1/7/11

I keep seeing posts where people say that banking just involves running models and copying charts into powerpoint. While I do understand that formatting is mindless and a big part of banking, I don't understand why anyone would think valuation or advisory is mindless.

If you actually know what you are doing, valuation is extremely detailed and requires a ton of thought. Moreover, telling a company how it should spin off an unprofitable division or restructure billions of dollars in overdue debt to save it from liquidation seems like it would require some cognitive thinking. So why do people say that banking is mindless for analysts? Maybe they are either too caught up in the stupid formatting? Maybe they just do what their superiors tell them without thinking? Maybe they actually don't know finance and don't know what they are doing so their superiors have to tell them what to do?

Please shed some light for someone that hasn't been in IB before.

Comments (51)

1/6/11

Hahaha...because as an analyst you will very rarely be doing anything BUT mindless crap...but will most likely still find a way to walk around and act like you are the next Moelis. There are always exceptions but at a BB this will almost certainly be the case. The perception of glamour and prestige that was created a long time ago in order to draw Harvard grads into entrepreneurial cutting edge firms, still hasn't faded even though all those same Ivy grads are just fighting and clawing to pack into what will most likely be a soul crushing/brainwashing experience, like sardines.

The WSO Advantage - Investment Banking

Financial Modeling Training

IB Templates, M&A, LBO, Valuation +

IB Interview Prep Pack

30,000+ sold & REAL questions.

Resume Help from Actual IB Pros

Land More IB Interviews.

Find Your Perfect IB Mentor

Realistic IB Mock Interviews.

1/6/11

If you work at a BB the formats are already built, you are just plugging in numbers. Please tell me at an analyst level what requires cognitive though on a valuation? Everything is a formula except maybe creating the comp set (what I should be doing right now instead of being on this forum), i am not saying analysts are dumb by any means. The fact is you are just not given that much latitude on your valuations at the very junior levels. Anything that has any big of subjectivity will almost certainly be handed down from your higher ups.

1/6/11

Haha oh college students. So bright eyed, bushy tailed, and full of visions of front page deals and big swinging dicks. All of the things you mentioned in your post are things that your FIRM will be doing. 10% of the time, you might get to help. The rest of the time however, you will be doing all of the dogshit that has to happen behind the scenes so stuff that makes the Wall Street Journal can happen. That includes mindless/pointless research, changing the color of an arrow just because your MD doesn't like the color green, or redoing a month of said mindless work in a single night on a VP's whim.

And the modeling. Oh, your model shows a valuation of 7.3x? The client is expecting to see 8.5x at least or we won't win the deal, so you'd better tweak your inputs so it spits out something higher than that.

But keep that idealism going, that's how we get you to sign the offer letter :)

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

In reply to HFFBALLfan123
1/6/11
HFFBALLfan123:

If you work at a BB the formats are already built, you are just plugging in numbers. Please tell me at an analyst level what requires cognitive though on a valuation? Everything is a formula except maybe creating the comp set (what I should be doing right now instead of being on this forum), i am not saying analysts are dumb by any means. The fact is you are just not given that much latitude on your valuations at the very junior levels. Anything that has any big of subjectivity will almost certainly be handed down from your higher ups.

This "set" model you speak of - are you saying it has over a 1000 inputs? Unless it does, there is absolutely no "set" model you can plug into that will give you a correct valuation. Every company is different and has many different valuation issues.

That is, of course, if you are actually trying to get the right valuation. Are you saying that the right answer isn't what they want?

1/6/11
aceofspadestrader:

If you actually know what you are doing, valuation is extremely detailed and requires a ton of thought. Moreover, telling a company how it should spin off an unprofitable division or restructure billions of dollars in overdue debt to save it from liquidation seems like it would require some cognitive thinking.

That's not something that analysts or associates do. The MD's are the advisors. Companies don't pay millions of fees to get 100 PP slides with graphs telling them info they can find out themselves. If I'm a CEO, why should I pay so much money for an analysis that I can get by hiring an accounting graduate, enrolling him in a valuation course and paying him 50k per year. Companies pay your MD's to act as agents and to provide expertise based on years of experience. Your presentations and 'analyses' are just marketing materials to help your MD play his role of a salesman. Excel/PPT/financial analysis skills are commodities. Relationships and experience add value.

