Investment banking layoffs- Time to reconsider?

Over hire, over fire. Hardly a new cycle.

Analysts, and associates to some degree, are the least endangered species. VP is when you are ripe for the chopping block.

Do what you want.

Yes. Less competition

more cuts are happening in BO and MO anyway

stop worrying about things you can't control

If lay-offs dissuade you from this career path, then, yes, you should reconsider your job options.

layoffs happen in all industries, all else being equal you are probably better off doing front-office work at an IB group that generates revenue than being in some F500

Yes

If I had to do everything all over again, I might not have majored in Engineering, but if I did- and I wanted money, I would have gone to work for an oil company. I went to a friend's wedding earlier this year and a MechE lady I knew was making more than most analysts/associates working on an oil rig in the Gulf.

I don't think so. Two main reasons:

1) You're a junior and this is just an internship. Banks rarely rescind SA offers/lay off SAs. In fact, I only know of one person who had that happen to him (at Bear Stearns in 2008). So your job security is pretty solid.

2) The experience you get as an IB intern makes you very marketable, assuming you're at a tier 2 bulge bracket/boutique firm (e.g. Citi, Moelis, etc.) or better. You can transfer this to other industries if you decide that you want to go somewhere more secure for a FT position. A lot of my friends interned at such firms before going off to top S&T firms, big three consulting, etc.

That said, have a backup plan. With a stagnant US economy and a deepening sovereign debt crisis in Europe, most banks are scaling back on hiring. I know FT recruiting this year was very dry, especially amongst bulge brackets.

Also look into restructuring practices. Firms like Lazard, HL, Evercore, BX, etc. have legit restructuring practices. These typically see more dealflow in bad economies. Probably a safe play in this economy and definitely a great way to launch your career.

Citi isn't tier 2.

OMG, of course!!!!!! Layoffs only hit the banking sector in the US.

I've been told over and over again that these types of layoffs really target more senior people and that banks view first year analysts as cheap labor.

I'm a junior as well and this has come up in my discussions with peers at school multiple times. My take is if your into finance, where you work should matter less than what you do - so if you don't get to work at your dream place but your doing your dream job, life is good.

I'd probably make the same choices, given the same circumstances. Where else are there better opportunities?

I actually liked the idea of going into law, but trying to go into BigLaw became like trying to go into S&T now. Law is an industry with an incredibly uncertain future and a shrinking number of jobs. It's a shame; I really preferred the partnership structure of Law firms to banks.

Medicine was never a get rich quick profession, but now the financial component is falling away. Reform could really kill salaries, and running your own practice means dealing with insurance billing. Not having a real income until ~30 also doesn't sound great.

Might have majored in math and done the actuarial route, but it's hard to say. I think I might get bored ~10 years in. Same could be said with dentistry.

Overall though, IB is one of the few industries that offers a path to upper 6-figures income without major risk. It also gives you a fair degree of flexibility in the field. IB to Corporate Dev? Sure. An internist moving to cardiac surgery, or a white collar defense litigator to tax law? Not so much.

No way, still a great industry. Even if you only get 6 months to a year in, you should be able to enter F500, consulting, or even PE depending on your level of experience. Born to bank. Born to win.

Commercial banking isn't as bad as this forum thinks it is.

Just sayin'.

I've been thinking about OP questions as well. But I'm still motivated to find a internship/job in this field. Maybe not with a BB, but if you really like the job, then why not. I can't really see myself doing anything else apart from consulting which i also find interesting.

work for whole foods. everyone needs food. especially vegan natural crunchy freaks

Evercore does not have a "solid" restructuring practice.

you sound like a pussy.

you shouldnt do banking

no risk no reward, do what you feel passionate about. There's nothing you can control with where the economy is going the best you can do is to stage yourself with highly sought after skills and ride out the current market shit storm.

IB will always be needed, unlike prop trading where opportunities are limited thanks to the assholes in congress.

No way! Love what you do, during good times and bad

http://dealbook.nytimes.com/2011/11/21/wall-st-layoffs-take-heavy-toll-…

What a depressing article.

