What do you guys think is the future of investment banking? Does it still make sense to be an MBA associate when tech and consulting keep on sounding more on-par?
Some things I am noticing:
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All the IPOs and corporate M&A seem to be more consolidated with MS, Goldman, Qatalyst
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IB rev down 30-50%
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It will never be what it was prior to the financial crisis
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Not many exits to investing post MBA level
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Availability of information that was prior restricted to IBs are pretty much everywhere
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Many PE firms are having their own credit/leverage finance arms
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New director-level positions that make it longer to become an MD
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Everyone from the class above that did tech west coast banking is out within a year except for the guys that went to MS
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Talent at the post-MBA level is going down. Only the most questionable people from harvard/stanford MBA are looking at banking. Feels like all the smartest kids I meet are either going to tech, consulting, or PE (prior banking) from M7
What am I missing that is making so many people still want to become bankers? Is the money going to be this good forever? I want to know what I'm missing.
following
I’m going to direct my response towards post MBA associates or “banking as a career” vs the alternatives. If you’re an undergrad the answer is definitively “yes, banking is still worth it”.
Generally I’d say the job is in a good spot - better than it’s been at any other point post GFC, and probably more tolerable from a work life balance standpoint than it’s ever been.
That said, it’s not for everyone. Plenty of reasons to choose consulting. Many think the work is more interesting, being focused on a single project can be less mentally taxing, the hours are better, there are a broader range of exits available, MBB has a brand name that’s probably only matched by Goldman etc.
I’m also willing to entertain an argument for Product Manager tech roles if anyone has one, but at first glance I really don’t get the appeal at all. Seems like you’re at best a cheerleader and at worst a bureaucratic roadblock for the actual revenue generators. Can’t avoid being reminded of the viral video of the girls on their laptops by the pool who couldn’t explain what they actually do.
This is pretty spot on
Do you really enjoy it or do you grind for the bonus?
Is this the video?
Tweet / Twitter
Thanks honestly wasn’t that bad.
“Seems like you're at best a cheerleader and at worst a bureaucratic roadblock for the actual revenue generators”
Wow, that is like the most accurate job description of product manager I have ever seen. Well down.
Also, it is shocking that how many college students fantasize product managers as the boss of software engineers. FYI, they are not.
Product varies widely from company to company. Hard to make any sort of generalizations but if you are at a product led company, PMs do run the show/hold the greatest power in the org.
Also depends on how technical the product is and the PMs background. MBAs can be very impactful in non-technical consumer product companies like a Slack etc. but not so much at nVidia or the like.
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Too simplistic. There's plenty of dud jobs at the likes of GS/MS/JPM, far less dud jobs at MBB. If I meet someone from MBB, it's a reasonable assumption they're a consultant and have a very strong resume. If I meet someone from GS/MS/JPM, they could easily be in some random MO/BO role.
Good thing consultants get hired by people in "business" then
Got a link to this viral vid?
I have a friend who's considering a PM role at one of the FAANG's known for having a shitty culture, and I'm trying to do my best to get him to not accept lol.
These are all great points. I think the poster is trying to get at something that is correct but probably not using the right points. IE IB as a whole not looking super promising, at least at the junior level, sometime kind of soon. I work in IB so no axe to grind here. And I think there is truth to that, main concern being automation of junior tasks. We've seen lots of that already, we'll see how much more exposure there is and how quickly that comes in.
I can't speak on the MBA recruiting piece other than tangential personal experience, but there is pretty firm evidence that the top talent goes elsewhere now. That is likely true about not understanding the pay discrepancy though, and who knows whether they are justified in going to become a consultant or work in tech instead.
Companies are always going to need financing so there will always be a need for investment bankers. Did you forget that there are a slew of Product teams within IBD? ECM, DCM, LAF, Securitization, etc... These are things which are very interesting to many people and many people in Product teams stay in banking their entire careers. It's not all M&A, modelling, or whatever bullshit WSO terrorists say
Thanks intern
This is completely false lmfao. Usual banker bs trying to spin everything into a positive.
We are entering a much different world with much higher levels of volatility, scarcity, etc that will drag down growth for decades to come. The same thing happened to sales and trading when they made record profits in 09 and then watched the business wither on the vine for the next 15 years.
Could argue that slower organic growth only increases the need for M&A, and I’m not worried near/mid-term about number of start ups considering the still massive levels of PE/VC dry powder.
70% of all M&A is dilutive?