1/6/11

Are you reinventing WACC or CAPM? Didn't think so, ok so you may have to re write a few things and delete some cells, real tough. I am always doing valuations on our portfolio companies and am at the mercy of my bosses, some of the stuff i do requires in depth analysis but it is not my valuations. All my valuations are tweaked a million times by my bosses, i certainly don't come up with growth expectations or days of expected receivables. Quit being a d-bag, you asked a question and you got an answer. I was not being a sarcastic little pric like yourself, so go get some insight and then return with a valid arguement.

1/6/11

So in team meeting discussions of helping the client get through their problem/task, would a very very good ibd analyst ever be able to assist or at least ask constructive questions (even though the md/vp probably already took them into account)? Would this change at a BB versus a boutique?

1/6/11

Keep telling yourself that banking requires anything more than a high school diploma lol

In reply to TNA
1/6/11
ANT:

Keep telling yourself that banking requires anything more than a high school diploma lol

hahaha only you ANT only you

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

WSO is not your personal search function.

In reply to aceofspadestrader
1/6/11
aceofspadestrader:

So in team meeting discussions of helping the client get through their problem/task, would a very very good ibd analyst ever be able to assist or at least ask constructive questions (even though the md/vp probably already took them into account)? Would this change at a BB versus a boutique?

Look, CEO's or CFO's are not some hopeless idiots that got into their positions by accident. It's not like their 20+ years of experience are so useless that they need to pay a bank several millions in fees just to have some nice chat with 22-year-olds who will ask them questions that will suddenly make them realize how to solve their problems. Even if that's the case, as a CEO, why would I pay your bank so much money when I can hire you for a fraction of that amount and your job will be to ask me questions all day. Or I can get that for free by making my wife at home ask me questions and help me 'think through issues'. As I said, you are not there to provide some insightful analysis that the companies can't do by themselves. I'm pretty sure that most CFO's have learned something about valuation at some point in their careers and they can figure out their company's value without your help. You are there to support your MD to help someone buy or sell something for as little/much as possible. In other words, you are there to do the annoying supporting paperwork that your boss will use as an aid in order to convince someone to buy/sell something for a certain amount. It's that simple.

1/6/11

Dude, they are outsourcing banking to India. I have come across a bunch of shops that have all the modeling done over seas. This shit isn't rocket science. Why do you think they take liberal arts graduates for banking positions. If you can figure out excel and sleep only 5 hours a night you will do fine in banking.

Hardest easy job to get

1/6/11

I think there is a lot of cynicism on this forum with regards to an analyst's role. I think the experience can be quite varied from being dull and boring crunching numbers, models and comps for your associate to being in the negotiation room with clients helping them think through the most appropriate offer structure and hedging and financing solutions. Certainly, I was fortunate enough to experience the latter, while the former is part and parcel of every analyst's life cycle at a bulge bracket. I think sometimes as an analyst you have to find ways to add value and not underestimate what a bit of lateral thinking and a fresh perspective can add to a deal. While you are initially expected to just crunch numbers (I'm talking perhaps most of your first and second years) the value of your grasp over the detail is generally never underestimated by the MD and / or the client. When you're in the drawing room with the client and you ask a smart question, that can sometimes be the trigger to initiate a discussion between the MD and the client, potentially resulting in a solution. Being the junior guy, you have the advantage of being able to ask a question without looking like you don't know what you're doing. Your VP or MD may not have the same luxury.

1/6/11

i call troll.

Veritas

1/6/11

this thread is great prep for the question: "why do you want to do trading instead of banking?"

The WSO Advantage - Investment Banking

Financial Modeling Training

IB Templates, M&A, LBO, Valuation +

IB Interview Prep Pack

30,000+ sold & REAL questions.

Resume Help from Actual IB Pros

Land More IB Interviews.

Find Your Perfect IB Mentor

Realistic IB Mock Interviews.

1/6/11

The why banking is the hardest question in the world. You have to be able to lie through your teeth, with a straight face, while both people know it is for the money.

In reply to TNA
1/6/11
ANT:

The why banking is the hardest question in the world. You have to be able to lie through your teeth, with a straight face, while both people know it is for the money.

Well, if you can get that down, then you're ready to be a big time banker someday.