Hi Guys, I'm a senior in high school right now just looking for advice. I'm deciding whether I should pursue a career in medicine or finance. I wouldn't mind studying medicine or finance, however I see myself doing something business related in the future. From what I've been reading it seems that pursing a finance career isn't a smart move. With all the lay offs and salary cuts, the finance industry looks bleak. What do you guys recommend? I have good SATs (2100+) and a great GPA so I think I could get into some of the lower ivy legaues (Cornell, Upenn CAS, brown, etc) and some instate bs/md programs. By the time I graduate (2016) do you guys think the industry would get any better? I really appreciate any comments and will award silver bananas.

317, It sounds as though you're not sure what you want to do out of college, so my advice would be to ultimately choose a school that doesn't lock you in on one career path (ie. Don't sign up for a ba/md program at a school that you wouldn't go to otherwise) while considering opportunities to switch between colleges at a university (transferring from Wharton to UPenn CAS is easier than going from CAS to Wharton).

If you get into a "semi-target" or "target", you'll have some of time in college to explore different interests before making a decision. A lot of my friends went into school pre-med, became bio/econ double majors, and ended up in finance. A few other did the opposite route.

I don't think this round of layoffs should influence your decision now. Even if this cycle doesn't recover by the time you graduate, the finance industry will always need some bare minimum number of analysts. Then it's just your job to make sure you're qualified to be one of the few.

317, go in-state if your school has a decent chemistry or biology program, and then apply at the University of Chicago for med school. You want to graduate med school with $300K in debt, not $500K. Hands down, Chicago turns out the country's most competent surgeons, and they care a lot more about your knowledge of organic chemistry and MCB than your pedigreee. Get yourself into a profession that helps people and makes the world a better place and isn't laying off 20% of its employees.

Thanks for the advice guys. @Illini I come from a lower middle class family. If I decide to go out of state to an ivy league, my parents will only have to pay 10k-15k per year due to financial aid (which they are willing to do). However, if I decide to stay instate I could probably make 100,000 dollars over four years. I don't know if this is worth more than a better pedigree though. Also, if I decide to go to Medical School I would stay instate. The tuition for instate students is only 20,000 per year (compared to 40k per year at Chicago) which means that I could happily become a primary care physician without having to worry about debt.

@revoad Yeah, that seems like a feasible option. If I plan early, follow the guides on this site, would it still be difficult to land a solid IB gig? Also, how is private equity doing. Are the layoffs similar to banking?

Anyone have insight on what the banking industry will look like in 5-10 years? I know this is a shot in the dark. Will salaries be lower and the industry smaller, or will it rebound?

Just going off of what happened after 1929 and the 1930s, I have a hunch the banking industry will be a lot smaller. Can't say the same thing for insurance or other financial services; just banking. I think a lot of folks will look at the market volatility and opt for a lifetime inflation-adjusted annuity at retirement instead.

will it be a less lucrative field or simply smaller? you can't really regulate compensation can you?

since im not in the IBD world, how are lazard/evercore/etc boutiquey places handling vs the bbs? standing strong n not cutting?

317, If you can get into a target school, you can land a banking job in this environment with a biology major. I don't know what recruiting will look like when you're looking for an analyst position, but if it's like what it is today... you should be able to get a job with some networking.

I've only interned in the industry, so I don't know too much about which areas are cutting personnel. I'll leave that to the experts.

>will it be a less lucrative field or simply smaller? you can't really regulate compensation can you? Probably less lucrative too. GINIs are at 70-year-highs, and things that can't go up forever start to retrace when they start hitting these levels. Not just banking- every lucrative industry from law to start-ups to consulting will probably pay less.

If you otherwise had plans of getting rich, this is not a terrible time to become a Jesuit and take a vow of poverty. There will be no industries that get people much past upper middle class in ten years, including banking.

@IP Are you kidding me? People will continue to get rich irrespective. You're overly pessimistic and it shows, the reality is that the general trend is people have done better as time has gone forward, there are corrections, but the general trend is up.

