Long term IB
Most people see (or at least treat) IB as a launchpad for a buy side career like PE due to higher pay ceiling and more engaging work, and from what I've been trying to gather, the bulk of this pay comes from long term carry with compensation. Would IB be a more fitting route to maximize getting out of finance quickly, assuming one can put up with the workload and stress? My overall goal is inevitably an early, comfortable retirement, and IB compensation seems like it can easily bring that just by sticking the progression. Would love to see what people that meet this crossroad have to say.
Based on the highest ranked content on WSO, it's clear that many individuals enter Investment Banking (IB) with the intention of using it as a stepping stone towards careers in Private Equity (PE) or other buy-side roles, largely due to the perceived higher pay ceiling and potentially more engaging work found in those areas. The allure of long-term carry in PE, which refers to a share of the profits generated by investments, is indeed a significant draw for many. However, the path through IB to achieve an early and comfortable retirement is not without its challenges.
The compensation in IB, especially as one progresses to more senior roles, can indeed be substantial. Bonuses, particularly at the higher levels (e.g., Managing Director), can be very lucrative and significantly contribute to one's financial well-being. This aspect of IB makes it an attractive option for those aiming for financial independence at an early stage.
However, there are several factors to consider:
Workload and Stress: The workload in IB is notoriously heavy, with long hours being the norm rather than the exception. This can take a toll on one's health, social life, and overall well-being. The stress associated with deal deadlines, client demands, and the high-stakes nature of the work is also considerable. One must realistically assess their ability to handle these aspects over the long term.
Career Progression: While sticking with the progression in IB can lead to substantial financial rewards, it's important to note that the path is highly competitive. Promotions are not guaranteed and depend on a combination of performance, networking, and sometimes, internal politics. The "up or out" culture in many firms means that not everyone will reach the top levels where the most significant compensation packages are found.
Exit Opportunities: Many individuals in IB eventually look for exit opportunities, whether to the buy-side, corporate roles, or other areas. This is often driven by a desire for better work-life balance or different types of work. While IB provides a strong foundation and skill set that is valued across many industries, transitioning out of finance entirely may require additional planning and effort.
Long-Term Financial Planning: Achieving an early, comfortable retirement through IB compensation is possible, but it requires disciplined financial planning and management. High earnings do not automatically translate to financial independence unless accompanied by prudent saving, investing, and lifestyle choices.
In conclusion, based on insights from WSO, IB can be a route to achieve early financial independence and a comfortable retirement, provided one is prepared to navigate the challenges associated with the career. It's essential to weigh the trade-offs between the potential financial rewards and the demands of the job. Those who have successfully followed this path often emphasize the importance of resilience, strategic career planning, and financial discipline.
Sources: [Very Long Post] Stepping Off the IB Train, Please stop wasting your life, Going to inherit 8 figures: should I bother with IB, Why work up to MD in Investment Banking?, Transitioning from tech to a serious finance job (yes, you read that right)
felt my thinking change recently to this mentality. feel like buyside isn't worth it if goal is cash flow in near term.
ignore title, vp1 in Chicago after 1 year a couple of years ago in UMM pe in CHI.
-on a risk-adjusted base ib is the best-paying career there is
-pe isnt what it once was tbh
-post vp ib is really the dream life
Why do you say that post vp is the dream life? Most seniors that I’ve worked with have still had terrible WLB and were constantly stressed out. What size IB are you at and do you focus on m&a exclusively?
really depends on shop, im at a top mm that used to be praised like crazy(pretty much gives it up) focused on m&a and its pretty chill.
-about 50-70 hours a week which isnt great but isnt that bad when most of your job is managing juniors and building network whether thats during dinners or lunches or golf.
also important to note that Chicago ib overall is more laid back then NYC.
You have to go away from where all the sweats go. IB is honestly gonna eventually become less sweaty than PE since all the sweats are going straight into PE. Yes IB sucks in terms of sustaining a healthy lifestyle and can be a dread, but I’d say that’s at least 50% because the juniors there make the group a sweatshop form mainland China. If you want a sustainable lifestyle, you have to do your due diligence and find a bank that gives you good exposure, comp, and hours. How? Usually you have to factor out prestige almost entirely.
this take is crazy to me. maybe I'm just spitballing but if we compare ib and pe from 22 - 40 assuming the individual gets to principal at 5-10 bn fund vs md at bb/top mm, the cash is almost identifcal. PE year to year is consistent as well cause of locked in structure. Also the carry is taxed at 20 percent, so you'd have to make significantly more from ib to match at 40 percent. On top of that the carry upside can be worth a lot if you have a monster exit. Why cap upside to suffer for maybe a million more guranteed in banking. Even if you get fucked on the buyside, you can go to private credit or secondaries and make about the same doing jackshit or go back to banking.
Agreed. I fully agree private equity is not what it once was, and will not produce guaranteed centimillionaires at APO/BX.
But the PE carry (and the tax benefit) from my colleagues who are now VP+ - it’s hell of a real cash pile. Sure, they had to wait a little longer than they would’ve liked for it, but they’re making more than most of my average MDs on the sell side.
Both careers are phenomenal, risk-adjusted ways to make millions. IB just leans towards the near term and flatlines, whereas PE leans towards the long term with some more comp upside
good luck making it past VP. PE isn't half of what it once was and the pyramid gets very narrow very quickly and when you're competing with the absolute best of the best it's tough. IB is a better bet nowadays unless you're truly elite which I would consider the top 1-3% who break in in the first place.
MMHF —> pod gets blown up —> MMHF —> pod gets blown up —> repeat until I settle for an ER seat.
thats just how it is brother
Ignore title, VP2. A2A, 29 years old, net worth a little over $1M, probably $2M in by 32 and then who knows. If path to MD opens, could totally be anywhere from $7-15M at age 40.
bro you could stay a vp and still hit close to 7 at 40 with appreciation lol
Absolutely true if possible - only problem is it’s not. It’s up or out in finance, so after I’d say year 4 or 5 as VP, he’s definitely shown the door
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