1/6/11

It's fascinating how many users with "Prospective Monkey" (aka college student) next to their names are so totally deluded that they feel the need to come in here and tell older, experienced guys that we're wrong about what it's like to be an analyst.

C'mon guys. I know you're all excited to major in finance, go work at Goldman Sachs, and be a master of the universe at 22, but sorry, you've got to pay your dues first. Everyone's a bitch for a while before they make you king.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

In reply to N.R.G.
1/6/11
N.R.G.:

Excel/PPT/financial analysis skills are commodities. Relationships and experience add value.

well put

1/6/11

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

In reply to robes
1/6/11
robes:

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

Not sure where you heard this, but hardly any hedge funds hire out of investment banking. Nearly all of the places you mentioned will hire from sales & trading, not investment banking.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

1/6/11

Penn's got a great perspective that I think, while it may be slightly optimistic, is true for anyone who is looking to go into banking.

Why wouldn't bankers be good fits for hedge funds? Those types of hedge funds require a lot of research and analysis that bankers have good skillsets for. I know plenty of bankers who ended up going to hedge funds, and my opinion is that the intuition and familiarity that you build in banking is what makes you a good fit, as long as you have in interest in investing.

1/6/11

Look, this is the third time I have proposed this. I need some damn backers for it. I want to start an Ibank and only hire high school grades with excel certifications, pay them 40k a year and treat them like chinese counterfeit shoe makers.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to CaptK
1/6/11
CaptK:
robes:

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

Not sure where you heard this, but hardly any hedge funds hire out of investment banking. Nearly all of the places you mentioned will hire from sales & trading, not investment banking.

Wrong. Just because your crap mm wasn't recruited by a HF doesn't mean HF's aren't calling up top analysts for jobs all day right now. Going to a recruiter HF interview tomorrow. Its the time of the month...

In reply to boutiquebank4life
1/6/11
boutiquebank4life:
CaptK:
robes:

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

Not sure where you heard this, but hardly any hedge funds hire out of investment banking. Nearly all of the places you mentioned will hire from sales & trading, not investment banking.

Wrong. Just because your crap mm wasn't recruited by a HF doesn't mean HF's aren't calling up top analysts for jobs all day right now. Going to a recruiter HF interview tomorrow. Its the time of the month...

the HFs hiring from S&T are those that focus on global macro, fixed income arb, relative value etc type of strategies (i.e. using those products that do not require balance sheet level analysis, the type of work you do in banking)...the HFs dealing with distressed debt, long short credit etc require balance sheet/financial statement oriented work which you don't really do in S&T

1/7/11

Banking is mindless. We just use people like you to convince other's it's not so we can justify getting all that $$$

In reply to boutiquebank4life
1/7/11
boutiquebank4life:

Wrong. Just because your crap mm wasn't recruited by a HF doesn't mean HF's aren't calling up top analysts for jobs all day right now. Going to a recruiter HF interview tomorrow. Its the time of the month...

Not sure who the fuck you think you are bud. So you spent an 8 week summer internship at a boutique, and still you come by threads you have no business being in and turn them into pissing contests with ad hominem attacks.

Good luck in your interviews. I hope for your sake you can trick some place into hiring you before they figure out what a prick you are.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

In reply to robes
1/7/11
robes:

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

It's not like they use IBD analysts to work on rocket science projects there and put them directly into senior positions. They still hire them for analytical work related to basic corporate finance. It's just a convenient pipeline to get people who are already trained in valuation - saves training hours and recruiting efforts to go to schools and sort through hundreds of resumes,

In reply to robes
1/7/11
robes:

the HFs hiring from S&T are those that focus on global macro, fixed income arb, relative value etc type of strategies (i.e. using those products that do not require balance sheet level analysis, the type of work you do in banking)...the HFs dealing with distressed debt, long short credit etc require balance sheet/financial statement oriented work which you don't really do in S&T

Fair enough robes, good point. Bit late and I should have read more closely - different strokes for different folks.

Still, to return to the thread topic, the reason you get hired into PE and HFs as a banking analyst is because of the 20% of your time that you spend doing actual analysis. You are also able to learn a ton by being around the senior guys, sitting in on calls, etc. But the fact does remain, you do spend ~80% of your life pushing powerpoint slides.

