He got his Masters from Stanford, too.
Those of you qualified for this position should not read beyond this point – you should be applying for the above position posthaste. For everyone else, I’ll give an overview of the Ignites article, since many of you won’t be able to read it directly.
In the article, Kevin Burke details the recent results of a CFA Institute study, finding that equity portfolio managers are the top earners among investment professionals, with an average salary of $456,000 a year. Polling more than 75,000 investment professionals worldwide, they received over 13,500 responses, and learned lots of juicy details about industry salaries.
A CFA news release from Thursday shares some of the facts:
In the U.S., the three highest compensated positions at all levels of experience are portfolio managers (equities) ($456,000), followed by investment bankers ($275,000) and then sell-side research analysts ($195,000). Buy-side research analysts (equity and fixed income) fall in the middle of the pack at all levels of experience.
The pattern for cash bonus is also affected by years of experience. There is little variability in median cash bonus for those with less than five years of experience. However, the gap widens at five to 10 years of experience. At all levels of experience, portfolio managers (equities) ($200,000) and investment bankers ($185,000) reported cash bonuses that are more than double that for most other occupations.
Not just is there a high potential payoff for choosing this career path, but after putting in your five years, the financial outlook keeps getting rosier. Granted, there’s likely some attrition here, with those who aren’t as qualified weeded out while those who are successful begin to see increased rewards and bonuses. After the ten-year mark, the average portfolio manager compensation grows to $499K.
A significant portion of the managers’ compensation comes from performance-based bonuses. Ninety percent of those surveyed were bonus-eligible, and indicated that, on average, bonuses comprise 25% of their overall package. Bonuses can be tied to individual, business unit, and/or firm performance. Some are a percentage of total assets.
The bonus component also means that companies aren’t stuck paying high salaries when the market’s down. So this certainly isn’t a rest-on-your-laurels type job, but there’s ample reward for a job well done.
Unsurprisingly, location also affects compensation, with the highest earners across all levels operating out of New York City, followed by other major metropolitan areas.
Who knew a Ph.D in Math or Physics could be so lucrative? It may be too late for my brother to become a portfolio manager, but perhaps, if you’re seeking a career change, it’s not too late for you.
Image credit: Yomanimus
Updated October 15, 2015 and originally published October 19, 2007.
{ 24 comments… read them below or add one }
Nice article, Sasha. It’s good to hear about this side of personal finance. Personally, I think the amount of money you make is just as important as how much you save. Showing people that it’s possible to make this much money could help them become wealthier, much faster.
This is similar to what I did for a living up until a few months ago. And you’re right: the money is breathtaking. In my experience though, much more than 25% of the compensation was tied to performance. Performance-based bonuses accounted for 80% of mine.
You can also make significantly more than $500,000 per year. I have two friends that start private equity funds, and both of them clear over $1 million per year.
Too stressful a job for me. With one year’s worth of that money (let’s assume that’s the takehome) we could pay off all our debt (which is big!) and buy a new house (a smaller one at around $200k) with no mortgage and have more money left over than I earn in a year. Dang. Why does Mr. Micah’s PhD have to be in philosophy?
But it’s really not the life for either of us, so we’ll take the lower pay and the greater happiness. But dang.
I am willing to bet that a lot of them are in debt up to their eyeballs – fast cars, big houses.
Perhaps I am just bitter,
The Dividend Guy
If only I’d been more interested in high finance (and decided to do a phd). Ah well, in my next life I might try this.
The money does sounds great. I wish I could work there for one year and live off that salary. I’ll just be content with where I’m at and move up at my pace. Thanks for the article!
note that it is total compensation, and a large portion of that is based off of commission.
The investment banker salary would be fine with me, especially if I didn’t have to add numbers together or anything.
I would have loved to become a portfolio manager and play with other people’s money but I only got a 2:2 in Accounting and Finance.
Now manage my own portfolio and more than match some of these over-paid manager’s underachieving portfolios.
The one PhD in Physics who was a coder, skateboarded to work in his Hawaiian shirt. He worked on mathematical modeling software for portfolio managers. He was a fun guy.
