How to Know if HF L/S industry is for me? Wealth Management instead? Feel lost

Finishing up my IB stint and have always been passionate about markets and have had several L/S opportunities presented to me. But I'm not sure I love the idea of extremely in-depth company research and a love for modeling.

I can certainly grit my teeth and do the work (pay will be good) but I don't think this is my "passion" (I know that sounds corny but don't know how else to describe it). I didn't like IB at all and didn't enjoy the technical work despite being decent at it. 

I don't want to throw away good opportunities especially given I believe these kind of roles are difficult to get once you move on from that period directly following an IB analyst stint. Have also put in a ton of work to get myself to the point of being a desirable candidate. 

If I'm being completely honest with myself, I feel like a role in wealth management would more so be my interest, but going on this forum makes it appear that would be a huge "downgrade" and have wasted my time grinding out in IB. I also have no clue how to go about getting such a role given all the posts on here seem to be from PWM to IB and not the other around.

Perhaps there is another role that is a blend of the two?

Any help or guidance would be much appreciated and also more than happy to chat with anyone directly.

Thank you!

 
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PWM is looked down upon because it is not likely to yield earnings as large as other areas of high finance as quickly, and the long term upside usually is higher elsewhere. The truth though, like most things, is a bit different and more nuanced. First, to get very very generalized here: 

Wirehouses (edward jones, morgan stanley): set up your own office using the tools and support of the larger firm, with a payout model based on generated activity. The type of investing here is more often than not model portfolios + whatever structured product of the day is being pitched. Wealth planning is a big focus here. Usually relies on the parent firm pitching how things should look, but gives team's a lot of flexibility to run things however they want. Want to pick stocks? Go ahead. 

Independent RIAs: Individually owned by founders/employees. Can run it however they want, and get paid on however profitable it is. Wealth planning is a big focus at some, and less so at others. Really up to however the firm decides it wants to run things. 

Private Banks within large institutions (JPM PB, etc.): Kind of similar to wirehouse model, but the clients are the firm's clients, rather than your own. Central investing team mostly picks how clients should be invested, and you put together the mix for your clients. There is a "house view" and "house model portfolio" more often than not.  

Then you have a ton of variation off these models (Neuberger Berman, Bessemer, Rockefeller Capital, First Mahattan, etc. - you'd really be surprised at how many firms there are that run in house strategies, similar enough to small LOs. The economics can be pretty good to pretty shit.)

The people who get paid the most are 1) the leaders within very large organizations who worked their way up the hierarchy, 2) founders of independent organizations (RIA) or independent teams (wirehouse), 3) advisors with very large books of their own clients (usually coincides with 1+2). Upside also comes from selling your book/firm. 

People will debate the utility of advisors, but we are not going down that path for now. Because the universe is so large, you can have people who really focus on building financial plans on emoney, and the investing side is an afterthought since it gets lumped into sleepy ETF + mutual fund portfolios. You can also have advisors who are very focused on the investing side, and their whole value proposition is picking individual equities. Neuberger w/ Steve Eisman is a bit like this, as well as First Manhattan, + a long tail of RIAs. I knew a woman at an independent RIA who was very focused on stock picking, and it runs similar to a small LO AM firm. She had +$1bn in client assets for her own book, and charged a flat 1% fee. She makes like +$8mn/yr consistently, and that was before the larger firm sold the RIA to an aggregator, which probably resulted in a +$40mn pay day at the very least.


End of the day though, research and investing at these shops will always be a cost center, and not a revenue driver. You eventually have to move into bringing in client money if you want to make real money, which is a difficult endeavor. If you like helping people, and see yourself as a strong salesman, and still want to be able to participate in the financial markets, it can be an interesting path. Most people here who love investing, however, want to work somewhere where investing is the revenue driver, and they can get paid on that performance. 

 

 

Much thanks for the response! I would ideally want that structure you described of being in front of clients but still being plugged into the markets and portfolio management similar to a LO fund – but more so working with various ETFs rather than single-stock picking. From what you've described, seems like an RIA would be the best fit but just unsure on the best path to breaking in from IB outside of networking heavily. Don't really see these roles posted on LinkedIn.

Thank you again for the write-up!

 
[Comment removed by mod team]
 

TL;DR; do WM! It won't be waste. That was the whole point of doing your IB stint - to give yourself the optionality to do anything within the field after. Don't feel the need to target something you don't feel like you're a good fit for just because. 

 

Much thanks. I think the issue is then just trying to find a role that's not all cold-calling / expects me to bring in a bunch of clients and who understand the value of the IB background.

Have applied via LinkedIn but not much luck yet as many places seem to either be looking for experienced advisors or fresh grads out of school. Figure I just need to network aggressively with advisors and see if one would be willing to take me under their wing?

 

Can't speak to the WM side but based on your prompt you should absolutely not go into a HF seat. Extremely in-depth company research and modeling is effectively what you will be doing, especially at the start of your career. If you don't have a passion for stocks your either going to burn out after a couple of years or get fired for underperforming (likely partially due to burning out). With the rare exceptions, the job is all about deep diving on names / industries and cobbling together disparate pieces of information to come to an informed (and differentiated) view on the name. Exit opps from HF / public equities are also nortoriously more limited than they are from PE / IB, so you may have to start back at an entry level position when you inevitably pivot and are prob looking at a massive pay cut. 

I get the prestige chasing, we were all guilty of it at the start of our career but its way better to like what you do vs. getting ooo's and ahhs from other finance bros when you say you work at a hedge fund. As the other poster pointed out, you can still make a tremendous amount of money in the WM space (with likely significantly less stress in your life). Yes the right tail outcomes are higher on HFs, but if you aren't passionate about the business your chances of acheiving one of them is near zero. 

May sound sacrosanct, but you could also consider sticking around in IB past the end of your stint (if that option is available). Associate life isn't that bad and it'll give you time to be patient for the right opportunity to come up vs scrambling to find something ASAP. 

 

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