I just graduated from an Ivy and will be heading to PJT/EVR/Laz full time. I've spent a lot of time in the past year thinking about buyside recruiting and various career directions and am ironically coming to the conclusion that banking might be a pretty good gig after all for a career. The way I see it, there's far less competition, very stable (good) comp, promotion visibility and an interesting role at the top. What am I missing that causes 95% of my class to hop to PE or other buyside roles? Would love some perspective.
As I see it, here are the pros of taking the A2A and pursuing a career in banking:
- At a senior level, the role of trustedd advisorr is personally appealing- I always enjoyed debate, case competitions, etc. where you win by being trustworthy and persuasive/good at negotiating.
- There seems to be a lot of mobility once you get to the MD level to other interesting roles (buyside, business, government, something else) if you want.
- Comp is very good (basically as good as top PE roles pre-carry, but let's be honest, MDs at good EBs don't have to worry about money)
- My firm strongly encourages analysts to stay on, which could be a career tailwind.
- And perhaps the biggest reason, there's a lot less competition. Look at it this way, if I go to a good PE firm or HF right away, I will be putting myself on the same starting line as dozens of other highly qualified candidates - from better schools, banks, etc. - all exactly my age. If I stay in banking, most of my competition as an associate and beyond will have started later (most associates at my firm are MBAs age 26 - 30ish), will have more demands outside of work like family as a result, will be less familiar with the work, and will not have the same reputation capital I'll have built after my analyst stint. (Not to say MBA associates don't contribute valuable attributes that I lack, but in many cases A2As run circles around them). This means that if I play my cards right I could potentially supercharge my career in the next several years, perhaps becoming an MD in my early 30s which could open a lot of doors.
Of course, there are cons too. At a junior level the work may be less interesting or intellectually challenging than alternatives (debatable for large cap PE), there are more office politics (having to lead recruiting or be the staffer or start an interest group or some sht to get promoted) and my sense is the opportunities to exit are greatest at junior and senior levels, and as such, less flexibility at VP/Director level. I guess I just keep talking to PE guys and realizing I'm not that interested in picking apart how a company operates and how to improve that (/ being skeptical that PE will continue to be such a lucrative asset class or that pre-MBA roles are so untouchable), and keep hearing from HF guys about how brutal public markets are. I enjoy the transactional/negotiation/complex situation analysis aspects, which is how I ended up in banking and why I got interested in certain PE firms or HF strategies like event-driven or special sits, but I am really torn.
I hope this didn't come off as arrogant or something, clearly there are many, many "ifs" and it's all a hypothetical and the best I can do is hit the ground running. I guess I'm just curious to hear whether anyone else has had similar thoughts. Hope this can be a jumping off point for insightful discussion. Cheers.
You answered it partially yourself, I guess -- you aren't interested in "picking apart how a company operates and how to improve that," ; you are skeptical of PE as an asset class ; compensation total isn't a totally determining factor for you ; you aren't interested/wanting to go through more competition ; you are fine with a less interesting or stimulating job ; you don't care about the not-so-great mid-career inflexibility.
There's plenty of people who do enjoy picking apart a company, aren't as skeptical of PE as an asset class, are largely driven by massive earning potential, don't mind more competition because all they've ever done is compete, place more value on their work being more interesting or intellectually challenging, and value the mid-level career flexibility.
Your reasons are totally legitimate and I do think that the buyside is a bit over-romanticized on this forum, but at the end of the day it just comes down to priorities, and whatever your priorities align with are what you should pursue.
Well to be fair being competitive doesn’t mean you want every race to be a fair fight. OP is clearly competitive, but his point was that if you have the option to sprint against Usain Bolt or sprint against some dude from your high school, with more or less the same reward, no rational competitive person would pick the worse odds. Competitive people like to win, if there’s a way to stack the odds in their favor (in this case A2A) a lot of them might take it.
I think you're right in most aspects of how you're thinking about this.
In general and on WSO in particular, banking gets a pretty bad name, particularly at a senior level and post MBA, but it is really a personal choice of what interests you.
With the emergence of Elite Boutiques, which offer comp in line with or even above top MFs (at least at a junior and mid level), I think you are seeing more and more people decide to stay in banking. By the time you're a 2nd or 3rd year analyst, if you're good then you've managed to:
If you look at CVP's last few classes, more than half of the analysts have stayed back to become associates, work in an environment they know they can excel in, draw 400k+ all in comp, what's not to love about that. The banks you mentioned probably don't stack up as well on the comp side, but may not be too far off.
No-one seems to want to talk about how many associates in PE get told to take a hike vs how many average associates in banking go on to VP and beyond. If you're good at sales, your comp as a partner at an EB is better than 90% of PE at the same level anyway. You're making up to 30% of the fees you bring in. A good MD can clear $20mm in advisory fees a year (on average), no problem.
