State of Investment Banking Today
Just to be clear, this isn't a "Back in my day, I walked uphill barefoot both ways" rant.
But I caught up with a younger friend finishing up his second year in my old group this weekend. He was telling me that weekend work is almost unheard of now (unless very serious live process) and that most people are clocking in at ~60 hours per week... I have to ask: is this even banking anymore???
I think most of these changes are good, but I know the VP who ran recruiting for my fund this year said analysts were far less experienced than usual.
Is this a handful of groups or banks, or is the whole industry moving to better hours and diluted analyst experience?
Opine, monkeys.
xoxo
an average work week of 60 hours doesn't mean 60 hours every week.
Touche -- btw all for lighter load, just curious about current state of affairs. Your average around ~60 now?
I'm a CRE guy not a banking guy but was just pointing out the biggest misconception about hours. Plus its highly group dependent.
You're right, but it also means as many 40 hour weeks as 80 hour weeks.
Yep. That might be it. I remember at one BB diversity event, the guys in one group were talking about how they hardly ever had to work on the weekends (once they got past the initial learning curve) while the guys in another were talking about working three days sleep with no sleep.
A lot of it come down to group culture and the type of clients you have.
While it seems like it's certainly less than years ago, I don't think a 60 hour average is the norm.
My group is known to have one of the above average cultures at my BB, but I think the average analyst is averaging 70-75. With that said, the best analysts / most heavily worked are still consistently average 80-90 while the weaker / less worked analysts are realistically pulling 60-70 on average. The discrepancy amongst the class has been the most surprising part of it to me. That doesn't stop the 65-70 hour a week kids from bitching about "late nights" or when they stay late but accomplished next to nothing all day long. But an honest overall average I would guess to be right around 70-75.
Where on earth are these 60 hr / week banking jobs and please can I have one? Out of my ~10 buddies who graduate last May and went into IB, not one is averaging 60. Would be pretty chill though.
I think part of these cultural initiatives have to do with the fact that the QoL of with a real income of say $50K is so much higher than it's every been. Flying is dirt cheap compared to 10 years ago. The comfort of a $40K car also outweighs a $100K car 10 years ago. Clothing, electronics etc. have progressed a huge amount. As such, making an additional $50k in real income is worth less than 20 hours of free time per week than it was 10 or 20 years ago, and banks are slowly realizing that in order to bring in strong candidates they have to provide some work life initiatives. Another factor IMO is that there are now prestigious employers (Google/FB/Apple) for target school kids that offer insanely good hours without losing the prestige part that was exclusive to the banks/consultancies/law firms for a long time. This has also added pressure for banks to work juniors less hard.
Killer reply. SB for you, bud
I think this is also what people forget when they say "real wages haven't increased in 30 years" and "inequality is so high". On the first, I don't know how people measure income, but on what really matters, lives are better than ever for almost everyone. On the second, inequality is not an issue in and of itself, but I do think that we should do a bit more on this front.
If you are an intern in the M&A department of HSBC France, you only work 4 days per week. Officially speaking...
I was at one of the BB's where we lost an intern and watched the very sudden knee jerk reaction to try and create 'work life balance'. For example, it went from c. 90 hour weeks, to c. 80 hours. Case in point, after these initiatives came in, I was called by HR after three consecutive weeks of clocking >80 hours, whereas before the initiatives, it was a non-issue.
That said, I think the pendulum has swung too far, they imposed rules about interns not working on weekends, and not working after 10, which I felt did a disservice to the new interns. It might sound like a dumb thing to say, "oh, the poor interns, they don't get to work long hours", but the reality is, they only get 8-10 weeks in the bank to learn as much as possible, not only skill wise, but also in culture, and to decide if this is what they want to do with their lives post school. So when they don't get the real experience, re: crushing 45 hours between Friday and Sunday, they really won't know if this is the life for them.
Also, one of the items I really lean on when recruiting new analysts, is that if you come work at a BB for three years, not only will you get paid, but when you're working 2x - 3x the hours of your graduating class peers (really working, not just in the office) the development in your skill set and maturity goes through the roof. Comparing peers that did the analyst programme vs. going into corporate, no contest. Which is something that's lost, or at least reduced, if you pull back to 60 hour weeks.
