Is it difficult at all to become a Managing Director in IB?
The more I think about it, I must be missing something. You get all of these MM Managing Directors running around, dime a dozen, beating their chests and expecting deal teams to trust their every word because, well shit, they made it to MD! That means something right?
Well, I'm not so sure anymore. IB is hardly even getting good workers at the Analyst level these days. If PE is noticing brain-drain to other industries at the Associate level, you can bet your ass IBs are noticing it at the Analyst level. Add into the mix that nearly all the talented Analysts and lateral Associates will eventually end up in investing roles and the non hot-shot but reasonably chill and humble people will end up in corporate roles that allow them to see their children before bedtime. So who exactly does that leave to climb the ranks in IB? Honestly, when I think of my own Analyst class, most of the guys who are still in IB were the strictly middle-of-the-pack guys. I won't lie and say they are/were the worst of the bunch - those Analysts flamed out and do something else now. But the guys who are still in banking and didn't recruit for PE because they don't want to "rock the boat" really aren't the types of hot shots you would pick out in a room and say "Oh, that guy is going places!". Moreso it's the types of guys who were kiss-asses and never push on seniors back but still only end up mid-bucket. These guys were definitely not my favorite to work with, yet still, I have no doubt that most of them (if they stay in IB) will end up as MDs. They will do things exactly as their MDs before them did things, inefficiencies and all, and convince themselves that those same redundancies and inefficiencies are what helped them get there in the first place.
Is it possible that while IB juniors trust their senior bankers with their lives and assume that they must be all-knowing, a lot of these guys are actually just not good or efficient workers straight up? Like, what if the reason for 90 hour work weeks is just because anyone with the talent and chutzpah to change things just leaves and finds a better industry? And only the middling, just-trying-to-hang-on people are left to try and lead deal teams?
There's an ocean between top MDs and mediocre MDs. Look at someone like Neil Augustine at GHL vs the average GHL MD.
Kinda sounds like the classic 80/20 rule. 20% of MDs bring in 80% of the business and then the other 80% of senior bankers are there to look busy and keep juniors busy.
At my bank, a lot of the junior MDs are in the office before even the analysts and in many cases stay as long as they do. In contrast, it's debatable whether some of my bank's senior MDs even exist lol because you simply never see them.
Found the Neil Augustine
Neil doesn’t help his own people :(
He’s my school alumni and didn’t answer a single persons networking request
In all fairness, the dude is one of the most sought after restructuring figures out there. My buddy who used to work at GH said he literally did not sleep. Anyone who reached out to him to network is definitely shooting way too high IMO
Saw some Rochester guy say this about Handler too. Are you guys that stupid over there to not only reach out and feel disappointed when these people don’t message you back, but also whine about it?
These guys are Wall Street veterans with super busy work loads and families that have been removed from university for like 40 years. They do not give a damn if a student went to their school, nor have the time to network with you.
a friend who used to work with Neil showed me the turn on one of the decks he was working on with him.... my god
Marked to high hell?
As in all these things, it comes down to degree.
is it easy being a middle of the road, corporate drone BB MD that makes 1-2mm a year, Relatively speaking yes, you have to work hard, play the politics, position yourself well and have enough drive and baseline commercial skills, but you certainly don’t have to be exceptional. And yet, probably 2/3 of the starting VPs don’t get here.
if you’re a 2.5-5 a year MD, it’s harder. This probably means you’re are expert in your niche, able to lead and manage real deals, probably manage teams. These guys have a real content and capabilities, This is probably the top third of MDs.
If you’re a 5-10mm a year MD, this is hard and rare. This means either you’re in a client facing role and important clients have you on speed dial and you are a true trusted advisor. Or you run a material important business at bulge bracket firm. Top 10% of MDs.
If you’re consistently over 10 a year, you either are a major rainmaker at an EB, head of banking at a BB, or run a super profitable group at a MM. Not bad work if you can get it. 1% of MDs.
So the baseline isn’t easy but it’s not really hard. To be a good MD is pretty hard, and to be an exceptional MD, very hard. It’s only really the right end of the bell curve that matters,
Every MD is client facing and leading what are you talking about
There are MDs that focus mostly on execution instead of origination, especially at the large banks. Also some who are more internal process gatekeepers, committee members, internal advisory members, etc. and don't do a ton of actual live deal execution or originations.
