A disclaimer on this post is that you may be disappointed if you are looking for figures. I am going to talk more about relatives because I actually think buying power is more relevant given the rise in asset prices since I first started.
I started many years ago as an actuarial analyst and so moving to investment banking initially did bump up my pay especially because I got an year end bonus, which I recall was quite significant relative to my yearly salary. This is despite I have only worked there for a few months.
We always joked about pro rata bonuses many years ago. We used to say, if we have joined a firm after a few months, the bonus we got, our boss would tell us it is pro rata so the expectation is that we will get a full bonus if we have stayed for a year. That is a good way of keeping us motivated for the year. Then of course, the joke is that by next year bonus time, our boss would forget what he said a year ago and tell us what we got last year was not pro rata and so we should have been happy with last year’s bonus. This year is just the norm.
But perhaps the bigger joke (or not really a joke) was that for the last few years when I was in the industry, my boss told me, that my job is actually my bonus. Which is kind of true when I think about it now, because the industry is declining.
Many years ago, I got a counter offer that I could have bought 2 properties with 10% down-payment. And I was actually still a junior back then. Those properties would have returned >5x and I could have retired if I had taken on those risks.
I am not talking about this to show off. In fact, it actually showed I didn’t have both the savvy and guts to make those investments. I am trying to illustrate how much asset prices have risen compared to salary.
I got quite steady income rises throughout my 10 year career in banking but by the end, my bonuses were not enough to be down-payments for a lot of properties. Although this had to do with stricter mortgage rules as well.
Looking back, that was one of the decisions that could have changed my life trajectory and I just took the safe path without even knowing.
This is one of the reasons for my decision to switch career.
I sincerely hope all of you reading will be actually prepared when the few opportunities arise in your lives that you need to get hold off. Because once you missed it you missed it and your life is changed forever until the next opportunity (if that ever comes up).
Another point I learned from my career in banking was that investment banking jobs do not allow you to take on personal investment risks. It is because their jobs are so pro-economic cycle so they would only buy assets during bull markets but not during distressed times because their jobs are on the line. This has limited their ability to make money personally, which has been extremely important in the last 10 years when asset prices significantly outperformed wages.
Also, imagine our seniors and their bonuses. I used to hear them say, back when they were VPs, they used to go buy properties straight after their bonuses were paid to their bank accounts.
And in the last 10 years, those properties have risen significantly so most of them have or at least can retire by now and they are just in their late 40s.
So if we use properties prices as a currency for an individual’s time and effort, the relative value of our time and effort currently has deteriorated significantly compared to the people before us. It implies that the generation before has created the most value and this may have something to do with demographics and an ageing population. Perhaps technology is our and future generations best leverage in increasing the value of our time and effort again.