Relevant username? To play devil's advocate, I don't think the incremental hours after 60 really add much to the learning experience, it is just very poorly managed time. Bankers are horrible at project management and see junior time as a limitless and costless resource. Perhaps that is changing for the better?
It's Parkinson's Law, work expands to fit the time available.
Agree that there is a lot of wasted time, overthought slides, underbaked ideas etc... and one of the reasons you get so fast is the continuous reworking of pointless slides and the addition of ridiculous sensitivities to models. However, I do think that there is a lot of value earned in hours 60 through 90. The combination of familiarity bought with repetition, and problem solving at 3:00 am with no one around to clarify provide a lot of value later in your career.
That said, you can get into a nasty loop, if you're in the office late, and come in tired, then everything you do the next day is slower and increases your chance of staying late again... which is where anything after hours 90 or 100 can start to be counter productive.
Based on the type of work analysts or associates perform, is it really the 70th through 100th hr of each week where bankers get 'better'? That's what I infer from some of these comments, as though working 60-70 can't teach you identical skills
The learning curve stuff is bullshit given so much of the time in banking is wasted/ spent on trivial (non-knowledge) work. When I had to pull 90 - 100 hr weeks at an understaffed hedge fund that was an insane learning curve, but only because it was spend on real work. I 'had' to do it not b/c of client deadlines, but b/c otherwise I didn't feel comfortable with my knowledge of our positions/risk
Strongly disagree. Some people pick it up faster than others, but obsessive attention to detail and "making sure it's right" only comes with time. You have to go through the painful repetitions to pick that up in my opinion. and it's one of the most valuable lessons the junior banking role offers.
I've had this conversation with quite a few old-timers. The transformation of IBD over the past few years is actually quite interesting to me.
To answer your question, yes I definitely think my generation has a more pussified analyst experience with better hours. Back when I was an intern, one of my mentors showed me that infamous DLJ memo as "inspiration" from his days at UBS LA. Whether he was being facetious or not, it's very clear to me IBD is less of the 100hr/week wild jungle a lot of old timers romanticize it as.
Then again, I don't see anything wrong with that. Salaries are up, bonuses are good, although granted I am too young to remember the crazy pre-crisis bonuses.
Future of IB and Wall Street Careers (Originally Posted: 08/20/2016)
I don't know how many of you guys are familiar with WallStreetPlayboys, but basically he's a WS guy who posts blogs for aspiring monkeys like ourselves. A few hours ago on twitter, he posted the following:
"Feel bad for those guys still entering Wall Street for $$. The declines are coming this year -20% all in. Gonna get worse. Leave asap!"
"If you are dumb enough to believe this is a "cycle" you're a joke There are ~5 years left of real pay then massive declines (automation)"
Where do you guys see WS ending up the next 5, 10, or even 20 years? Are we all doomed in the long term?
there are a lot of F-500 building a strong corp finance bench to take care of their own M&A process in-house (popular because the hours are better plus you're part of developing the actual strategy and see how the pieces fit in together vs. recommending the deal that pays most fees - pay is lower, but for how much longer?). I've recently been working with software that can develop research reports and you can't tell that it was produced by a computer (can't say which it is because it might give the deal away - think Narrative Science). Underwriting is about all that still has a legit case for existing but even that will get hit with pressure to lower fees. Everything else is gradually being handled by hedge funds, PE and dark funds. Add all that up and can one definitely understand WallStreetPlayboys's meltdown.
LMAO, you follow wallstreetplayboys on twitter? do you actually read that shit and take it seriously & feel motivated? damn.
I think it probably will be worse as it seems most traditional careers seem to be on the decline. It was very good in the past and that probably will not be repeated
it may die down over the next few years, but 25 years from now in a scene comparable to Star Wars: The Force Awakens, a 20 year old H/Y/P sophomore will be walking down 200 West street, find an old GS pitch book and hear Lloyd Blankfein's voice saying " There has been an awakening, have you felt it?"