So according to your predictions, there will no be a single industry in the US that you can get rich from? Not banking or tech or anything else?

So should I just drop out of college now?

It is my view that the definition of "rich" in the US will slowly become the ability to maintain a given standard of living instead of increasing it. The world is getting more competitive and this country has a disproportionate share of global wealth. The slow correction of this imbalance will be extremely painful to the average American.

Drop out of college? Are you kidding me?!?? When you're struggling to pay the electric bill and living off of PB&J the last week each month the prospect of a middle class life will start looking real attractive.

Also, it is the owners/capital holders who get truly rich, not the laborers (name of the game is still CAPITALISM). Most owners still live in America but a lot of labor has moved overseas. Hence the GINI explosion.

The real track: Go to School > Work Hard > Get Job > Work Hard > Build Capital > Deploy Capital > Monitor Labor >> "Rich"

I believe GINI numbers are a poor way to determine if banking will help you getting rich/will not help you getting rich in the future. I am from Europe and countries like Sweden or Germany have significantly lower GINIs than the US, however banking in these countries still help you get "rich" so much faster than any other industry. It might average out a little, especially the bottom 5 % in these countries own a lot more than in the US. But I don't see this development from stopping bankers earning more money than regular workers.

Are we talking about out earning the majority of workers or "getting rich?" They are a bit different. Banking will still pay more than average, but there will be less banking jobs.

Banking will see few layoffs compared to FICC (although some of the excess will flock to private $).

The real difference is that economic growth is so shitty that the hiring market will stay flat. Harvard can only admit as many students as it can house...

when do you see that growth picking up, within the next 3-4 years?

i didnt think so :(

What do you mean "difficult political environment?" As in distain towards the financial industry?

Why does everyone still look back at 2004-2008? That time is over that is a given fact. Take out those 4 years in history and making $100 million before 40 is pretty FLIPPIN hard regardless of the political environment or economy. This industry has always seen hardships and the strong survive, take out 2004-2008 today is not a lot different from the 1980s or 1990s I would say (granted I was not around just from what I read and heard).

Compbanker even had that great post that some of the 2004-2008 folks who were given a head start have flamed out now. Even more proof there is no guarantees in this industry nothing that is new.

By difficult political environment, I mean that voters hate bankers right now and also don't want to see the rich get richer while the poor and middle-class tread water. Meanwhile the west is dealing with a shrinking resource pie as China and India bid up the price of middle-east crude.

The next big multi-millionaire-before-40 will be the guy who figures out how to get us off of crude oil. And it's possible he hasn't been born yet.

Illini, the next multi-millionaire-before-40 guy will be some 20 year old college dropout in Palo Alto who starts some blog that aggregates pictures of cats. None of us here will be that guy.

For us 99.99%ers, it's ridiculous to expect to clear 7 figs/year.

You don't usually get rich working for other people, whatever the industry.

Innovating beyond oil is definitely essential for the survival of the west. So what is the average college grunt to do, work on the nissan leaf?

This is about the 40th thread that has turned into a missive from Illiniprogrammer on how great the farming and commodities sector is and how nobody is ever going to get rich again in finance.

People have gotten rich in finance since the crisis began in 2007-2008. People got rich in finance during the great depression and after it. In fact people got rich in banking and speculation in ancient greece. These are tremendously old professions and if you are successful at them you can make alot of money and that isnt going to change. Is it going to be as easy as it was last decade? Of course not, but so what?

On farming and commodities...just FYI the leverage boom that created the various financial bubbles of the last 20 years is also a big culprit behind the commodity boom. Not only is oil trading at high prices despite a weak global economy, but farm prices are at all-time highs also. If we see a sluggish economy for the next twenty years or a breakout of geopolitical unrest that is enough to crush the finance industry, it is likely to result in lower, not higher, commodities prices. Most commodities purchases are leveraged investments that have to be financed...when funding dries up prices go down. Just look at the correlations if you dont believe it. If globalisation slows down or reverses oil demand will collapse with it.