There’s nothing positive about entering this downturn lol (oddly very much unlike the pandemic recession where there were a ton of positives). But it’s also very far from the first time this has happened
anyone who remembers 2008 would take this over 2008. THAT was an apocalyptic nightmare for finance
this will be worse...
OP, 100% agree with the top upvoted comment above - as an ex-IB (now in PE) guy, this poster speaks the truth.
As he said, I’ll just reiterate that I don’t think most people appreciate how large a difference the bonus portion makes to your total comp - there are very few (in fact no other that I’m aware of) industries outside front-office finance where you regularly expect bonuses equivalent to 100%+ of your base salary (I’m speaking from my personal experience here). I have consultant friends and frankly I’m not sure they would even believe me if I told them the size of my bonuses - our base salaries are similar, however (as the above poster said) they’re overjoyed with a 30% annual bonus. In IB/PE that means they basically want you gone from the firm lol.
Equally would just re-emphasize the worklife balance aspect - this has dramatically improved since Covid. Admittedly it was very rough during the pandemic itself (as you might see, some of my previous comments from 2020 allude to this) - but from 2021 onwards there has been a massive cultural shift. Of course it’s still a very intense job on the whole - but with hybrid working becoming mainstream, it’s now acceptable for me to leave the office at 6 and login later on. Also people’s expectations seem to have lessened somewhat (maybe that’s partly due to the shortage of people in the industry?) But anyway pre-Covid I was almost always in the office until 8-10pm every night, and frequently till midnight. Can’t remember the last time I was stuck into the office doing an all-nighter now lol.
Anyway basically I’m just echoing/re-iterating what the above guy said - whilst IB/PE certainly has its drawbacks (and they are numerous admittedly) I also can’t think of another job that pays anywhere near as well for the relatively low amount of risk (ie you’re not having to start your own business).
Tech is an obvious potential alternative, but can you code to the level of a software engineer? Also one thing nobody has mentioned yet is a massive proportion of SWE comp over the last decade has been through rapidly appreciating Big Tech stock options/RSUs - looks like that gravy train might be at an end for now.
Obviously super biased, but to your last paragraph: in my view, Tech companies have been able to pay SWEs effectively for free given insane multiples granted by the markets,. The strategically advantaged thing was ALWAYS pay more, no matter what, because if you don't this guy will go to twitter or google or Meta and build the Next Big Thing (tm) that will be worth billions. So there developed effectively an "employment bubble" - where higher and higher prices were being paid for worse and worse engineers.
Have friends who work for big tech getting paid 300+ to do marketing or project manage (which is effectively just running a chill sell side, as I understand it) and work 25 hours a week. It's not tenable when you can't pay people in skyrocketing stock.
You are spot on. Those tech companies pay insane money to people so that they can handcuff people in a slow, boring corporate role, preventing them from doing real entrepreneurial innovations that may later disrupt the landscape of top players in tech. That’s why those slack engineers and PMs who work 20 hours/week (most of which are spent in useless meetings) get paid 300k
The year is 2050. X AE A-12 Musk has invented a device that allows people to shut down necessary parts of the brain to sleep while also be able to work. JPMorgan Stanley explodes with joy. Sleep is no longer an excuse. Policies shift, 100-hour work weeks become the norm.
Junior bankers continue to grind, asking which brand of shoe is the most prestigious to wear during the 20-hour shifts in the office. All is right in finance.
PE firms
1) don't pay investment banks for advisory services anymore these days (why would you when your own team likely has more insights from running portfolio companies in industries. Note that there are exceptions to these rules which are that some bankers are actually close to C-suite decision makers, those are worth their fees)
2) increasingly find investment bank's financing options to be expensive. For example, in today's markets Global IBs will provide financing on an LBO at say 5.0x leverage (generically speaking) and pricing runs something like SOFR+500++. Some direct lenders / private credit can beat that on large deals, while domestic / local banks go further (SOFR+400 for 7.0x leverage)
There's still a role for IBs if you can carve out a niche and are actually "ears to the ground" on market intel, but as OP noted, they're increasingly concentrated amongst a few shops.
Which is actually a return to what banking used to be.
The returns in IB will go towards the top BBs, independent advisory shops and the best MMs. Second tier balance sheet banks will suffer.
And amongst bankers, returns will go to the true advisors that add real value to clients. The day of the mediocre “coverage salesman” is over (at least until the next boom).
It’s a good thing for the industry. Less so for the post MBA mediocrity with no skills and middling intellect.
Cannot SB this enough.