He went from doing God's work to being God himself... beautiful
Worth throwing in here - Citi predicts that FinTech will cut out 30% of banking jobs (1.7 million jobs) over the next ten years
Source: https://www.finextra.com/newsarticle/28680/fintech-boom-will-lead-to-30…
This is a legitimate concern. At my BB this summer, one of the keynote speakers from senior management said that IBD headcount would continue to shrink over time due to robust process automation. Maybe we'll get a robo advisor one day saying sell at 7 times EBITDA.
How bad are the hiring situation and career prospects in IB really? (Originally Posted: 02/17/2012)
How bad are the hiring situation and career prospects in IB really?
Seriously, taking a cold look at it, is it really as bad and dead as the media say? Or are they just overdoing it?
Will starting a career now in the IBD direction be a dead end?
I'd be interested in perspectives on both the U.S. and the European banking job market.
I'm sure there is a bit of steam left, in the nonsensical career of being a banker. But the long term trend is similar to that of the brokerage houses.
Look at t this way: bankers are not exactly the brightest or most competent of the bunch(after all, all you need is a degree in cooking from harvard), so by definition they need their harvard friend politicians (former classmates) to bail them out. every few years. Do you really think people are going to take this bailout crap again? the tension is growing. people are fed up.
Banking will come back, it's just a matter of time. It will probably not be a raging money making business within the time frame you are looking at (next couple of years). We are at the bottom of the cycle right now and everyone is crying about it as they do every cycle. This cycle is going to be longer than most due to high debt levels and failed government policies, but it will eventually turn. As comical as this is to say, investment banking provides a valuable service to society, and there will always be some level of demand for that service (which will fluctuate up and down based on the position within the business cycle). Banking is not dead. A career in banking will still have decent or better exit opps.
The only way banking would be dead is if in the future companies were not going to go public, issue secondary equity or bonds, or pursue M&A deals. That's obviously not ever going to be a realistic scenario.
If by "career" in IB you mean coming on as an associate with the intention of becoming an MD yeah it may be a bad career choice compared to other options. But no, getting two years of IB experience after college and jumping ship for the buy-side or corporate finance and then getting an MBA will never become a bad idea.
who do you expect to take over the investment banking functions? someone has to do it and firms aren't going to create internal departments for M&A or financing
what investment banking functions? the ones that can be done by W.R. hambrecht? Sure the system has flaws, but its improving. The brokerage houses were touting how good their advisory was to retail, and we rarely hear of retail investors going with full service brokerage houses. Same with companies and rating agencies. If retail no longer needs the advice of full service brokerages, why does a 50 year old CEO need the bullshit advice of some25 year old yuppie?
Warren buffet will tell you alot more about this. Speaking of buffett he is quite vocal about his criticism of bankers. So are many other big time investors. quite strange huh?
thats cause no1 smart stays in the industry past 2 years of analyst, you must have a serious intellectual deficiency or just be mentally deranged to stay on as an assoc.
the problem is mgmt at f500 isnt particularly bright either, so the blind will keep leading the blind.
Corporate development is absolutely an internal M&A department. I think most F500 companies would look at an ideal merger as one that doesn't require a bankers fee. You get all these guys jumping ship from BB's who will definitely take a look at making solidly in the 6 figure area and potentially in the 7 figure if they stick with it at CorpDev, especially considering it's real person hours. I've always considered IB as the middle man, and there's the possibility it could get worked out of the process, but a lot of bankers work really damn hard to make sure they still bring something to the table. I don't think banking is fading away, and PE, VC, HF etc aren't going anywhere soon. It's really hard to predict what the future holds, but I'd be interested in hearing some more of what you guys think. Still really early in my research. Bottom line for me is that there's still not much better a field for a monkey to pursue than finance. IT isn't a good fit and Latin American Studies graduates aren't finding any more exit opps from their job at gamestop. Might as well go for it and give it hell, if only for the exit opps.
How bright is the future of the bank? (Originally Posted: 02/28/2016)
According to some, banking has been hurting for some time now due to the loss of trust in the global financial crisis of 2008, higher expectations from consumers, and rise of the millenial demographic.
From World Economic Forum:
Is technology really influencing the banking industry this much?
