Tech TC with stock appreciation vs Finance TC
Many posts claim that while tech offers may seem lower than top quant firm offers, it would beat the quant firm offers with stock appreciation.
As an ex-F/G employee (and aS a MiLlIoNaIrE) with first-hand knowledge of compensation structure in both tech and finance, I decided to do some calculation on the effect of stock appreciation on overall TC.
Let's examine a top of band E5 F / L5 G offer:
Base: 200k
Bonus: 15%
Equity (4 years): 700k
Signing: 50k
Assume 20% yearly stock appreciation and no RSUs are sold, total pre-tax income in 4 years would be 200*4*1.15 + 700*(1.2^4) + 50 = $2421k.
For a fair comparison, let's look at a finance offer where instead of equity+15% bonus, an equivalent cash bonus is paid at the end of every year, and the entire cash bonus is invested into the same stock as the above:
Base: 200k
Bonus: 200*0.15 + 700/4 = 205k
Signon: 50k
Total income after 4 years: 200*4 + 205*(1.2^3 + 1.2^2 + 1.2 + 1) + 50 = $1950k.
Yearly income difference between tech and finance: (2421-1950)/1950/4 = 6%.
In other words, if an all-cash offer is >6% higher than the tech offer, then you would make more over 4 years with the all-cash offer by investing the cash bonuses into the tech company.
A few things this calculation has not accounted for:
1. An yearly stock appreciation of >20%/year: while certain tech stocks have indeed outperformed NASQAD-100, it'll not be logical to make your decision base on an assumption that the tech company you choose will continue to outperform. In fact, FB/Google stock prices were stagnated between late 2017-2019.
2. Stock refreshers: you'd get yearly bonus increments at top quant firms to offset this. Stock appreciation of the refreshers would only change the final 6% figure slightly.
3. Taxes: the tech offer might be more tax-friendly due to a larger capital gain tax (instead of income tax), but the difference it makes to the overall post-tax income would only be a small percent.
4. 4-year stock cliff: this is a small advantage finance offers has over tech offers.
5. Stock choice: with cash bonuses you can invest in whatever stocks you believe have the biggest potential/least risk while with RSUs you don't get a choice.
6. If you quit before 4 years, the 6% difference would be even lower.
This post only focuses on TC and there are obviously other factors you need to consider (location, culture, team wlb, interest etc).
TC: higher than tech
#google #facebook #netflix #apple #amazon #citadel #janestreet #hrt #swe #offer #tc
comments
Weird flex but okay, got your validation for the day from random strangers on the internet?
Edited to make it more apparent.
This post is classic - https://en.m.wikipedia.org/wiki/T.M.I._(South_Park)
How does the math look if instead of holding tech stocks, you sell every vest and hold total market in both cases?
How does wlb compare between the two? In your experience does finance work match up with EE/GE rating work in tech? Maybe we could consider that in the calculation by fixing that variable somehow.
Also curioua, do the bonus increments really match up with refreshers?
Another way to look at tech initial grants are as a guarantee bonus for 4 years. Haven’t seen 4-year guarantees for bonuses on finance offers I’ve gotten, just 1-year guarantees. Have you seen otherwise?
WLB varies greatly between teams even within the same firm; finance don't necessarily have worse WLB as many teams in FB, AMZN, TSLA etc could have it worse. Best to ask your hiring manager during the interviews.
Bonus increments are highly dependent on individual performance and the high variation/lack of data makes it hard to compare with tech. In general both the lower and upper bounds are more extreme than tech refreshers.
Not sure about other quant firms, but in Citadel bonuses generally only go up every year (or you get fired for underperforming).
If you assume a lower appreciation (eg. S&P), then the 6% figure would be even lower.