Give it 6 months kid. You'll see how despite the same comp you will be working on bullshit (I.E. formatting and flow of pages) which won't even be looked out for most of your job at the VP level.
On the buyside at least things are objective and you get to use your brain
I mean let's look at it cynically, in PE especially toward the larger cap end you spend all your time as an associate/sr associate grinding out detailed models with zillions of cases, running due diligence and putting together materials for IC, all for deals most of which will never come close to closing. Call it objective or using your brain or whatever, I have realized that the MD role at a bank is pretty damn similar in skill set to partner at a PE firm. At the end of the day your ability to "sell" your fund, win over boards and close deals trumps all the "objective" analysis and number crunching in the world.
And on the public side, sure, you can say you're objective, but what's worse than watching the market move against your oh-so-objective thesis. As Keynes said, the market can stay irrational longer than you can stay solvent. If by objectivity you mean being true to yourself or offering sincere advice, I don't think that's an impossible ask in any of the three careers.
Again, not to say there aren't great things about PE or public markets investing, I just don't buy it when people say "oh you're objective you're actually using your brain, etc. etc." when I think reality is a lot more nuanced than that on both the sell and buy sides.
I don’t disagree with anything you said, I think you covered a lot of my own thoughts I had going in as well.
But, 6+ months on the job you just need to revisit all of these points continuously, as other opportunities are always present while the downsides of being client service with essentially zero autonomy until you’re super senior level are also always present.
It isn’t easy to be on call 24/7 for a year let alone a decade. Yes the in-office hours improve, but you’re never really “off”. Bad hours are one thing, unpredictability kills. Not comparing this to buyside roles you mentioned though, because like you said, they come with their own unique stressors.
For many of my initial years in banking, I was of a similar opinion. I think as you gain some experience in investment banking, your view of investment banking as a career might get somewhat "tainted"....
The job of an investment banker completely changes when you become a Managing Director, period. You can have been a top bucket analyst, a popular co-worker, effective manager of junior employees and great at handling the day-to-day of M&A processes, but that all means squat if you can't ultimately generate revenue.
I didn't really appreciate how difficult generating revenue is until I had more exposure beyond the analyst level. Investment banking as a career has become so proliferate in the last 30 years as a result of 1)deregulation and economic growth and 2)the internet and dissemination of information that there is an extreme amount of competition for M&A business. Your post implies that you think you're competing against the people at your firm and that is only true up until you are promoted to MD at which point you are competing against all investment bankers at various firms in your coverage area. At that point, it doesn't matter if you were an A2A or an MBA. From my observations of senior bankers, the distinctions between "rainmakers" and other MD's are very slim and often come down to dumb luck.
I think investment banking as a career makes more sense for MBA's than analysts as it is one of the few career paths this group has of potentially making big $$$. However, for IB analysts I think the buyside (and I think this applies to certain buyside fields more that others) provides more opportunity to differentiate oneself based on merit/intelligence/etc. to make $$$.
I grew up with parents in finance and have lots of family friends who are senior in both buy side and IB roles. Regardless of what people on here say, lifestyle is 100% better at buy side compared to IB.
IB is a client facing business, so at the end of the day you are always at someone else's beck and call. Even the most senior MDs get called in to deal with crap when they are on vacation. I've been out to dinner with my parents and a friend who is a big IB MD and the MD has literally had to leave dinner to go back into the office to deal with something on a Friday night. I've never heard of that happening to someone on the buyside.
Senior PE/HF guys can take off weeks/months over the summer and know they are still making money because there is still movement in the fund even when they aren't in the office. For someone in IB, you are only making money on deal fees, which means that if you decide to disappear for the Hamptons for three months over the summer, you don't make a penny.
That’s true but don’t lose sight of survivorship bias on the buy side. The only senior PE/HF guys you see are the ones who’s funds performed for enough years to get them to that status. For every one of them there’s many more former buy-siders working “in industry” because there wasn’t enough room at the top of the pyramid for them. Same concept applies in IB too, but I think less severely.
Going to guess that you are going to work at Evercore, given PJT and LAZ are generally less supportive of A2A promotions. I think to an earlier poster's point, if you were going to Centerview, this would be a different conversation, and a lot of the points you made would actually hold water in terms of staying in banking over leaving for the buyside.
However, Evercore has clearly been struggling as of late (the layoffs in January are pretty clear evidence of this), which makes it a considerably less appealing long term home in my opinion. Also a few counter-points to your pros about staying in banking. Try not to drink the kool-aid so much lol:
The trusted advisor shit is way overblown and bankers don't add nearly as much value as you think they do in terms of providing actual advice. The reality is that usually the Fortune 500 CEO is just gonna hire whatever senior banker he had a prior relationship with, maybe it was his pledge brother in college, or drinking buddy from HBS, etc...
