Q&A: The Final Cut

Hello WSO. My investment banking journey started with my first post on WSO back in 2006 after I had just received my full time offer as an IBD analyst. After 15+ years of banking, private equity, and business school, I decided to call it quits and retire. On that note, I wanted to offer up one final Ask Me Anything to the community. Any topic is on the table, including career, relationships, mental health, travel, etc. I will try to be as open as possible, although I’d prefer to avoid rankings / compensation / hours type topics that have already been discussed in detail. Also, please post your questions for all to see, I’d prefer everyone benefits from the feedback, not just a single individual.

I have linked below my latest “Then and Now” post which gives a much more detailed description of my background, but my direct experience is in: MM IBD, LMM PE (LBOs), MBA with geographic experience in the USA and UK, and a wide range of sectors (e.g. industrials, healthcare, tech, etc.). Happy to discuss other career paths, but these are the areas I know best.

Compbanker - Then and Now (2020): https://www.wallstreetoasis.com/forums/then-and-now-compbanker

 

How has your life satisfaction trended throughout your years, and how has your career influenced it for better (promos/comp/stories) or worse (lost relationships, health)? Now with that in mind, if you were once again in your 20s in today's day and age, what are the main things you would do again, and what would you avoid doing

 

A few thoughts here. In terms of life satisfaction, the career elements are an important part, but not thing that drove life satisfaction. The thing that always mattered the most was the people (friends / relationships), then where I lived, then the job itself. The main exception was my analyst years. Those were absolutely brutal. I gained weight, barely slept, and was generally unhappy throughout those two years. It was a means to an end though, and I’m very happy I went through it in hindsight because it really did set me up for success both personally and professionally.

Analyst years aside, I have lived in a number of different cities from large to small. While I think that every city is only as good as the friends you make in it, I do think it is incredibly important to live where you want to live. Different cities have very different vibes as well as different ‘types of people’ — and it is important to be in a city where the vibe matches what you’re looking for. My advice would be to maintain flexibility in your 20s in order to progress your career, but ultimately ensure you end up in a city you enjoy when you’re ready to settle down. More to come on this topic in another post because it is incredibly important.

In terms of what I would do again, I’d say that I’m really glad I didn’t make any major life commitments too early. I changed a LOT in my 20s and even in my 30s. How I spend my time, the people I want to spend time with, what I spend money on, where I want to live, etc. I was in a very long relationship with a wonderful girl, but ultimately we parted ways instead of getting married. In hindsight, I wasn’t the right guy for her and she wasn’t the right person for me (long term), and I’m very glad we didn’t make the decision to get married in our mid-20s. I have a lot of friends that are still happily married to their college girlfriends/boyfriends 10+ years later, but my personal recommendation is not to rush it. You will change, your partner will change, and hopefully the two of you change in the same way, but it adds an additional risk. 

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

I would say yes, I think IB/PE was a good career path for me. I have friends with such a diversity of jobs, from lawyers/consultants to restaurant staff. I’ve always felt IB/PE was very dynamic. I do get bored easily and while the big picture is always the same in PE, you are still encountering new situations, learning about new industries, and meeting new people 15+ years into the job. Plus, I had the opportunity to travel a lot for work, which to me adds an entirely new element to one’s job. For a period of nearly 10 years, I was on a plane about once a week on average. While for some people this is hell, it enabled me to develop a unique set of skills including working from anywhere as well as gain extreme comfort navigating the world. This has paid off personally as I’ve always spent a great deal of personal time traveling.

That said, as much as I like PE, I think trading would have been an interesting alternative for me. I have always excelled a lot in math, particularly mental math and lightning math. Additionally, my ‘gut instincts’ tend to be accurate when it comes to both people and investing. While this is very helpful in PE, I think I could have built a successful career in trading or at a hedge fund without nearly as many late nights or painful days writing memos. That said — I don’t truly know what these jobs entail, so I could be very wrong here.