There are entire teams of standalone M&A bankers that are not primarily client-facing (they may meet clients but only as a tag-along)
There are plenty of MDs who are just post boxes for their institutions. There may face the client but have no impact with said client.
Then there are MDs with trusted client relationships. World of difference
How long can the $1-2mm a year folks survive at their respective banks?
Fascinating analysis. Do you mind a follow up that I think would be informative for the juniors?
As a senior vp, here’s what I think happens to folks that “don’t make it”
- natural attrition of those that want to lead normal lives
- former junior “stars” that know how to crank work, are smart (and can be entitled), but don’t get the game and how to develop and execute your “MD business plan”
- folks who “floated” and never got a few senior advocates to push you through
- bad luck on the political and/or market side
What do the 2/3rds of VPs who don't make it do? End up in corporate? From what I've read VP level exits to buyside aren't that great.
I always find these threads to be interesting… for the most part I always come away from them thinking sticking it out in banking isn’t such a bad idea. Mostly because it seems like the odds of making it to MD are better than the odds of making it to partner / managing partner and therefore more likely to clip $1-2m years earlier in your career. Assuming you’re relatively well connected (probably should be making it that far) to gain access to some funds/deals to put that money into and build above average wealth. Ultimately, just better odds of becoming above average wealthy - which for the middle of the pack fellas is better than they should expect... But in any case, that’s another conversation that’s been touched on a million times on here.
What I feel like these threads usually leave out is the higher likelihood of losing your job in IB due to economic cycles than PE… which can certainly put a wrench in anyone’s “path” to being an MD. Granted, it’s not much easier to be savvy enough to navigate a downturn as an investor either (what probably separates managing partners from the rest).
If 2/3rds of IB VPs don't make it to MD, what percentage would you say PE VPs make partner?
I mean most PE firms only promote like the top 25% from Associate to VP to begin with. It makes IB AS-VP promotions look obligatory.
Chutzpah?
Oy vey!
Look I'm no schlemiel but in this weather I tend to shvitz a little bit, alright? Alright. Oy gevalt!
analysts and associates know that some seniors are dumb but pretend to admire them to get promotions instead of getting fired
As an IB/PE guy now in my 30s, 100% echo what the top-voted post above says - becoming an MD in IB is not easy but nor is it "hard". Now of course by not being hard that doesn't mean it's not hard like getting a job at McDonald's (otherwise everyone in the world would be an MD lol) - but if you're smart & hard-working enough to get into IB initially and have the dedication to grind it out for 10-15yrs, I would say there's probably a roughly 50% chance of eventually making it to MD level. So if you've made it into IB and your heart is truly set on this as your career, there's a pretty decent chance you'll be an MD one day. And tbh this is borne out by the fact there are some pretty mediocre MDs in this industry.
However I also agree that most people (2/3rds) don't end up as MDs. So thought I'd expand on the main obstacles to making it to MD:
- You have to pay your dues, and it's easy to get "stuck" at Director/ED level for a long time. Looking at LinkedIn now, I can see multiple people I've worked with at banks who made it to Director level relatively quickly, however have been stuck there for years. So are still at Director/ED level into their late 30s/early 40s. Why is that? Well the problem is that there's a big element of luck involved (more on that below), also you really need to have a compelling case/support internally to make it to MD. And that can be hard when either there's a downturn in business and/or the firm is too top-heavy i.e. older MDs who are still hanging around/clinging on. So a lot of people (even if they thought IB was what they wanted to do with their career) either tire of this and/or find better opportunities outside IB, i.e. moving to a relatively small fund/PE firm or even corporate development (although problem with CD is the pay even for senior roles won't be anywhere near what you're getting in IB by then).
- Luck: as mentioned above, luck plays a huge role at this point. I've seen barely above-average people shoot through the ranks of VP and Director to make MD in record time, just because the market/their area happened to be super-hot. Equally very smart guys I know took ages to progress upwards from VP, just because their sector was struggling (Oil & Gas might be a good example here of a sector that's been buffeted by various headwinds over the years).