Buyside investment roles are going to be closed off to you, if you are an MD level in banking. Sure you can exit to a corporate, but you could do the same thing from the buyside with arguably an easier route given you could simply exit to a PortCo/become an operating partner. I almost never see government exits from boutiques, so won't even comment on that one, if anything, banks and buyside firms typically hire career government people (see Eric Cantor at Moelis, Tim Geithner at Warburg, Jack Lew at Lindsay Goldberg)
This is simply wrong, because at the partner levels in PE, the majority of your compensation is going to come in the form of Carry so ignoring that is comparing apples to oranges. The top PE and HF partners clear significantly more in all-in comp than top EB bankers, that''s just the reality. How many M&A bankers do you know on the Forbes 400, I can name you a few dozen HF managers.
To my earlier point, this is less so the case at PJT and LAZ, and EVR is facing serious headwinds to my layoffs comment
Sure, you're probably right that there is less competition from a talent perspective in banking versus going to PE or HFs, but, "lot of y'all ain't built for the league". No one's throwing you a trophy parade for winning the G League.
I think you've made some strong points here, but I think your discussion on comp is really an over-simplification, so wanted to add some additional thoughts there:
Nobody staying in banking or PE is getting on Forbes 400, so just forget that altogether. The people you've seen in PE/HF in that bracket have started their own funds, raised billions of dollars (literally the largest funds that exist) and might as well be akin to a Ken Moelis or Robert Pruzan or other founders of an advisory shop, also worth in the hundreds of million if not billions. It's not happening for 99.9% of people who go down either path, so I don't really think it is relevant.
Most PE funds have a very steep pyramid structure, and making partner is extremely difficult. The guy who breaks into an H&F or Warburg as an associate, even if he chooses to stay in the industry, is much more likely to make Partner at a MM or LMM fund, just given the number of spots available and unlikelihood of Partner roles opening up. You could say the same for banking, but I would put your odds of making MD at a bank (be it a BB or EB) much higher than your odds of making Partner at a large cap fund. So the comparison isn't correct. The correct comparison is the MD comp at a bank to the Partner / MD comp at a LMM / MM PE fund. And difference is much less than you would think.
Carry. Everyone loves to talk about carry, partners splitting hundreds of millions of dollars between the 3-4 of them. The reality is 1) Carry takes an extremely long time to be realized and 2) There are many funds who haven't seen carry in ages. It's by no means a guarantee.
Having worked in both sell side and buy side roles, there are pros and cons of each. If you are in a buy side role just to chase money / a spot on Forbes 400, I can bet you're not going to end there.
Frankly, as someone that is still in the very beginning of your career, comparing the lives of MDs and PE Partners is pointless, and especially pointless comparing the top MDs and top Partners at MF/UMM. Most of the points made in this thread are very valid, but not relevant for you now. The problem is most people that have only worked 0-5 years professionally (probably even 10 years), have absolutely no idea how difficult it is to move up, let alone to the top, in either path. It's not just about how "easy" employers will let you move up (which the answer is not easy at all regardless of firm). It's also about how much you want (or willing to sacrifice) get to the top in IB/PE - and really, what you're willing to sacrifice is far more important than anything else.
It's easy to say you're a type A person that's competitive, highly career driven, blah blah blah in your 20s, especially early/mid 20s (most people that got into banking/PE/consulting are like this). But life happens, your interests change, your priorities change, you change, you'll have relationships that you have to take into consideration (romantic, friends, family). All of these things will make you evaluate whether the sacrifices of IB/PE are worth it, every single day; because you have to be trying to be your best at work 100% of the time (or will feel the pressure to do so) if you want to make it to the top.
Keep in mind that your "career" in IB or PE really starts at the mid-level (VPs and up), and the grind REALLY starts then. It's a lot easier to suck it up early in your career and grind it out for 2-4 years when there's an end in sight. This means your chosen career, and the dedication to that career, really starts in your late-20s/early-30s. That's when your personal life also really starts to affect your thinking and decisions. Very, very few people, actually only care about work, even on Wall Street.
My advice is to:
The skillsets and mentality to be a good banker and a good investor, even at the top, are very different. Try to forget the about the accolades, money, title, perception, anything that is an external validator of your choice, and focus as much as you can on internally what speaks to you. Your questions are good questions, just don't get caught up in the pros/cons too much.
Far easier said than done, but this is the struggle that most mid-level and senior people in both IB/PE still try to balance. I don't know any experienced professionals that just think "is making $X amount enough", it's always "does making $X amount justify the sacrifices I have to make?". And the ones that don't even like the job itself are in a special kind of existential hell, day in day out.