I will say one thing that I have learned though: I truly despise client services. I don’t think I would have survived long term in IB. I live for efficiency and the inefficiency in IB is mind boggling (PE has its moments as well). However, if I had to take orders from a client that I felt were a complete waste of time, I think I would lose my mind. The trade offs between IB/PE have been discussed extensively on this forum already, but this one aspect of IB is pretty much a deal breaker for me. Same reason I don’t think I would have enjoyed being a lawyer. I’m happy to take the responsibility that comes with being the client in order to have full control over my day-to-day.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Just want to start by saying thank you for all your posts on this forum, you've given me a lot of insight into the finance industry. As someone who is going to be a trader (about to start at a high frequency trading firm), is there any general advice you could give me that you found useful throughout your career?

 

The answer is equally vague. I’m not 100% sure. I have a general idea, but I’m pretty certain my plans will change. If there is one thing that has been consistent for the last 15 years, it is that I’ve always planned, and life has never gone as planned.

Time wise, I’m focusing on my health and my hobbies. That means working out or playing sports every day to maintain fitness. I’m also now sleeping between 7 and 9 hours a night which is something I haven’t been able to achieve since I was a teenager. It is AMAZING how much this improves my happiness and wellbeing. Sleep is so important. I’ve known this forever but for whatever reason, I’ve always been unable to sleep. Now I’m finally rested each night because nothing is on my mind and I can wake up whenever I want. In terms of hobbies, I’m trying out new things to see what I like. I’m currently working on my 3rd language through self-study and a private tutor, learning how to cook (I was a horrible cook before, still am really), and want to pick up something more artistic as well (drawing or perhaps an instrument, although that isn’t an immediate focus).

Professionally, I really don’t feel the need to jump back into working, mostly due to how much I’m enjoying sleep. I’ve told myself that going forward I will only do work that I enjoy, but the focus is no longer on earning money. I’m actually considering becoming a professional mentor and charging $100/hr or so to help people navigate their careers. Teaching at the university level could be fun as well, but I’m not in a rush — I want to spend at least the next few years in personal pursuits first. We will see.

Geographically, travel has always been important to me. At a minimum, I plan on spending my summers in Europe or traveling elsewhere. Winters I will probably also spend in some warm climate, be it Florida or Central America. I’m planning to just pick the country based on how I feel when the time comes!

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Thanks for doing the AMA Comp Banker.

What drove your retirement decision,  and what kind of lifestyle do you plan to live (assuming it's not Wolf of Wall Street style?)

Persistency is Key
 

I've mentioned it a few times on these forums, but I actually live a really inexpensive lifestyle. I'm not a foodie whatsoever, i prefer not to drink alcohol (a few drinks a year), i don't care for cars/boats etc., and I like to fly under the radar when it comes to fancy clothing. The only thing I spend meaningful money on is rent, which is a function of wanting to live close to the office to minimize my commute. In retirement, this won't be a problem! So despite my annual compensation growing to 7 figures over the years, I have never really spent more than $100k/yr (if you normalize for rent). In fact, I've lived off my base salary alone since the start of my career, and I buy/spend on everything I actually want.

I think most people in this industry get absorbed by lifestyle creep. They go to very fancy restaurants, order expensive booze, buy expensive cars, fly first class, and otherwise live a life of luxury. While certain expenses are inevitable (supporting kids), there is an expensive way to do things and a cheap way to do things. I don't begrudge people who want to send their kids to private school, but it comes at a very real financial cost. I personally know with 100% certainty that I don't want kids. This lifestyle choice made it a lot easier to pull the ripcord and feel confident in my ability to retire.

I posted above about how I want to spend my time (hobbies / travel etc.). In terms of lifestyle, I don’t have anything grandiose planned. It is amazing how much cheaper life becomes when you have time (aka, we spend a lot of money trying to win back the time that we lose making the money). Cooking at home is a great example. I finally have the time to look up a recipe, buy all the ingredients, cook it, eat it, and then clean up without worrying that I just squandered my night. Transportation is another. I really enjoy walking or cycling places — and now i don’t mind walking 45 minutes to get to my soccer game whereas before I would be rushing to the game after finishing a conference call or email.

