Should you even be aiming for BB IBD anymore?

Asatar's picture
Rank: Senior Neanderthal | 4,229

A couple of stories have hit the tapes recently which both make fairly depressing reading for those looking to jump into a new 2/3 year analyst programme at a bulge bracket bank.

1 - Bonuses are down. Way down. I can only give UK figures here but the average 1st year salary is now around PS65,000 all in (20k bonus) which, after tax, is more like 35-40k. Numbers are similar in the US.

2 - Banks are slimming and trimming faster than an anorexic teenager. First Goldman announces it is cutting it's 2 year programme, then UBS lays off most of it's London bankers. Across the board the bulge bracket are cutting middle-management, promoting less partners and hiring less grads.

Now, I am not for a second going to question the value on your resume of having 2 years at a bulge bracket, very little compares. However, what about the stuff that DOES compare?

Top tier consulting, boutique / middle market investment banks and advisory firms, hell even corporate finance positions aren't far off. If you're aiming for business school any of these will set you up nicely (arguably better than BB IBD in the case of consulting). The economy is in a terrible shape so now is probably the least risky (in terms of your career) time to try the entrepreneurial route.

So, aspiring monkeys, consider your options wisely! An investment banking stint at a bulge bracket will always be an incredibly rewarding path, but that isn't the only thing that's out there. It isn't all-or-nothing, there are other paths out there.

Have a good week!

Comments (17)

Nov 14, 2012

These are definitely trends that job-seekers should be aware of, however:

1) I don't think that at most BBs in the U.S. analyst bonuses are yet as low as $20k, even for first years. All-in should still be over $100k and good luck making that in consulting or corporate finance.

2) Yes banks are slimming, but firstly: Goldman isn't "cutting" its 2-year program. From my understanding, they're changing the structure so that newly hired analysts just aren't automatically put on a 2-year contract, with the goal of making them stay around longer. GS is still hiring analysts, however, and analysts will still be able to leave and go to PE if they desire (someone please correct me if my understanding is not correct). And you also cite UBS, specifically London - arguably the weakest BB in one of the weakest possible markets right now. I'm not surprised they have cuts but their situation is not representative of all other BBs in the U.S. and/or other non-Europe markets right now.

3) MM investment banks and corporate finance positions would not be generally comparable to BB IBD in terms of exit ops - the job landscape has changed, but that hasn't. Same for non MBB consulting. For MBB, the exit ops are definitely strong, but people should probably decide between banking and consulting based on their interests. Do you want to help a company go public, buy another firm/sell itself, or raise debt? Or do you want to advise a company about how to optimize its revenues, reduce costs, or simply come in to support a strategic decision your client has already made? Some people might prefer to stay in NYC 7 days a week, even though they have long hours, than be constantly travelling to (typically) unexciting places across the country. I don't mean to knock consulting - others might think that what I wrote presents a slanted viewpoint, and that may be true (it's just my impression). But at the end of the day, banking and consulting are very different and people should think about what they really want to do for 2 years.

4) Entrepreneurship is awesome. Everyone that I know wants to do it eventually, but the thing is, it's hard to feel ready to pursue a start-up immediately after graduating. Banking still offers a great foundation to learn corporate finance/how businesses operate financially, especially for students that didn't study business in college. I'll concede that consulting also offers a good jumping-off point for entrepreneurship, with a greater focus on strategy than finance.

5) The last point is good to remember. There are lots of things out there, and no one "perfect job."

    • 1
Nov 15, 2012
asiamoney:

1) I don't think that at most BBs in the U.S. analyst bonuses are yet as low as $20k, even for first years. All-in should still be over $100k and good luck making that in consulting or corporate finance.

The equivalent in the US would be around 30-35k yet which means 100-105k all in. As others have mentioned, the hourly rate is probably something in the region of $25 which is pretty damn good on a standalone basis, but when you look at the opportunities a target with stellar grades and internships would have, it's suddenly not THAT amazing anymore.

asiamoney:

2) Yes banks are slimming, but firstly.....

UBS is the first mover, I think most of the BB are going to be cutting their hiring dramatically. Maybe not firing in the same manner as UBS but every report / analyst prediction / CEO statement says they will not be hiring anywhere near as many in the future. Yes it is cyclical but who knows how long this cycle is going to go on for.

asiamoney:

3) ....

Fair points on consulting. Obviously it comes down to the preferences of the individual but in terms of opportunities, reputation and even pay, consulting (top tier at least) is definitely up there with BB IBD.

asiamoney:

4) Entrepreneurship is awesome. Everyone that I know wants to do it eventually, but the thing is, it's hard to feel ready to pursue a start-up immediately after graduating. Banking still offers a great foundation to learn corporate finance/how businesses operate financially, especially for students that didn't study business in college. I'll concede that consulting also offers a good jumping-off point for entrepreneurship, with a greater focus on strategy than finance.