These are fair points. I worked at where you are going (if you are going into RX group vs. M&A) and once contemplated many of the same things. I enjoyed my experience working on dozen+ transactions and seeing things from private-side banker perspective especially in such a frantic environment that RX can bring. There is an aspect of "trusted advisor" in the sense that getting a good outcome for your client feels awesome but you aren't really being tapped for your expertise when it comes down to it, its typically a pre-baked relationship driving the sale of your bank's services.
What will change your opinion once you pass the six month honeymoon is how much the job wears on you and how you can avoid many of the negatives of being a sellside-slut by going to work for the client. The 24/7 on call, weekend work and mindless pitchbooks / useless slides / iterations of models will make you grind your teeth at times and say "why the fuck am I doing this, this is useless" no matter how much you think a shit-eating grin is your natural face.
People on this forum, because there's literally hoards of thousands of newly minted investment bankers a year, think that the conversion from banking VP to MD is an easy path they can pull-off if they just survive, because the majority of their classmmates defacto drop. The best VPs often times make the worst MDs, the best analysts/associates may not be able to manage down and up efficiently. Sure - you can become an execution guy and cruise along until VP/ED and maybe rely on your group head to bring in deals and allocate them to you, but then you're talking about significantly less pay vs. what you are comp'ing to (FYI - there's maybe a handful of people making $10mm+ a year, even at EVR...don't let your dreams run wild i.e. $20mm payday and MD by age 30).
I agree with you that apples-to-apples top banking group vs. top-PE (banking 2.0) seems less appealing with your basic premises, the most negative issue I find is there is a seriously limited pool of post-MBA seats available so this constant upwards drag of follow the promiseland-of-prestige feels like it can just be generally avoided by picking a career-track seat and being sure you like that seat / job / firm.
Going to a partner track-PE or HF seat vs. staying in your IB seat can lead to life being more interesting from a work perspective, working 20-40% less hours, controlling your own schedule (for HFs, very understated benefit), being more efficient with your time, get paid between slightly to significantly more than an equivalent banking gig and just be generally happier from quality of life perspective (not as applicable if you are running 80-100 hrs a week at a mega fund or in a vastly underperforming HF seat).
Take it for what it's worth but when you quickly trace back your classmates or the few classes of graduates ahead of you and those who stayed in banking, the common trait you find is 1) risk-averse, 2) don't mind the mundane / annoying work (or successfully figured out how to push it off to people below them and manage upwards effectively) and 3) highly incentivitzed by money. There are certain outliers and I have friends that are on the VP-star track who I know will make great MDs some day, they have a charisma, brute-like work ethic, know how to manage office politics / inefficiencies of banking / managing their senior MDs expectations and likely not seeing themselves as suitable to any other career. Any banker past the associate level trying to climb VP-MD ranks today is very likely the polar opposite of what buyside is looking for / they themselves are looking for in a job so your thought that you can "switch to buyside" is way off. Some sr. bankers end up switching to capital markets roles in PE, otherwise very few and far between.
The stressors of banking are well-documented (lack of predictability is my personal bete noir) so I won't cover those here. Others can speak to the stress levels in public markets investing, but, as you might imagine, a great deal is tied to the real-time feedback you receive from the market on your valuation and assumptions. As far as PE goes, I will speak to MM/LMM stress levels, but I understand from friends and colleagues that the Apollo threads give a decent glimpse into how many MF work internally.
PE (as an associate): As an associate, your stress comes from the work needing to be right. Not just mechanically correct, but intellectually defensible (e.g., does the way you are modeling revenue make sense, are you scaling SG&A appropriately, does the model reflect the 3-minute conversation you had with the operating partner before he hit the jet for his flight). You need to be ready to not only prove that this is true, but that things you didn't model or think about are relevant. When the model's done, you might have to hop a flight to go sit with a portco CFO who's biffed the reporting one too many times. Or you might have to go out for a management meeting solo with the partner, who hasn't read the CIM. Your stress, then, is predictable and controllable, but it is omnipresent.
PE (as a mid-level): The same stressors from associate-level often apply, perhaps with a different flavor: "Did Associate think through this modeling exercise correctly?" "Fuck, did [Partner] even read this book? [said to myself in a DD meeting]". The added complexity (read: stress) comes from managing a deal process while simultaneously demonstrating your investment accumen, political savvy, ability to be the face of the fund to intermediaries/lenders/LPs, knowledge of legal docs, and total mastery of every task your associate might be doing. You also may have a family. Your spouse might get pissed at you for being on the road four days a week; your kid might cry when mom/dad misses yet another school event because she/he is on a plane back from Dayton, Lincoln, Sacramento, or El Paso. That's where the stress comes from in PE.
I'm piecing my judgment together from my own experiences and those of my network. I've only been at this 6 or 7 years. At every level, "high finance" is stressful. It also can be highly remunerative and intellectually stimulating. There is no "least stressful" path among the alternatives you mention. There are only trade-offs as to the specific kind of stress that you will experience.