In terms of where to live — I don’t intend to live in a high COL city anymore. I don’t really see the point given my interests. I’d much rather travel around Europe and spend my summers discovering new cities and meeting people there. I have friends scattered across various cities in Europe and I plan on spending the next few summers visiting them, learning the language if i don’t already know it, and enjoying life. In fact, I’ve already mapped out the first 3-4 years and discussed with friends! I’m certainly not on a shoestring budget but in some of these areas you can rent a huge place for 1,500 /month a live like a king.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Out of interest, just wondered your thoughts on knowing you don't want kids - how did you come to that certainty. Was it something you always felt or something you came to realise over time?

 

I very seriously considered starting my own business when I was in my 20s (around the time I went to business school). My main desire to do so was to have freedom over where I lived and how I spent my time. I went back and forth between that and staying in PE for easily a year+. I even registered a website and told my friends in order to make it more real. Ultimately, I decided that after putting in 6 years in IB/PE, the ‘grind’ was mostly behind me. From that point, the compensation from PE was pretty much a sure thing while I could have epically failed as an entrepreneur. I actually make the conscious decision that I would just work in PE until I had enough money to retire early and enjoy my ‘freedom’ then instead of trying to achieve it through entrepreneurship. Looking back, I think I made the right decision for me.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

How did your friendships with your hs and college friends evolve as you got older (obviously, this was when technology wasn't around)

Did they drop off immediately as soon as you graduated college / thought you would keep in touch but didn't / realised they weren't keeping up in terms of similar career choices / stay in touch with only the closest / stay in touch with only 1 or 2 / talk to once every 2 years / drifted but still acquaintances / still get drinks with them as a group if you had a group / all in a group chat now / all have kids so dropped off / live in different continents ... or are they solid business contacts?

 

It is a good question and everyone’s experience is different. I have friends that still hang out with their HS/college buddies and others that never speak to them. I’ll share my experience but this is truly just a sample size of one. Also, Facebook came along when I was in college and everyone I knew joined, so we’ve had that element of social media. Most people no longer post though (myself included) and all the posts for the last 5-10 years have been of children.

Interestingly enough, many of my female high school friends went on to be quite successful while the male ones took on more blue collar jobs. For the females, we’re talking MBB consultants, lawyers, MBA at Harvard, etc. For the men, ranges from engineers to working retail at the same place he worked in high school. Most of the women are all married with children and the guys are a mix of single / married without children. Anyways, I lost touch with nearly all of the guys shortly after college graduation. We just didn’t have much in common and I wasn’t interested in going to the bar and drinking. I also did my banking years immediately after graduation in another state, so I wasn’t geographically proximate either. In terms of the girls, I still keep in touch with roughly half of them .. and by keep in touch I mean a call every 6-12 months to check in and provide life updates.

In terms of college, I wasn’t in a fraternity or anything like that. I was a part of a core group of four guys and had an assortment of male/female friends from different circles. Sadly, I immediately lost touch with 2 of my 3 good friends. I’m still close with the other one though. We stayed in touch over the years, did dinners or went to sports games when we were in the same city, and have kept up with each others’ lives. He was even going to visit me in Europe but COVID got in the way. He was never a ‘business contact’ — just a really solid friend and good guy. My parents have even gotten to know him and could spend time with him without me there. The female friends from college are a mix. I kept in touch with a few of them over the years. However, almost every single one of them stopped being social (with me and their girlfriends) the moment they got married. I am shocked at the number of people where the last time I saw them was at their wedding!! There is one friend in particular I keep in touch with who nearly has teenage children at this point (scary), but the rest have fallen away over the years. Note that none of these people is a solid business contact — while they are mostly business professionals, they work in completely separate industries.

So there are two other categories of people that you didn’t ask about that are worth mentioning. MBA friends and friends made post-graduation. These have actually been my core.

