Incoming Summer Analyst at a BB with placement pending, and I was wondering how the future will be for the different product groups (especially M&A/LevFin), as AI starts removing the highly technical tasks and work starts shifting towards a more client-centered focus.
I want to hear your opinions, should I focus on placing in a coverage group while avoiding product? Or am I missing something? (the most likely answer).
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Congrats on Citi
I work in Coverage. So take my views with a pinch of salt. However.
There are many reasons to choose Coverage over Product, and vice versa (I've responded on other posts with thoughts on that), but this isn't one of them.
All product groups in IB are high-touch at the senior level, including product grops. There's:
(1) a good amount of origination, meaning getting in front of clients, calling friends in the capital markets teams of funds, speaking to other banks, etc., that won't by replaced by AI. It's relationship and expertise-driven;
(2) the "technical" work that the seniors in these teams do is very much reviewing and negotiating documentation. A lot of the "technical" work here goes like this. (A) Legal counsel summarises key terms of the document and has a view on what is off-market, where to push back, etc. (B) senior bankers take a view on these terms, call up stakeholders (the counterparty, internal risk functions, their client if applicable, etc.); (C) Counterparty receives the mark-up and now it's their turn; (D) process continues until document is agreed (or until we all kill each other, whichever is sooner). Again, not going to be replaced by AI as so much human judgment and negotiation needs to happen;
(3) a lot of risk management. In fact this is true across most of IB, but most documentation is how to divide massive risks between two or more parties, or is in some way of huge importance (e.g. an M&A deal is huge for the CEO whose company is being sold). And if there's big risks, someone who breathes needs to be able to be blamed. You can't let AI execute a TLB and when something goes wrong (which, I stress, might not have been the AI's fault) tell shareholders / LPs / Chief Risk Office it was an AI contract and humans weren't involved;
Now does that mean that AI won't kill jobs at the junior / mid-level? No. I don't know where this shakes out between junior jobs going and workload expanding (i.e. when Microsoft Excel or Factset / CapIQ entered the picture it didn't remove junior jobs, we just started doing more). But this is the same in Coverage as well.
So while I think AI will impact this industry significantly, I don't think it should impact your long-term view on Product versus Coverage
Take this with a grain of salt - just my opinion. Early in my career, I thought M&A was a sexy group to be in with such robust and varied exposure to deals. When recruiting, I focused on coverage groups that held pen on model because I didn’t want to play second fiddle to M&A coming in in mandates.
A longtime mentor eventually advised me to stick with coverage vs M&A to make the big bucks as a senior. I pushed back citing our M&A BSD was on every important client call, but he “showed me the light” in that the coverage MD still had the relationship; the technical guy has to add value by hopping around with soundbytes on really really nuanced issues.
Either path is obviously great for learning and earning, but in a world where compute and hard technicals becomes more and more of a commodity, I see a lot of value in being the client’s trusted advisor, and it seems easier to do so through coverage.
I doubt product teams will cease to exist, but as moats disintegrate, we will all trend toward zero economic profit (fee compression, weak business units dying, etc.) so would have a think about what paths make sense to you to give you ammo in 5 years to be a great (in person) advisor with credibility that can only come from having good judgement and results in unique/difficult situations.
definitely try to be in a group that does their own modeling, it’ll help you learn and at least get some exposure to sector specifics while also the technical side of holding pen on a model
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