So, if you want to go work on an oil rig or a cattle farm feel free, but please dont pitch it as some secret idea that you are way ahead of the market on...you are buying in with your future at extremely high levels.

I don't know bondarb. Most investors I meet claim global warming doesn't exist. The prospect of global warming creating trouble for farmers let alone put parts of the world underwater as we pass 7 Billion mouths to feed is rather discounted.

In the long-term Bernanke is going to run the printing press- especially if there is a panic on sovereign debt- and the supply of money is going to replace the lost leverage. I don't know where the roulette wheel of sovereign default vs. inflation is going to end, but I do know that treasury bonds won't be worth all that much CPI-adjusted when we are done in five years. I don't think dollars are a good place to stick your money; I don't think US consumer stocks or financials are a good place to stick your money; the one thing that is fairly certain is that we all need food and we all need energy and some people will always want gold because it's shiney. Whether we like it or not, commodities form the foundation for an economy and if the economy is operating, they will always be of some value.

But the question remains, is that a viable option for joe shmoe? What an ironic twist if farmers became the billionaire bankers of the future.

Bondarb I know many of the world's filthy rich will make their fortunes in banking/finance/etc. for decades to come but my question was more related to difficulty, not the reality of it.

In other news whats the best way to make money on the impending collapse of the euro?

I never said US financial or retail stocks were good buys...I have no idea. My simple statement is that people will continue to get rich in finance (which is supported by thousands of years of data) and that if the global economy is weak for the foreseeable future then getting a job on a farm or an oil rig is hardly ideal protection against that outcome. This thread was not about trading it was about career advice.

Traditionally the commodity cycle is much more volatile then the business cycle, not less, and so farming is a tremendously cyclical business. This really is the heart of why societies generally try to move away fro agriculture as they become wealthier.

And it is a huge assumption to extrapolate the bernanke policy indefinitely into the future...if Obama is not re-elected "the Ben Bernank" will most likely be gone by the end of 2012. Even if he is re-elected the guy will be gone at the end of his term if the economy doesnt improve. Point being that basing your career decision around the policies of the current fed chairman is not a strategy I would advise on a board full of 20 year olds.

I never said US financial or retail stocks were good buys...I have no idea. My simple statement is that people will continue to get rich in finance (which is supported by thousands of years of data) and that if the global economy is weak for the foreseeable future then getting a job on a farm or an oil rig is hardly ideal protection against that outcome. This thread was not about trading it was about career advice.

And it is a huge assumption to extrapolate the bernanke policy indefinitely into the future...if Obama is not re-elected "the Ben Bernank" will most likely be gone by the end of 2012. Even if he is re-elected the guy will be gone at the end of his term if the economy doesnt improve. Point being that basing your career decision around the policies of the current fed chairman is not a strategy I would advise on a board full of 20 year olds.

You will be able to make a career in finance, but I doubt you'll get into nine figures. Even if you can, the second you somehow manage to do so, you'll probably be labeled a thief and the politicians will start finding excuses to try and take it away. So why not do something that you really enjoy instead? Be a math teacher or maybe work for the CFO's office at an F500 firm.

Do something that creates fundamental economic value. I'm starting to think about working on a project to revamp modern portfolio theory for a volatile market with individuals who have different preferences. Portfolio allocation and personal financial advising is one of the few places in finance that's creating net economic value. Interesting how Ayn Rand's book was about railroads, mines, oil derricks, and machinery. There was one lone banker whose duty was to make smart loans, and the folks sitting at the casino were largely the connected elite.

MK92, why do you keep asking what the average college grunt will do or should do? Why do you care? You are aiming to be average or find the most simple way from point A to point B? You may on the wrong forum or looking at the wrong industry.