I actually disagree. Going the entrpreneurship route straight out of undergrad is possibly the best time to do it. Yes you have less finance knowledge but you also have less responsibilities. You wont be tied down to a $1k (minimum) per month rent contract, you won't be earning money so theres less inherent financial risk to you, it's much easier to explain 2 years after college with starting your own business than it is when you're say 30.

asiamoney:

5) The last point is good to remember. There are lots of things out there, and no one "perfect job."

Agree :)

Nov 14, 2012

To say all in $100,000 USD for a 22 year old outside of NYC is bad makes me sick.

Nov 14, 2012
BTbanker:

To say all in $100,000 USD for a 22 year old outside of NYC is bad makes me sick.

Seconded.

Nov 14, 2012

^ Same. Anything less than 250K is horrible for a 22 year old target

Nov 14, 2012

Just to back up the OP, the salary is pretty bad when you look at it from an hourly basis. Of course it's still a lot of money but you're working at least 2x the average person who is clocking 40 hours of work a week. However, investment banking is still going to be very popular due to its overall high salary and the exit opps. If anything, due to the cuts you mentioned, getting a banking job is going to be even MORE competitive going forward.

Nov 14, 2012

Banks have always overhired during good times and overfired during bad. This, too, shall pass

Nov 14, 2012

If you're making 70k+ out of undergrad, consider yourself to be in the top 10% of 22 year olds. It blows my mind when my friends (who are aiming for IBD) complain about how certain roles (e.g. ECM/DCM) pay less than "traditional" IB and that 80-90k sucks. Are you serious? 1 in 5 college grads probably can't find jobs right now and you're complaining about that salary figure? Loads of people are willing (and competent) to take the job.

Nov 14, 2012

That's not the point. It's not that 100k is not enough, its just not enough for that many hours.

I make as much as an IB analyst working less than half the hours. As much as I want to leave and go do an Analyst stint at a BB, I find myself unable to commit losing my life for two years. If the salary was like 2007, I probably could justify the switch for my future. Working that many hours for a 100k salary does not seem worth it.

Nov 14, 2012
qweretyq:

That's not the point. It's not that 100k is not enough, its just not enough for that many hours.

I make as much as an IB analyst working less than half the hours. As much as I want to leave and go do an Analyst stint at a BB, I find myself unable to commit losing my life for two years. If the salary was like 2007, I probably could justify the switch for my future. Working that many hours for a 100k salary does not seem worth it.

do you do S&T at a BB bank?

Nov 15, 2012
animalz:
qweretyq:

That's not the point. It's not that 100k is not enough, its just not enough for that many hours.

I make as much as an IB analyst working less than half the hours. As much as I want to leave and go do an Analyst stint at a BB, I find myself unable to commit losing my life for two years. If the salary was like 2007, I probably could justify the switch for my future. Working that many hours for a 100k salary does not seem worth it.

do you do S&T at a BB bank?

No I trade for an independent firm not a BB

Nov 14, 2012

This somewhat related, but can anyone comment on the potential impacts of the new tax laws (capital gains taxes, dividends taxes, etc)? This may not affect investment banking more so than it would to private equity and hedge funds, but I think that these new tax laws would deter many prospective undergrads from going into Investment Banking. If capital gains are going to be treated as ordinary income (39.6 percent instead of 15 percent), then I don't see why any would suffer for two years in an attempt to exit to industries that won't be as lucrative.

Nov 14, 2012
3176401:

This somewhat related, but can anyone comment on the potential impacts of the new tax laws (capital gains taxes, dividends taxes, etc)? This may not affect investment banking more so than it would to private equity and hedge funds, but I think that these new tax laws would deter many prospective undergrads from going into Investment Banking. If capital gains are going to be treated as ordinary income (39.6 percent instead of 15 percent), then I don't see why any would suffer for two years in an attempt to exit to industries that won't be as lucrative.

I don't get your point. This won't change anything. Capital gains taxes are levied on assets you bought, not assets that were given to you as compensation. If a company gives you company stock as part of your compensation, you pay ordinary income taxes on that compensation now, and you will in 2013. So nothing changes here. The only thing that will change is the taxes you pay on stocks you buy with after tax money and you make less than 200k/single or 250k/family.

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Nov 14, 2012

Good Thread, Asatar! I say No, hell no, not anymore. Monkeys, when you are late, you are really late. This is not like some meaningful sacrifice, if you feel you won't be rewarded accordingly like before, move the fuck out of the misery!
I've already thrown my banker dream to a no where land since way earlier this year.

I'm feeling like a star, you can't stop my shine---Ridin' Solo

Nov 15, 2012

What are the other paths please?

Nov 15, 2012

My personal view is if you wanna do banking, avoid BB and go for boutiques...preferably elite boutiques. As an analyst the job outlook is more stable at a boutique. Look at Rothschild (not an employee there or whatsoever), they are "global financial advisors." No balonie balance sheet risk.

Nov 15, 2012
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