MBA friends is easy. I keep in touch with a lot of them. I’m still going to weddings and holding FaceTime calls to catch up. We text back and forth more regularly. When I moved to London, I instantly had a group of friends from my MBA that welcomed me into their world. Whenever I visit a city, I would usually meet up with former classmates who were living in that city. Part of it is no doubt due to the fact that people from the top MBAs are fantastic at networking/staying in touch, and part of it is because we are on similar paths as business professionals. These people tend to be in IB, PE, consultants, entrepreneurs, or increasingly high-level executive positions. While part of the interactions are business talk, most of it is just friends hanging out the same way we did in our 20s. We talk about life, career, sports, people — pretty much everything.

And finally there are the friends I’ve made outside of school/work. My experience here has probably been a bit unique because I have moved cities six times since graduating from undergrad. Each time I moved, I’ve made a new group of friends. I will need to edit this post at some point to expand on this category, but I have met some really amazing people along my journey. In general, I have kept in touch with 1-2 friends from each of the cities that I have lived in. These are guys and girls that I really connected with and felt were very good humans. One of them, who I was particularly close with, would chat with me for 1-2 hours every single week for years even after we lived on different continents. To me, this was proof that while your friendships developed as a kid are very unique and special, you can still form strong bonds as an adult.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 
Most Helpful

You wouldn’t be alone. Many of my friends have expressed frustration with making friends in new cities. Particularly as an adult, making new friends outside of school or work can be difficult. I’ll share some anecdotes as well as advice.

1 - Get comfortable striking up a conversation with strangers. You won’t establish a connection with everyone. You will find yourself in a number of awkward conversations. Shrug it off. Some of my best friendships have come from striking up a conversation with someone in an elevator or the lobby of the building I was living in. You’d be surprised at where you can meet people.

2 - Be helpful. Be kind. Be genuine about being helpful and kind. When I first moved to the midwest, I didn’t know a soul. Every day after work I would go to a certain restaurant near my apartment by myself. The restaurant didn’t have any TVs. I would sit at the bar, order dinner, and chat with the bartenders and restaurant staff. We would chat for a couple of hours and I would go on my way. Over the course of a few weeks, I got to know the staff and we started to build rapport. One day, at closing time, I offered to help them clean the bar, restock the fridges, and close up. I didn’t mind - it was better than awkwardly sitting there while they did their closing responsibilities. After that night, they started inviting me out with them and other restaurant staff in the city. I eventually became friends with the whole group, regularly going to parties or inviting them to mine. Now, nearly 10 years after leaving the city, I still stay in touch with one of them and we have even visited each other.

3 - Acquaintances can turn into very good friends. When I first moved to London, I wanted to find football (soccer) teams to play with. One day while jogging through the park, I passed by a bunch of guys playing. Luckily, they invited me to join them, so I did. Turns out they play every week, so they added me to their WhatsApp chat and I became a regular. Out of the 20+ guys playing, there was one guy in particular I thought would be a good friend. Similar age, has an MBA, athletic, and appeared to be a generally nice guy. So I went out on a limb and invited him to join me and a couple of my friends for drinks. He meshed well with the group and has become one of my very best friends. I’ve since invited a second guy from football to join me for board games night, which is a small get together that I host every so often. He brought his wife, left his four kids (!) at home, and got along super well with the group. Now that we’ve transitioned from acquaintances to friends, I’m sure we will start hanging out more outside of football.

4 - An extension of the above concept… I randomly discovered that someone who studied abroad at Booth had moved to London. We had spoken a few times while she was at Booth, but didn’t have any very meaningful interactions, and hadn’t even chatted for about seven years. Regardless, I reached out to her. We met up and I gave her a book about all the best walking tours of London (COVID times). We had a nice chat so I introduced her to a female friend of mine who lived close to her and who I thought would connect. Lo and behold, they hit it off and the four of us, including the guy from #3 above, all hang out nearly every week and have even done trips to Europe together. It didn’t take much, just a bit of courage to reach out and show a bit of kindness to someone.