Also beyond how much business your team is bringing in, there's also the matter of holding onto your job. E.g. let's say you've worked at GS for the past 5 years as an ED and have been angling for that MD promotion, when suddenly you're caught up in last year's layoffs and lose your job (not performance-related, just bad luck/sector specific). If you join another bank, are those 5 years going to count towards your MD track at the new place? Well, yes and no - yes in that you'll have 5 years more experience/deals under your belt/industry contacts compared to a freshly minted ED, but then also no in that you don't know anyone here and have nobody who is going to vouch/push for you to make MD quickly (also it would look a bit ridiculous if they hired you as an ED and promoted you to MD within a year, no matter how talented you are). So worst case - you might have to put in another 5 years to make MD! The only other option would be moving to a smaller bank/boutique to perhaps become an MD there, but that has its drawbacks as well.
Soft skills - no doubt about it, becoming (and being) an MD requires a huge amount of soft skills. Yes, to become a Director/ED you have already progressed well beyond the role of being an analyst/associate grunt - but whilst you might be a maestro at running transactions, are you great (and do you have the willingness) to play the political game internally? In an ideal world your outstanding work would do the talking and be enough by itself - but sadly in many firms that just isn't enough, the great work is seen as the minimum requirement rather than the only requirement to become an MD. So struggling here means your promotion to MD may be delayed by years, or indeed never happen at all. Which leads me onto the final point:
- Burnout/not wanting to be "trapped". I.e. how ever much you think you wanted an IB career at the outset, working as a Director for 5-10 years (potentially) running transactions for your boss the MD to make millions whilst you make six-figures, will likely grind on you. Yes of course you're working less hours than analysts and associates, but equally there's a different type of pressure - as an analyst you're not held to account if the deal falls apart, whereas a Director likely is (even if it's not their fault). So the need to be "always on" doesn't really ever subside.
And on not wanting to be "trapped" - I put this in quotation marks as of course by most people's standards you're earning a fantastic amount of money, but equally that does have a flip side - it limits your exit options. If you grind it out for 5+ years as a director you're likely in your mid to late thirties, maybe have kids and a big mortgage, and so are effectively "stuck" doing the MD's donkey work to keep your lifestyle going. Furthermore at that point you can't change careers as you have no experience in other fields. And the exit options you have (MM PE, corporate development) won't pay at least initially anywhere near what you're making. So I think a lot of people at VP level perhaps look down the road and know it will be a tough slog (with zero guarantees of ever actually making MD!) and decide to opt out/seek opportunities outside IB.
So yeah those are probably the main reasons off the top of my head for most IB people not ultimately making it to MD. But it's not because it's extremely hard by any means, more that it requires you to dedicate at least one and a half decades of your life (from analyst-level) to a goal that is highly dependent on luck and politics. That's a big period of time to sacrifice of things in your life you're maybe missing out on (doing more travelling, spending more time with friends, living life less stressed etc), for something that may not happen. Whereas by contrast the analyst (and associate as well) years are almost a no-brainer - yes it sucks for a couple of years, but that's a small portion of your life when you're likely too young to have kids or any real responsibilities. And if you make it through you are almost guaranteed to have very good job prospects. Pushing through to MD-level is a whole different level in terms of the work/risk/reward equation.
Excellent post. That’s why the advice I give to people (and not enough take it) at the VP / D level is to be 100% focused on making MD. That means a) being brutal with yourself and with your seniors about your probabilities, b) having a clear plan and objectives as to how to get there, c) being entirely ruthless about finding the right seat to make MD. Once you have the button, no one can take it from you and there is a huge comp / psychology / quality of life difference.
Believe me, I know this. Being a Director was miserable but I just assumed things would work out. When they didnt, I lucked my way into a great MD seat at another firm and the rest is history but when I look back, I was utterly complacent.
If you had to do things again would you still aim to be an IB MD?
Any thoughts on how you navigated your career / where you got lucky or unlucky?
Isn't it commonly understood that avg IB MDs (not killer, rainmaker, legendary types) are the mid of finance?
In an analyst class, the cream of the crop leave early for the buyside. The bottom flame out of finance completely. That leaves the mid of the pack.
Out of that mid, the average ones (who value WLB, maybe) leave for cushy industry jobs.