- Capt K -
"Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham

In reply to N.R.G.
1/7/11
1/7/11

In a nutshell: you are just toggling the numbers to match the valuation that the MD has decided on long before you fired up your Excel.

1/7/11

Whilst I agree with your point that the work being done is actually often very interesting (i.e. Advising massive corporations on their capital structure), as most people have explained you don't come anywhere near this sort of decision making at the analyst level- and you rarely build models from scratch either.

afroman23

In reply to CaptK
1/7/11
CaptK:

Everyone's a bitch for a while before they make you king.

This is funny and very true. It is something that every college student (including myself) and recent graduate should have written in their cubicle/dorm room/apartment so they see it 100 times a day.

patternfinder:

Of course, I would just buy in scales.

See my WSO Blog | my AMA

1/7/11

Agree with CaptK, everyone is a slave for a while until you earn respect and show everyone you really want to learn and add value. Also agree with Ivoteforthatguy, your bosses know what they want and you need to get there....Let me be the first to let any prospective monkey know that arrogance is the first thing that will destroy your career, and listen to senior guys (I am not senior) because they know their stuff. I better alt tab on outta here before my boss pops in...

1/7/11

I think the problem lies in the glorification of the job by the banks themselves, which is necessary for them because they need a way to lure fresh bodies into the grinder each year. At the end of the day, it is a sales job, but sales doesn't sound 'sophisticated' and that's why bankers try to make it sound as if you will be shaping the economy or some crap like that. In reality, your boss is an agent who gets paid well because he is able to extract a small fee from a high-value transaction, and you are the support that prepares marketing aids that will help your boss win the deal against other salesmen. You are not a decision maker, but neither is your boss - you are there just to facilitate events.

In reply to N.R.G.
1/7/11
N.R.G.:

I think the problem lies in the glorification of the job by the banks themselves, which is necessary for them because they need a way to lure fresh bodies into the grinder each year. At the end of the day, it is a sales job, but sales doesn't sound 'sophisticated' and that's why bankers try to make it sound as if you will be shaping the economy or some crap like that. In reality, your boss is an agent who gets paid well because he is able to extract a small fee from a high-value transaction, and you are the support that prepares marketing aids that will help your boss win the deal against other salesmen. You are not a decision maker, but neither is your boss - you are there just to facilitate events.

this.

the upside for the analyst is that he learns a bit of valuation and technical skills(altough often times your valuation skills will just continue of fudging with numbers till the valuation your boss pulled out of his ass and ur model match) and that after 2-3 years you can stop bullshitting for a living.

In reply to aceofspadestrader
1/7/11
aceofspadestrader:

...correct valuation...right valuation. Are you saying that the right answer isn't what they want?

The first two terms do not exist. There is no right valuation. There is the valuation that you pitch to get the deal and the valuation you sell the company for. Neither of those is "right" or "correct." Besides, the analyst is not the one making assumptions on the inputs in the model. That comes from senior guidance. Read some more about the industry before asking questions like this.

1/7/11

that's why I work in a boutique

1/7/11

I'm a current banker, and my two other banking friends warned me best: "A dog could learn to do my job in 8 hours." Its mindless work. Your MD isn't gonna BURST into your cube and say OMG aceofspadestrader PLEEEAASE help me sell this billion dollar company! If you can't then we're DOOMED!

Hell, analysts don't add value either. We punch in numbers into excel and make powerpoints look pretty. We're just doing our best to make the seniors' lives easier.

1/7/11
1/7/11

Its more about detail orientation, work ethic, and being proactive than raw intellect.

In reply to robes
1/7/11
robes:

then why do all the top hedge funds doing distressed debt, long/short credit, long short equity, event driven strats (merger arb, cap structure arb) etc have PMs and analysts that come from IBD backgrounds if all IBD analysts do work that is so trivial...

When they do hire banking analysts, its because you get kids who are used to working 18 hours a day and will consider it a step up to work 14. You dont have to worry about work ethic being a problem. It has nothing to do with any skills you learned in banking. Just like an MD at a bank, most portfolio managers at hedge fund dont give a shit about the opinion of a 25 year old. I know because I work for a hedge fund where we hire 25 year olds from banking or elsewhere....they know nothing and the closer they are to understanding that they know nothing the better they tend to do.