Last few years, at least on the MM/LMM side, you could fund or sell any asset with a pulse, a semi presentable CEO and topline growth. Those days are gone and honestly, good riddance. My biggest gripe has been the influx of bankers whose only value add to clients is access to a balance sheet. Actually have to work for a living now - quality ideas/advice, execution chops and a good network.
would love to see what local banks do S+400 at 7x leverage.. also direct shops all adjusted their pricing to be closer to syndicated market, took them a bit longer but that's always the case in cycles.
I find it interesting that tech 'sounds more and more on-par' when the FAANG+ index has lost like 40% value this year and smaller, growthier companies even more. Still a great career but if we're making the argument that banking isn't what it was pre GFC, where's the equivalency for tech?
I feel like the IB biz model will be seriously challenged. For industry-specific knowledge, EBs do better. For financing like the earlier post stated, private credit is cheaper. There aren't many good fee-based deals for M&A, IPO etc. GS this past quarter made money trading bonds, not in fees.
On top of that, banking culture is outdated and counterproductive. You can't get the best out of your employees by burning them out, and mistakes will cost the banks. Why would you go into IB knowing the insane hours working for idiotic MDs?
You could do this bavardage, out of context “doom and gloom” forecast about literally every industry.
As long as there is free markets there is M&A advisory. And it’ll pay better than 98% of tech/consulting gigs at all levels.
I think there’ll always be a need. I don’t think that has or ever will be a a question.
Where I really hope we see change in the future is the culture and false sense of urgency surrounding this job. The truth of the matter is, what we’re doing is not that critical other than to your respective MD, and there really is not a need to be pushing 100 hour weeks. 60-70 at the max, sure. But constant weekend work and late nights is stupid. There is a clear lack of management accountability and lack of efficiency industry wide which I believe has led to this.
I’m hopeful because I believe the new era of young MDs who are up and coming will lead these changes, but I won’t be in this industry long enough to see that change.
Ibanking will continue to be glorious, but the industry will gradually divide and segregate into two type of roles:
1. The people who do grunt process work (deal execution, adjusting ppt fonts, excel fudging).
2. The people who provide strategic visions & advisory to clients, have negotiating power in the directions of the deal, and can bring deals to the firm ( Example: the MD who attend social events with CEOs and play Golf with investors )
In the past, one must go through 1 in order to become 2, therefore banks are very picky about who can become 1. If you made it to 1, then congratulations, your foot is pretty much in the door, and as long as you don’t fall off the trail, you are pretty much guaranteed to grow into 2
However, things have changed. Now the most polished and well-connected target school kids go straight to buyside, and ibanking roles are getting increasingly filled by non-target hardos who have no aptitude in relationship-building / strategic visions / sales, but are very good at memorizing excel shortcuts and aligning PPT fonts. Those hardos will find themselves stuck at VP level because their experience in excel shortcuts is no where transferable to being a true deal-bringing ibanker ( require sales, charisma, and strategic vision ). Therefore, becoming an analyst / associate is no longer a definitive path to becoming a true ibanker . There will be clearer division of labor: only privileged few are rain-makers (MD and above, maybe a few VPs), the rest are not even real ibankers, they are just support roles who prepare meeting materials and will likely continue to do so for the rest of their career
True enough, but maybe hyperventilate a little less about senior bankers and their strategic vision. We still live in a world where - what, 50%+? - of all M&A deals destroy shareholder value for the acquiror. Not a lot of industries where that hit rate would get you anything short of fired, let alone paid a fortune.
What the hell are you on about, this is the status quo today and it has nothing to do with target / non target. We are a relationship business and those who are better at it win.
This is part of why I crap on modeling work, I don't know why people get so hard on building models. It's a foundation to build on, but the faster you remove yourself from this support stuff, the better.
Good point. Learn the bigger picture
My wife went to an M7 and everyone I met who was going to IB had no intention of staying past 2/3 years, some just wanted to pay down loans quicker lol. I think everyone understands it's a shitty non-intellectual job that pays wells so it has some utility for MBAs. I met 2 people who were considering it longer term and they were, without joke, the biggest hardo losers I've ever met in my life. I just get the sense people are looking for more purpose out of their jobs and the literal only purpose of IB was to pay down debt lol or try to get to the buy side.
But I would say because many massive less intelligent hardos who define themselves by their jobs (and don't have lives outside of work) stay in IB, I can't imagine the culture changing aside from the tip top firms (CVP/PJT), but they don't represent the broader field anyways
The future calls for a status quo of culture and future regulation as democrats continue to demonize Wall Street for political gain (lower fees)
It has generally been my experience that when MBAs really want to go to a particular sector, it’s time to get the hell out
And vice versa
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