That leaves the mid mid types, who are not killer smart that they get poached by MF or HF early on, but not so incompetent that they flame out early. They are the atypical team players and hard workers.
Throw in the MBA associates (who make up the majority of MDs).
This is consistent with the life advice that it's better to have a slightly lower IQ, but higher grit and EQ which compels you to stay in the game for longer. The high IQ people take 1 glance at a paper and understand 80% of it, and move on. However, the lower IQ people can only understand 40% of it at 1st reading. Therefore, they have to read it multiple times which the smartest people don't have to. Eventually, because of this repetition, they understand ~90% of it and thus even surpass the intelligent people
Can you explain more about your last paragraph. Where did you read that?
Haha sure. It's an article that my dad sent me, and smtg that he wanted me to always remember. It's a Chinese article tho, but it should be easily translatable. Linked it here.
It discusses the notion (that I came to the same conclusion too, independently), that it's damn near impossible to be the top 1% cream of the crop, but it's pretty achievable to surpass 80% of people. You just need to stick it out like these IB MDs here. Because the best will always leave early for PE or HF, leaving the path ahead clear for the mid.
What I said earlier is under the 2nd point of 'multi-point action'. The smartest people understand things immediately so they don't need to wrestle with it further. The mid people, cuz they have to wrestle with it further, eventually surpass the smartest people in their comprehension of a certain topic
Case and point. You’d make a great MD.
It’s easy to become MD if you can prove to bring in business. Once you get to the later stages of the VP level you should start doing more BDR. If you’re promoted to director level this is where you have to prove that you can be a viable MD. At that stage you should act as if you’re an MD, bring on business, meet potential clients, develop key relationships and hopefully bring on a deal. At the director level if you can prove to bring on business and close deals you’ll be in the running for the MD position. Some stay at the director level forever because they’ll never be good MDs but they’re excellent executors btw.
I feel like that's where the luck comes in. Like someone whose a Director for 1.5 years and is in the right place at the right time to bring a big ole piece of business in probably gets promoted, even if it's a fluke or if it's really the MD above them wins the engagement but makes a point to give the Director credit for it. On other hand I bet there are a lot of people with potential that just have a Dbag MD above them who takes credit for all their BDR work so they don't get promoted because optically they don't look as good even though they're a major contributor.
That second possibility already boils my blood just thinking about it because I know it probably happens to everyone at least once. Idk if I could stomach it with my big ass mouth I'd be screaming bloody murder.
Just push down as much work as possible to subordinates and throw around some meaningless jargon and boom! you'll have your corner office in no time.
.
This is absurd...settling for a multi-million dollar annual paycheck? Just because the job doesn't appeal to you, doesn't mean that it doesn't appeal to others in some way (even if it's just financially, but it's hard to make it all the way if it's only about money). Nobody is putting in a decade+ of grind to try to reach the top of their profession by accident. The folks that are just along for the ride are generally gone by the time they are a VP
It doesn't really matter in the end anyways, because 80% of analysts will be in corporate / something non-finance related within 10 years anyways, regardless of if they stayed or went to the buyside
Is that true? I thought at least half would still be in some sort of buyside roles 10 years out.
People like to dog those corporate drone type MDs that pull $1-2mm and mostly on flow business but they're having the biggest laugh of all; they may not be the sharpest tools but if they're able to bank their entire bonus for most of their banking career, they can retire well before 60 with a NW of $10mm. Not many careers allow relatively normally talented people that kind of financial gain.
I think the point most people are making too is 1-2mm/year after 10-15+ years of absolutely gut wrenching and personal life destroying work isn’t that much…
If you kill yourself for 10-15 years and then end up as a below average MD (the 1-2mm variety), that could be - sign you are not very good at life. Getting to that stage should be 3 hard years as an associate (5 if you started as ann annalyst) and being effective as a VP / D and focusing on personal positioning / value add cs ghe grind.
If you go the extra mile, you want to end up in the 5+ category. And yes, I’d say that’s worth working for.
I don't know - work becomes less gut-wrenching at Director (so 10 years) and people stay MD often a lot longer than 10 years. And those guys who do very little M&A but a lot of flow are not grinding crazy hours.
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