Is it difficult at all to become a Managing Director in IB?
The more I think about it, I must be missing something. You get all of these MM Managing Directors running around, dime a dozen, beating their chests and expecting deal teams to trust their every word because, well shit, they made it to MD! That means something right?
Well, I'm not so sure anymore. IB is hardly even getting good workers at the Analyst level these days. If PE is noticing brain-drain to other industries at the Associate level, you can bet your ass IBs are noticing it at the Analyst level. Add into the mix that nearly all the talented Analysts and lateral Associates will eventually end up in investing roles and the non hot-shot but reasonably chill and humble people will end up in corporate roles that allow them to see their children before bedtime. So who exactly does that leave to climb the ranks in IB? Honestly, when I think of my own Analyst class, most of the guys who are still in IB were the strictly middle-of-the-pack guys. I won't lie and say they are/were the worst of the bunch - those Analysts flamed out and do something else now. But the guys who are still in banking and didn't recruit for PE because they don't want to "rock the boat" really aren't the types of hot shots you would pick out in a room and say "Oh, that guy is going places!". Moreso it's the types of guys who were kiss-asses and never push on seniors back but still only end up mid-bucket. These guys were definitely not my favorite to work with, yet still, I have no doubt that most of them (if they stay in IB) will end up as MDs. They will do things exactly as their MDs before them did things, inefficiencies and all, and convince themselves that those same redundancies and inefficiencies are what helped them get there in the first place.
Is it possible that while IB juniors trust their senior bankers with their lives and assume that they must be all-knowing, a lot of these guys are actually just not good or efficient workers straight up? Like, what if the reason for 90 hour work weeks is just because anyone with the talent and chutzpah to change things just leaves and finds a better industry? And only the middling, just-trying-to-hang-on people are left to try and lead deal teams?
There's an ocean between top MDs and mediocre MDs. Look at someone like Neil Augustine at GHL vs the average GHL MD.
As in all these things, it comes down to degree.
is it easy being a middle of the road, corporate drone BB MD that makes 1-2mm a year, Relatively speaking yes, you have to work hard, play the politics, position yourself well and have enough drive and baseline commercial skills, but you certainly don’t have to be exceptional. And yet, probably 2/3 of the starting VPs don’t get here.
if you’re a 2.5-5 a year MD, it’s harder. This probably means you’re are expert in your niche, able to lead and manage real deals, probably manage teams. These guys have a real content and capabilities, This is probably the top third of MDs.
If you’re a 5-10mm a year MD, this is hard and rare. This means either you’re in a client facing role and important clients have you on speed dial and you are a true trusted advisor. Or you run a material important business at bulge bracket firm. Top 10% of MDs.
If you’re consistently over 10 a year, you either are a major rainmaker at an EB, head of banking at a BB, or run a super profitable group at a MM. Not bad work if you can get it. 1% of MDs.
So the baseline isn’t easy but it’s not really hard. To be a good MD is pretty hard, and to be an exceptional MD, very hard. It’s only really the right end of the bell curve that matters,
As an IB/PE guy now in my 30s, 100% echo what the top-voted post above says - becoming an MD in IB is not easy but nor is it "hard". Now of course by not being hard that doesn't mean it's not hard like getting a job at McDonald's (otherwise everyone in the world would be an MD lol) - but if you're smart & hard-working enough to get into IB initially and have the dedication to grind it out for 10-15yrs, I would say there's probably a roughly 50% chance of eventually making it to MD level. So if you've made it into IB and your heart is truly set on this as your career, there's a pretty decent chance you'll be an MD one day. And tbh this is borne out by the fact there are some pretty mediocre MDs in this industry.
However I also agree that most people (2/3rds) don't end up as MDs. So thought I'd expand on the main obstacles to making it to MD:
- You have to pay your dues, and it's easy to get "stuck" at Director/ED level for a long time. Looking at LinkedIn now, I can see multiple people I've worked with at banks who made it to Director level relatively quickly, however have been stuck there for years. So are still at Director/ED level into their late 30s/early 40s. Why is that? Well the problem is that there's a big element of luck involved (more on that below), also you really need to have a compelling case/support internally to make it to MD. And that can be hard when either there's a downturn in business and/or the firm is too top-heavy i.e. older MDs who are still hanging around/clinging on. So a lot of people (even if they thought IB was what they wanted to do with their career) either tire of this and/or find better opportunities outside IB, i.e. moving to a relatively small fund/PE firm or even corporate development (although problem with CD is the pay even for senior roles won't be anywhere near what you're getting in IB by then).
- Luck: as mentioned above, luck plays a huge role at this point. I've seen barely above-average people shoot through the ranks of VP and Director to make MD in record time, just because the market/their area happened to be super-hot. Equally very smart guys I know took ages to progress upwards from VP, just because their sector was struggling (Oil & Gas might be a good example here of a sector that's been buffeted by various headwinds over the years).