5 - Last story. I moved to the south after graduating from college in New England. I didn’t know a soul and I was an investment banker, with almost no free time whatsoever. Shortly after my moving in, one of my neighbors happened to have a block party. I decided to go. Well, turns out I was the youngest one at this block party by about 10 years, and the average age was around 50. So I awkwardly chatted with the older folks for a few hours and told them how I had just moved to the south. A couple of weeks later I received an email that read:  “Hi, so this is probably the most awkward message I’ve written in my life, but my parents are friends with Mr. and Mrs. (Jones) and they told me you had just moved here. Anyways, I’m having a party this weekend and would love for you to come.” So I went and made a whole bunch of friends. Five years later, the same girl who invited me to her party invited me to her wedding.

I have dozens of stories like the above. The common theme amongst them is that I wasn’t afraid to put myself out there. Plenty of my attempts at making friends have resulted in dead-ends. But as long as you are out and meeting new people, you will make friends. Be genuine, be kind, and people will gravitate towards you.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

- What advice would you give to your 20-year-old self?

- Do you think sacrificing your social life during college to get a high GPA is worth it ?

- What's your favorite book ?

Thanks for doing the AMA 🙏

 

Some good questions here. I’ll answer the book question in a later post as the question was asked below as well.

In terms of advice to give to my 20-year-old self, I don’t think I would do much different. To quote Boris Johnson, “we got the big decisions right.” So my advice would definitely be to “stick with it” and “grind it out” in banking despite the immense desire to quit when the hours were long and torturous. I pulled so many all-nighters, left work each day after 1:00am, and lived with a perpetual throbbing headache as an analyst. There is no two ways about it — it was awful. However, it sets you up for a lifetime of success if you are able to grit your teeth and make it through to the other side. For many careers, your first job dictates your second job, which dictates your third job, which determines where you can get an MBA, and so-on and so-forth. While there are exceptions and pivot points (such as an MBA), it is amazing how much you are defined professionally by your first job. I highly suspect that had I not landed in banking, my entire career and earnings would have been substantially less exciting. It isn’t worth sacrificing your long term health over, but if you can crush it during the first 2-5 years of your career, you will be set up for the next 30.

As for sacrificing your social life during college to get a high GPA … I think balance is important but it should skew towards academics for career-oriented people. If you think of it as a time allocation, I think 75% academics / 25% social is probably the right balance for the average person. Given the correlation between academics and your first job, I do think it is worthwhile to put in the effort to secure a strong GPA. That said, the difference between a 3.7 and a 3.9 is minimal from a recruitment standpoint but the social cost is generally quite high. So without contradicting myself too much, I’d say shoot for a GPA of 3.7+ but don’t do so if it means having no social life whatsoever. Developing social skills is an important part of college and shouldn’t be ignored.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

It moved around a lot through the years. At the start of my career, I thought the number was going to be $20M+, but it adjusted down over time. I mentioned it in another post, but as long as you avoid lifestyle creep, you don’t need $20M to live an impressive lifestyle.

I started looking at some other websites/forums about early retirement. A lot of people seem to be recommending an approach where you draw 3% of your savings per year and invest the rest. Depending on sequence of return risk, this will work for 30-50+ years. Using this model, there were people in their 30s / 40s trying to retire with as little as $1M in the bank. Personally — I think this is absolutely nuts and is too risky / low.

The thing about PE is that your carry pays out many years after you stop working. So you can theoretically have already hit your number, but not know it for certain. Given this, it is risky to retire if you are reliant on future carry payments to reach your target.

So to avoid your actual question as best as possible but still give some sort of response, I’d say I wouldn’t have felt comfortable with less than $5M in the bank (realized, after tax).

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Thank you for doing this, you are a legend on this site and one of the most trusted users. I've read so many of your posts and they are always so well articulated and you clearly put in considerable thought to each one. 

1. Based on your background, I would assume you traveled across the country / globe a good amount and therefore it may have been hard to maintain a relationship. Did your SO come with you or did you not really seriously pursue anyone until you reached a certain point in your career / life? 

