What would happen if IBD fees started getting billed by the hour?
I always found it strange that IBD gets their fees in the form of a % of the deal instead of hours, as opposed to billing clients by the hour like MBB does it, or a law firm.
Shit would probably hit the fan if this happened and IBD fees would plummet, followed by bonuses and base comp. MBB would definitely become a lot more lucrative due to arguably superior exit opps at the top level (c-suite vs PE), better hours and more cerebral/variation in the work done.
AM and PWM would probably become even more competitive than IBD due to their revenue generating method, which is still % based. (obviously VC and PE would remain more competitive and lucrative than IBD).
Is this a thought experiment or a prediction?
Do you know smn we don't?
You're retarded if you think there's more than a 0% chance of this ever happening
Take it easy, it was rhetorical.
Obviously it wont happen.
Prediction, I know a lot of thing you plebeians don't.
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billable by the hour plus much smaller percentage incentive pay based off difference between median comp and final sale price would also align interests. it is absurd in a way you could get paid 30 million or 300 million for the same amount of output
Banks also do a lot of transactions which involve the use of bank capital, so % of transaction does make sense there. This is common outside of banking as well. Real Estate Agents and CRE Brokers both work off a % of transaction size.
MBB isn't outcome oriented. Rainmakers actually have value add that the c-suite values- more than MBB stuff which is why they are paid as much as they do. A good senior IB person can create enterprise value, real tangible value, that the company could not itself in any way shape or form.
The process is super competitive and not like hiring a consultant for branding / external hours to throw at a problem (eg for what consultants do you can hire them in house but it's more expensive to do so which is why they'll pay high hourlies).A lot of us and even if you work at the same firm won't know or understand the real value that senior relationship guys bring because the juicy stuff happens off what juniors will see and hear.
A result of implementation on the consulting side will take months—years to realize in the public markets.
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