Also beyond how much business your team is bringing in, there's also the matter of holding onto your job. E.g. let's say you've worked at GS for the past 5 years as an ED and have been angling for that MD promotion, when suddenly you're caught up in last year's layoffs and lose your job (not performance-related, just bad luck/sector specific). If you join another bank, are those 5 years going to count towards your MD track at the new place? Well, yes and no - yes in that you'll have 5 years more experience/deals under your belt/industry contacts compared to a freshly minted ED, but then also no in that you don't know anyone here and have nobody who is going to vouch/push for you to make MD quickly (also it would look a bit ridiculous if they hired you as an ED and promoted you to MD within a year, no matter how talented you are). So worst case - you might have to put in another 5 years to make MD! The only other option would be moving to a smaller bank/boutique to perhaps become an MD there, but that has its drawbacks as well.
Soft skills - no doubt about it, becoming (and being) an MD requires a huge amount of soft skills. Yes, to become a Director/ED you have already progressed well beyond the role of being an analyst/associate grunt - but whilst you might be a maestro at running transactions, are you great (and do you have the willingness) to play the political game internally? In an ideal world your outstanding work would do the talking and be enough by itself - but sadly in many firms that just isn't enough, the great work is seen as the minimum requirement rather than the only requirement to become an MD. So struggling here means your promotion to MD may be delayed by years, or indeed never happen at all. Which leads me onto the final point:
- Burnout/not wanting to be "trapped". I.e. how ever much you think you wanted an IB career at the outset, working as a Director for 5-10 years (potentially) running transactions for your boss the MD to make millions whilst you make six-figures, will likely grind on you. Yes of course you're working less hours than analysts and associates, but equally there's a different type of pressure - as an analyst you're not held to account if the deal falls apart, whereas a Director likely is (even if it's not their fault). So the need to be "always on" doesn't really ever subside.
And on not wanting to be "trapped" - I put this in quotation marks as of course by most people's standards you're earning a fantastic amount of money, but equally that does have a flip side - it limits your exit options. If you grind it out for 5+ years as a director you're likely in your mid to late thirties, maybe have kids and a big mortgage, and so are effectively "stuck" doing the MD's donkey work to keep your lifestyle going. Furthermore at that point you can't change careers as you have no experience in other fields. And the exit options you have (MM PE, corporate development) won't pay at least initially anywhere near what you're making. So I think a lot of people at VP level perhaps look down the road and know it will be a tough slog (with zero guarantees of ever actually making MD!) and decide to opt out/seek opportunities outside IB.
So yeah those are probably the main reasons off the top of my head for most IB people not ultimately making it to MD. But it's not because it's extremely hard by any means, more that it requires you to dedicate at least one and a half decades of your life (from analyst-level) to a goal that is highly dependent on luck and politics. That's a big period of time to sacrifice of things in your life you're maybe missing out on (doing more travelling, spending more time with friends, living life less stressed etc), for something that may not happen. Whereas by contrast the analyst (and associate as well) years are almost a no-brainer - yes it sucks for a couple of years, but that's a small portion of your life when you're likely too young to have kids or any real responsibilities. And if you make it through you are almost guaranteed to have very good job prospects. Pushing through to MD-level is a whole different level in terms of the work/risk/reward equation.
Excellent post. That’s why the advice I give to people (and not enough take it) at the VP / D level is to be 100% focused on making MD. That means a) being brutal with yourself and with your seniors about your probabilities, b) having a clear plan and objectives as to how to get there, c) being entirely ruthless about finding the right seat to make MD. Once you have the button, no one can take it from you and there is a huge comp / psychology / quality of life difference.
Believe me, I know this. Being a Director was miserable but I just assumed things would work out. When they didnt, I lucked my way into a great MD seat at another firm and the rest is history but when I look back, I was utterly complacent.
like any ambitious, type A, intellectually curious person, I often indulge in what if fantasies (if I had joined the navy, I’d be on the path to becoming an Admiral? My friends in Washington are at the undersecretary level and that sounds interesting? If I hadn’t trained myself to think in bullet points, I could have written the great American novel? Brett Kavanagh isn’t that much older than me? Etc).
In the realm of the more realistic, of course I think I can do my sponsor clients and CEO’s jobs better than they can. I wouldn’t have the arrogance / confidence to advise them otherwise. So naturally when we do a deal together, there is more than a pang of jealousy because it’s ultimately their deal, not mine.
All of this said, it’s really hard for me to complain. I make mid to high seven figures l, I would consider myself one of the top three or four bankers in my sector, generally like the team I run and have a happy, uneventful family life. It’s often stressful but there is a reason I get paid what I get paid, So no substantive regrets at all. There was some uncertain periods but in every practical sense, it’s worked out well.