There’s a common perception that traders and bankers in London are among the best-heeled people around. The 
stories of excess and multi-billion dollar bonus pools – despite regulatory crackdowns in the wake of the financial crisis – have fueled opinions that every trader in the City is living the high life. The question is whether or not perception is reality.
Young traders may struggle to cope with London’s cost of living
For entry-level traders straight out of school, making ends meet in London can be a real struggle. A junior analyst may expect to make about £50,000 a year – which translates into around £36,000 a year once taxes and National Insurance contributions are taken into account. With rents on a small flat in central London running at around £1500 or more a month, that means that 50% of their net income goes out on accommodation alone.
Add in high transportation costs, food and taxes, and there isn’t much left over for a pint at the pub. Worse still, junior traders effectively work as contractors for up to three years, and have very limited job security. They’ll have to wait several years before they become an associate, when they can expect to earn nearer to £180,000 a year over time – at which point they might just be able to purchase an entry-level property in London’s overheated property market.
Long hours detract from quality of life
Even when traders do get ahead, the demands on their time are extraordinary. It’s not unusual for traders to work 80 or more hours a week – and they’re always on call when clients need support. Fast food late night is a common dietary phenomenon, and the pressure often runs high. This is particularly the case for people who work in the front office, who have much more exposure – but earn a lot more – than back-office staff.
It’s also worth noting that because trading is a high octane job, many traders only have a very limited lifespan because of this. Burnout is a common phenomenon, particularly among those who work on the front lines. Anyone who has the ability to work until midnight, go home, shower, grab a few hours’ sleep and be on the job again at the crack of dawn deserves some admiration – and arguably deserves the compensation that they get as well.
Long-term potential is still huge
In the short term, traders have to pay their dues to put their foot on the career ladder. However, in the long term, there are still a lot of people in the City of London taking home huge pay packets. By some estimates, there are nearly 10,000 people in the City who make more than £1 million a year in total compensation. When you consider that about 280,000 people are employed in finance in Canary Wharf and the Square Mile, that means that nearly 4% are breaking the £1 million barrier. Of course, this compensation includes basic pay, bonuses and long-term incentive packages – but it’s still enough to buy a very comfortable lifestyle. That’s why investment banks in the City attract the very highest caliber candidates – although any candidate needs to be prepared to work to the extreme to reach these heady levels.
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