Boutique investments banks are spending less on pay. That's a good thing
Boutique investment banks have always had a reputation for paying very well. In the last few years, this reputation has been stronger than ever – and it’s causing problems. Luckily (for shareholders of these boutiques), the historic years of pay are coming to an end. They must, in fact.
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Boutiques are paying more than they have ever paid historically. A lot more. Across the last 18 quarters, the compensation ratio - the percentage of revenues paid out as compensation to employees - at five major American boutique investment banks (Evercore, Lazard, PJT, PWP, and Lazard) averaged 71%. It was at its lowest at the start of 2022 (where it was around 65%) and lowest at the start of 2024, when it was around 78%.
None of the figures in the previous paragraph are sustainable. Reuters reported a few days ago that boutiques have historically paid around 60% of their revenues as compensation. It also calculated that, by diverging from this historic compensation target, four of the main boutiques alone (Evercore, Lazard, Moelis, and PJT) will pay an excess of $2.3bn in compensation to its bankers between 2023 and the end of 2026.
Part of that is related to hiring patterns. Hiring has been disproportionally weighted towards senior bankers who can bring in clients – rainmakers, dealmakers, MDs, SMDs, Partners, whatever you want to call them. All the boutiques advertise how many dealmakers they’ve hired. When banks talk about investing in their platform or their team, they’re talking about hiring MDs.
Lazard, offered a uniquely candid candid clue as to the future. Last week, CEO Peter Orszag told media that AI would deal teams “leaner”, with smaller teams being led by more managing directors. Senior bankers are much more expensive than junior ones, however. And at Lazard specifically, the ratio of MDs to employees is already around 1:7.
A lot of the problems at hand are related to the fact that boutique banks didn’t really do well enough in the first half of 2026. Lazard and PWP revenues were down on the first half of 2025. PJT and Moelis did better, but still behind how their bulge bracket rivals, especially on Wall Street, did. Only Evercore did on par.
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