IlliniProgrammer, I think the point your missing is you think most people in finance can just flip a switch and go do something totally different. That may be the case for yourself, but most people looking to get into finance do not have that personality, frame of mind, work ethic etc...Likewise the only way we in finance can succeed or the only real scorecard one has is $$$ and wealth. You are pitting tons of super-competitive workaholic people who are willing to sacrifice time, youth, etc and the only thing they are judged on is the value of their bonus or bank account. So it is very silly to say that all these folks will all of a sudden give up and decide to stop at "8 figures" or so. It is not the nature of the business or history at all.

The same way you always have crazy artists who live in a box and sacrifice everything to be able to show the world their art and gain recognition for it, sacrificing things along the way. You will have those in some area of finance who will find a way to become wealthy and uber wealthy and then give back to society, which is basically what they have done in the past.

You can just go from waking up at dawn (traders) or working 90 hrs a week (bankers). To being a math teacher or working 40hr s a week in F500 office where things move super slow. You cannot just change your personality and way of life overnight.

Can I name anybody who made 8 or 9 figures in the 30's-50s? Well, first of all 10MM in 1930 = about 125MM today so that is a large amount of money. But how about Prescott Bush? In 1931 he was one of the orginial partners of Brown Brothers and in 1942 he was one of the 7 directors of the Union Banking Corp which was seized for trading with the Nazis. Not sure how much dough he made but I'd say he certainly made his riches and of course his son and grandson became presidents of the USA. Not bad.

http://en.wikipedia.org/wiki/Prescott_S._Bush

Bondarb, he made his fortune in the '20s, along with everyone else. The guy was 34 when the crash hit after making VP at Harriman and Co five years prior. And the family fortune really came from Daddy who was the CEO of Buckeye Steel Casings. Prescott almost lost it like most of the other folks who made theirs before 1940, but somehow he managed to hang onto it. To top it all off, the best guy you can come up with had his firm seized by the politicians. Again, this is just CLASSIC for the kind of anti-GINI operating environment we are going to be moving into.

So who wants to be a guy who starts their trading career in 1997? (Everyones' hand goes up.) Ok, now what if I tell you that you're going to be flat for 12 years until your firm gets seized by the pols. But what if your son might be president? Oh, I just got word he raised taxes and his grandson actually increased spending from a Democrat. Ah, a bunch of finance folks who hate politicians in the room. Ok. ok. Nobody wants to deal with that. Let's hand out the role of Samuel Insull for the future finance souls next, see if we've got any takers. Who wants to build an electric utility empire? Wait wait, I've just got word that he went bankrupt in 1931 and was charged with mail fraud- largely for political purposes- in 1934. Anyone? Anyone?

Bondarb, I hate to say it, but 1930 to 1950 was an absolutely horrendous operating environment. Nobody made money and anybody who did must have stolen it and needed to be put on trial for theft. Who wants to deal with that? Guys; please listen to Warren Buffett; the world needs builders and inventors, not gamblers right now.

So he had $20K in 1937 and became general partner of a $500K firm twelve years later in 1949? Again, no quick, easy money earned there and a lot of treading water instead. Bear Stearns started to become big in the '60s like many other banks, and he was the general partner of one of many investment banking partnerships in an era of strict antitrust and low trading volumes, and he owned 4% of it.

Kids, the best way to make a small fortune by the end of a depression while GINIs are contracting is to start with a large one. It would have been great to graduate in the early '50s (CC Warren Buffett), but no serious fortunes were made prior to ~1950, and even most of the small coups were done by experienced pros.

Even the best swimmers in Wikipedia struggled to break even and stay 50 feet above the bottom of the waterfall. That said, breaking even meant coming out of the Depression and WWII owning 4% of a then two-bit investment banking house that would one day be worth billions.

You know who made money between 1930 and 1950? An engineer by the name of Henry Kaiser. Even then, he was getting million dollar contracts prior to the crash, though. So if you're not fabulously wealthy right now and the financial industry and P/E ratios continue to contract and GINIs follow, it's unlikely you'll become a serious member of the capitalist class for another 20 years.

no the firm was originally capitalized in 1937 with 500k. Where do u see anything about the size of the firm in 1949 in that paragraph?