As for the money and the math, it goes together. Quant is heavy heavy math and it takes big brains to power the models.
You’re right though, most of the high salaries for PhD’s in math and physics are for folks that ended up coding and founding their own companies. But you can do that without a degree too.
Those numbers are stunning. Generally speaking, I know there’s a small discrepancy between someone with a BA salary and someone with an MA salary, but statistically, I think there’s a much larger one between an MA and a PhD. I guess it holds doubly true for these guys. Crazy.
Also – I love the phrase “math-averse.” It makes me think of A) someone who doesn’t like equations, or B) a universe built entirely of math. Good times.
P.S. Thanks for checking out my blog, Sasha!
I am curious to know if the 450,000 was a median or a mean estimate. We all know a couple of portfolio managers can make $15-$20 million in one year, that could inflate that average.
Which degree do i need to become a portfolio manager? i am planning to take a bachelor of commerce as a gold standard in business/accounting.finance world. am i on a right track? currently i am taking some cga courses to begin in accounting and start making at least some money… i think in another year i’ll be able to complete it. it’s a seneca accounting and finance diploma. but then i want to switch into b.comm and go into investment banking with joint cfa and mba from concordia. am i on a right track so far?
Evgen
Yeah…..over 450K…
After 15 years of working in the domain….
While this article is over 2 years old, I felt compelled to place a rebuttal to correct some of its’ critical inaccuracies.
First off, most computer science schools – particularly the more theoretical ones – are offering programs with a level of rigor equivalent to many programs in mathematics. In fact, many departments in the highest-ranked universities worldwide are departments of “Computer Science and Mathematics”… these are fundamentally entwined elements of quantitative analysis. Therefore, your point is moot. Many programs in undergraduate physics require less advanced mathematics that programs in computer science.
Second of all, while graduate degrees are a benchmark for many portfolio manager positions, the Ph.D is not the-all-and-end-all. In fact, a master’s degree with an additional 3 or 4 years of intensive work experiences is very often more of a competitive advantage than a Ph.D in a moderately related field. We’d rather see your history of Investment Analysis than your Ph.D in Quantum Optics.
Finally, many Portfolio Managers have backgrounds in Engineering, a category under which Computer Science is often considered. Analytical skills are key.
Good work on an informative article about the earning powers of Portfolio Management, however it is my great hope that further research be done into acceptable qualifications when writing an article like this, for it has the potential to misinform a future generation of potentially gifted managers that may not fit your narrow range of descriptives.
Uhhh..the sample posting said “Sr. Fixed Income Quantitative Analyst”, which is different from a Portfolio Manager.
For ex., here are the Portfolio Analysts for Invesco Trimark, most of them do not have PhDs in math or physics:
http://www.invescotrimark.com/publicPortal/portal/retail.portal?_nfpb=true&_nfxr=false&_pageLabel=invExpertise_portfolioManagers_landing_page_label
lmao. The photographer for this company must be either terrible or have a sense of humor. I couldn’t even get through the whole page without falling on the floor. Great post bro.
@Jennifer
“Many programs in undergraduate physics require less advanced mathematics that programs in computer science.”
This is just plain wrong. I have 2 Bachelor’s from a top 5 university. One is in Physics and the other is in CS. Not in any way is the mathematical rigour of CS even touching that of Phyics. Some of the senior-level courses in statistical mechanics and quantum had math that PhD students in mathematics don’t see until their 2nd semesters.
No date on article leaves readers wondering how relevant this is to today’s economy. A date on something, if not the article, the comments, would be nice!
Since large portion depends on performance, in today’s bearish market, these numbers should be much lower, isn’t that so?
Is this a hard field for a woman to get into?
no..its not hard..infact there are many women who are cfa charterholders
Pointless article since no date exists. The numbers could be from 2007 which leads to inflated figures
The date is right at the bottom of the article.
Hello I am 28 year old mal, working as F&I manager, at a luxury automotive dealership. I like what I make but I am not happy with the hours and I was always interested in the world of Finance. Is there opportunity for me to change my industry from Automotive to Finance ?. I’m ok going to school for 3 or 4 years, if I will make $150k after that. Please let me know.