1/8/11

well people like to hire banking analysts because a) getting into banking is pretty hard so they worked hard at school and likely had good GPAs b) they may be dorks, but many of them are very smart dorks and can be taught basic human interaction skills later on c) great work ethic and basic knowledge of finance/accounting/excel d)many of them are sooo happy to be out of banking ;)

Analyst program is a very tough experience but ex analysts from top banks are very good people to hire

In reply to ILOVENYGUY
1/8/11
ILOVENYGUY:

well people like to hire banking analysts because a) getting into banking is pretty hard so they worked hard at school and likely had good GPAs b) they may be dorks, but many of them are very smart dorks and can be taught basic human interaction skills later on c) great work ethic and basic knowledge of finance/accounting/excel d)many of them are sooo happy to be out of banking ;)

Analyst program is a very tough experience but ex analysts from top banks are very good people to hire

[ ] the buyside needs great human interaction skills

you can be a rhinoceros wearing a purple hat with a massive dildo attached to it and generate 20% return a year with your fund and get loaded.

1/8/11

There is no correct answer in banking. The correct answer is what the buyer is willing to pay.

The OP's rant about building different models for different banks made me laugh. What a fucking bafoon.

That being said, it doesn't mean being an analyst is not challenging. When your MD tells you and your VP to do whatever you can to bring the comps and precedents' valuation range down in a defensible manner (which no one will ever check, but it can't be complete nonsense) - at 10 PM when the meeting's at 9 AM the following day, and you have do another screen with various criteria for precedents, then center on a set of 10 and then have to fully spread each for LTM and P.F. shit and have it all BE RIGHT to the tee - and add to that that you just got sick with the swine flu going around preying on people with fucked up immune systems b/c they don't get enough nutrients / sleep / exercise in their lives, and you got the fever so bad you can make scrambled eggs on your forehead, but you can't go home, and it's midnight already ------------ this is where your value as an analyst actually comes in handy. It's not easy. But for fuck's sake don't ever, ever, ever think you'll be adding value to your client. They can easily reschedule that 9 AM meeting while you're in this semi-conscious psychological limbo reveling in the fact that you're an awesome analyst with the world at your feet.

In reply to ILOVENYGUY
1/8/11
ILOVENYGUY:

well people like to hire banking analysts because a) getting into banking is pretty hard so they worked hard at school and likely had good GPAs b) they may be dorks, but many of them are very smart dorks and can be taught basic human interaction skills later on c) great work ethic and basic knowledge of finance/accounting/excel d)many of them are sooo happy to be out of banking ;)

Analyst program is a very tough experience but ex analysts from top banks are very good people to hire

You seem to be very misinformed. Do you really think an investment bank hires an analyst for 100k+ a year planning to teach him basic human interaction skills? Working hard in school and getting a good gpa will get you an interview, but in no way, shape or form get you a job any where on the street or at any company for that matter. You have a lot to learn before setting foot in an interview my friend.

In reply to TNA
1/8/11
ANT:

Dude, they are outsourcing banking to India. I have come across a bunch of shops that have all the modeling done over seas. This shit isn't rocket science. Why do you think they take liberal arts graduates for banking positions. If you can figure out excel and sleep only 5 hours a night you will do fine in banking.

Hardest easy job to get

Seeing the same.

1/9/11

Yeah, every shop has analysts in India. Pretty soon there won't be a need for analysts, just a couple of guys consolidating information into PPT slides without doing any work. Come to think of it, they'll probably outsource that too.

1/9/11

Read Monkey Business and you will understand why banking is mindless.

1/9/11

To unlock this content for free, please login / register below.

  • Facebook
  • Google Plus
  • LinkeIn
  • Twitter
Connecting helps us build a vibrant community. We'll never share your info without your permission. Sign up with email or if you are already a member, login here Bonus: Also get 6 free financial modeling lessons for free ($200+ value) when you register!
In reply to SHORTmyCDO
1/9/11
1/9/11

What's Your Opinion? Comment below:

Login or register to get credit (collect bananas).
All anonymous comments are unpublished until reviewed. No links or promotional material will be allowed. Most comments are published within 24 hours.
WallStreet Prep Master Financial Modeling