Bondarb, Bear hadn't even opened its first branch office until 1955. How many mergers and IPOs did they do in the '30s? A lot of the money they paid in the '20s was probably distributed to partners. Are you sure their equity was a lot higher in 1937? That's what we have to go on. Maybe he owned more or less. Either way, Lewis showed up when he was nearly 30, plunked down $20K from a divorce to become a partner, and 12 years of slaving later, finally made General Partner but with the original founder still overseeing everything as Senior Partner.

Had he been born 40 years later, he would have owned Citadel, rather than owning a portion of Bear Stearns and being its CEO. Had he been born 40 years earlier, he might have gotten rich starting/owning an oil company, utility, or railroad or maybe being a trader. Incidentally, the poor man died before he even got a chance to see the '80s boom let alone Carter's tax cuts on capital gains.

If you want to build stuff or invent stuff, I think this will be a great generation to be born into. If we can get fusion working or even just get nanotubes strong enough to build a space elevator, we might just have the colonies on the moon they promised in the '60s. But you are going to have to work extremely hard just to tread water let alone advance in finance in an era of contracting GINIs. And the few heroic stories of folks advancing just a little in the 30s and 40s seem to be the exception that proves the rule.

Listen, I am not going to argue whether cy lewis got rich. Its absurd. They had portraits of him on the wall at Bear Stearns up until the place burned down in 2008. According to wikipedia he also was the head of NY Federation of Jewish Philanthorpies...no idea what that is but I know you need to be rich to be it. Please stop with this nonsense. The man arrived on wall st without a college degree in 1937 and became rich.

More generally, your assertion that nobody got rich in an entire two decades of finance is even more ludicrous. Every major investment bank such as JP Morgan, Goldman, Lehman, etc operated during this period...u think people didnt get rich at these places? Many many bonds and stocks were placed in the market...was this done for free during this era? The stock market also gyrated wildly in the 30s especially...did nobody make money being long or short?

Of course, but where are the $100 million- err, $10 million fortunes? Yes, these people were heroes at these firms. But George Washington was the president of a two-bit Republic that borrowed the name of its currency from a city-state in Poland; Washington was the US's hero, but the country didn't really become a powerful nation on the scale of the UK or the Netherlands until ~60-70 years later. The same is true of these people. Yes, Cy Lewis was a hero at Bear Stearns. He probably saved the company several times during WWII. But the firm back then employed 200 people and had several hundred thousand in capitalization. He may have been a heroic manager, but he was neither a Rockefeller nor even a Cliff Asness- at least until the '40s ended.

I'm not saying you won't leave a great legacy if you slave away in finance for the next 20 years, but if you're going into finance purely for the money, you may as well go just into engineering instead. Responsibilities were given and reputations were made, but fortunes weren't. Especially with top marginal tax rates on personal income (this would include flow-through partnership income from investment houses) hitting a punitive 90%. Just with those taxes alone, it was practically impossible.

...

OK I am done with this after this post...but below is a link to a google books excerpt from a William Cohan book about Goldman Sachs. It details how Cy Lewis introduced Gus Levy (a prominent partner at GS) to the NY philanthropy scene and describes a dinner held at the UJA in Lewis' honor...in 1957. I am quite certain this qualifies him as being pretty dam rich...charities generally dont throw galas in your honor due to your management skills. I am done with arguing about this and I am literally dumber for having taken part in a debate about whether people got rich during a 20 year period in finance. I have argued about alot of things on this website thatr were stupid including the mechanics of bar fights, whether going out drinking alone is a good idea (it is), etc but this one really takes the cake.

http://books.google.com/books?id=1ZZn7DLTskkC&pg=PT293&lpg=PT293&dq=the…

Crappy industry to be in for the long-term. Do something where you acquire the skills you need to run a company.

Can someone please explain to me how people get rich when federal taxes are at 91% like they were from '33 through the '40s? Is there some secret to earning hundreds of millions and keeping $10 million of it in the midst of a depression?

this thread started off good, now its just a contest to see who can make up irrelevant facts to prove a point that I'm not even sure anyone remembers.