Article
If you ask someone what fintech means and what it encompasses nobody would be able to tell you. If you look at all the hot fintech startups they're really not coming up with anything new or revolutionary. Nothing what banks couldn't have come up with. That's just my opinion. The only good thing they're coming up with is making commercial banking more convenient and that's it and maybe peer to peer lending until a small group of people will abuse the hell out of it.
Spot on.
I would argue the fact that banks can do what fintech startups are able to do. The entire reason that startups and tech startups at that are able to thrive and build such up so large (without a Google or Facebook scooping in and destroying them) is the inherent advantages of the startup.
I agree its a little overstated, but thats just for now. FinTech is practically brand new and we haven't seen the Google's or Facebooks of the bunch even sprout out yet. Its like we're at the stage of Bebo and Myspace before the big FB comes up.
Fintech is an interesting sector right now and I've done a lot of underwritings in this space, but it's a typical tech growth market game. If you're not smart/lucky enough to pick the 2-3 winners in the given market, you're left holding equity in a company which has been left far behind
What is with this desire to crown tech companies as the king of industry?
If you are interested then go for it, but let's stop pretending that creating an app to make process X 10 seconds faster is somehow intrinsically better than every other career.
The General Future of IB (Originally Posted: 06/11/2016)
Hello WSO,
As a freshman at a semi-target, I was wondering how the future of IB is looking life, if I choose to follow that path. I have seen some users say IB is going to be "in a rough state" for the next couple years, which frightens me as this will be right at the time I will graduate. Thanks.
Hard to say, my sneaking suspicion is that there will be a continuation of the trend of strong boutique banks particularly for advisory work. As a junior banker I think the BB/EB distinction is moot save for those planning to spend their life in banking and even then it's likely to remain a close call. For senior bankers EBs offer a big advantage, cash money homie. No RSUs or deferred compensation generally speaking. In terms of capital markets I think weaker franchises may exit more capital intensive areas. Sales and trading will probably continue to go more towards electronic transactions, more transparency and spread compression. In summary, don't expect the mid aughts glory days anytime soon, but it is still a place where outsized compensation is achievable.
My (private) EB definitely had a deferred/non-cash stock option / RSU component for VP's+ - bank let them sell it back to them over a certain time period if they wanted to monetize or the koolaid drinkers could pray that they one day ipo.
Electronization isn't the only problem plaguing S&T.
Keep in mind that S&T became big following the repeal of Glass Steagal as firms rushed to make money with proprietary trading. While first viewed as a moneymaker it was also revealed as extremely risky post-crisis. Now banks are being told quietly that they won't be bailed out on trading losses (only on loan losses) because the government is simply able to do so this time: the central banks are already overstretched. The lack of a bailout safety net severely limits bank's ability to trade: less of a safety net combined with more risk aversion post-2008 means that banks will be taking fewer aggressive trading positions, hence much less of a need for traders.
Only one factor of course but it's a noticeable one.
Incidentally this ties into why I usually make good recommendations: my starting assumption is not that the market is "efficient". Rather I assume that, as George Carlin would say: "there's some OK ones out there but on the whole.....they're FUCKIN DUMB!!!"
IB keeps its’ rep because no one will admit they slaved away their undergrad earning perfect grades to simply slave away at a IB as a glorified assistant. So they make it sound ‘baller with how much money they make and how they are closing deals and what not. In reality, they are powerpoint b!tchboys (aka the deck) who make pretty presentations to the sellers of businesses. Modeling is part of the job, but not a huge part. Despite what you learn in the CFA, valuation does not equal price. Some of you were bashing me for my comp valuation I was attempting awhile ago and how I should use free cash flows. Look, we’re looking to buy a company at the lowest price possible and justify it by comps in the market, not do a DCF valuation and pay what the company is hypothetically worth 10 years from now.
IB is like spring break. Any of you ever go? Every year tons and tons of horny frat boys go South to places like Cancun, South Padre, Miami, etc. to party and hook up each night with ease like MTV makes it out to be. I’m here to tell you that it’s all a ruse. When I went on spring break, it was easily 10-15 guys per girl, and most girls kept close to their crew since they know what our agenda is. It was a far truth from what the REAL WORLD MTV made it out to be. But, no guy is going to admit they blew $2k on a spring break that was shittier than the run of the mill weekend in their college town; so they lie and say it was crazier than a GGW gang bang.
There you have it folks. The cat is out of the bag.
Terrible post on many levels. From your post history, you've been in IB less than 5 months. Yeah, you're probably not going to be given a ton of responsibility when you're still learning the basics, particularly if you don't understand the logic behind valuations (hint: you don't).
Pretty sure you're a troll, as many others have said, but I do commend you for your long history of consistently terrible posts.
south not South. Plz advise. Thx.
Future of IBD > PE (Originally Posted: 03/15/2010)
There's been some bad press lately (massive understatement) directed at Wall Street. I personally have the greatest of respect for bankers and their work ethic.
All negative press, rumors and predictions aside, I've spoken to a number of my friends in IBD, and while it's still top tier for prestige (esp for finance / moving to main street) they say the bonuses are markedly lower than back in 2005-2006 (boom years) and the "PE bubble" has burst. Some say we'll never again see the good ol' days of massive buy out funds like KKR and Blackstone raising billion dollar funds (Blackstone's recent $8 b fund aside since they've been working on that one for ages).
Do people have feedback on this? I have no opinion yet. Is the classic BB/elite boutique IBD > Megafund route now less lucrative, with fewer slots at the megafunds, and more competition then ever?
Uh since when was IBD > megafund PE?
For the time being, the answer is obviously yes, but who knows how that will change in the coming years. My guess would be that if someone were to do 3 years as an analyst at an IB and then 2 years as a pre-MBA associate in PE, the percentage of compensation earned in the last 2 years will increase as the sell-side gets squeezed by the govt.
he meant progression, not greater than.
I think difficulty of getting into IBD (especially BB/top boutique) has also gone up. Given that one is already in, the progression still exists. Though you're right, PE is not as lucrative as it used to be and people will begin to look at other options.
The whole point of PE was to take capital intensive, cash producing manufacturing companies, leverage the shit out of them, halt all capital investment, and increase equity through debt repayment as the machinery and capital assets gradually ground themselves into dust, thus ass raping the company and making the fund a lot of money. That's how PE made their money in the 70s and 80s. In the 90s and 00s, PE made money because banks literally went crazy and offered them ridiculous levels of debt with no covenants, then the PE fund either sold to some even crazier bank or just gave themselves a giant dividend. Most times both! Now, with the US manfacturing base raped and the credit boom over for the foreseeable future, someone tell me how PE is supposed to make money.
And please don't tell me some bullshit like operational expertise.
Operational expertise.
As much as I agree with your statement for the megafunds and their targets, there's a shit-ton of money to be made in the middle-market and below. I work at a MM bank and I can't even begin to explain to you how poorly some of these companies are run (even public companies with market caps around or above $1 billion). We deal a lot with companies in the $100-200 million revenue range, and I see more companies that are run poorly than companies that are run well. If you can pair an intelligent investor and someone with industry (and operational) expertise, there is a boatload of money to be made. We have a great relationship with a MM industry buyout shop that does just that -- over the past year-and-a-half, they've made six acquisitions with ALL equity (layered debt on post-transaction in a few cases) and then went in and removed the inefficiences... These guys don't make a whole heck of a lot of acquisitions, but every investment they provides a hefty return because they are experts in their industry.
I think that's why you'll see some of the megafunds shift towards smaller investments -- large companies generally have solid management and are run pretty efficiently. Not always, but it's far more difficult to make a killing on a huge company with "operational expertise" than it is in the MM.
this has got to be the most blunt summary of the pe saga in the past decades.
my answer is... the whole is no longer greater than the sum of its parts. better to piece off companies and keep crown jewels. another... asian manufacturers still haven't gotten owned by pe as much as the u.s.. megafunds have begun courting china since 90s.
What are some of these other options? Is there anything that pays nearly as well as PE?
Interesting info on MM PE funds. Are they easier to get into after B-school with no prior banking experience per say? What about consulting experience before B-school? Or they more selective in only offering positions to people with prior experience?
I am actually find the MM realm more interesting from your descriptions. Which region is really good for MM PE funds? NYC, Cali, Chi Town, Florida, ?
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