 2. What helped you reach your retirement goal after just 15 years? I am not on the traditional IB --> PE path but I would estimate you moved very quickly. Was it early carry at your fund, living below your means, just simply being smarter than the rest of those following a standardized cookie cutter career path? Were you the guy who banked every bonus in full as opposed to buying bottles? Any general financial advice would be helpful, because I anticipate I will be working much longer than 15 years unless I can successfully transition to PE asap. 

 

I appreciate the kind words.

1. I don’t think think the traveling puts much strain on relationships, but moving cities absolutely does. Early on in my career I had a long term relationship and was moving cities. I personally didn’t think it was fair to ask her to move cities with me unless I was prepared to propose. She was a career-oriented individual and had no friends in the city I was moving to. Ultimately we decided to go our separate ways and are both probably happier as a result. To anyone in a similar spot, I strongly advise you to think carefully about whether this is the girl/guy you want to marry before asking them to move cities with you. Since then I’ve had a number of relationships but often find I enjoy the freedom of being single more than the benefits of a longtime partner.

2. I would say a combination of good decisions and a lot of good luck. I was fortunate enough to be granted very meaningful carry when I was 26 and the fund performed exceptionally well. I went on to get carry in other funds and each of those funds performed well above average. I was promoted along the way and my individual investments generated good returns. On top of all this, I have lived a relatively inexpensive lifestyle, which I outlined to a degree in an above post. Limited expenditures on food and booze, flying economy, staying in the Hampton Inn, and other similar decisions. I certainly wouldn’t call myself cheap — in fact I almost always picked up the entire tab when I went out with friends to dinner and often hosted events at my place. However, I have always lived massively below my means, enabling me to bank part of my salary, my entire bonus, and all of my carry.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Hey Comp, congrats on hitting the big win. Your posts have always been great to follow.

On your second response, you mentioned receiving a significant carry allocation early on in your career. How big was the fund at the time of your allocation, and how have subsequent funds grown since then? How were you able to secure that carry allocation so early? Did you have a special relationship with the founder of the fund? Given the PE universe today vs. even 10 years ago, do you think PE is still a good place to build a career to try and replicate the success of someone like yourself?

I ask because I, along with a handful of friends, are increasingly doubting PE for other career paths and a few are leaving/have left. Some are going back to banking, others are pursuing corp dev, a few are joining strategy roles in funded startups and the rest are sleepwalking in PE while dusting off MBA applications to reevaluate their career path. Most of us are/were at funds that raised $300-750mm size funds and we are/were all associates/senior associates hoping that being in that LMM/MM space would unlock early access to carry, but for those of us that have received carry, it's been relatively insignificant, especially when you factor in the idea that PE is becoming more competitive and fees are/will be pressured down. Seeing your success and that of a few other online strangers produces a bit of cognitive dissonance with what seems to be a different PE landscape today. 

 

+1 SB, I would give more if I could. I can't tell you how much I appreciate your feedback. 

Regarding 1, I am in a very similar situation. Potential opportunity to join my dream PE fund (tiny little LMM shop on the other side of the country but I interned for the partners in UG). Im deep into a relationship and trying to figure out if I extend an invitation to my SO in the event that I do pack my bags and leave. As you said it requires serious consideration. My logic so far has been almost identical to yours which I find heavily reassuring. 

Regarding 2, I am glad to hear you received excellent opportunities early on. Sounds like you were wise enough to find the right fund to join and used that as a springboard to continue the climb. Love that you lived below your means as well, it is something I have always tried to do. 

Thank you again for doing a Q&A, I hope your retirement is everything you hoped it would be. Don't forget to stop by WSO if you ever find yourself bored, I know we could all use more of your wisdom. 

 

Thanks rabbit. Glad you found my posts from years past helpful. Also glad you’re still here in WSO!

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

thanks for doing this!

Selfishly I'm curious as to the psychology behind it as retirement is a hyooj part of what I do

  • what caused you to make the decision (apart from the financial), was there a moment in time (vesting, liquidity event, argument with boss, health scare) that pushed you over the edge?
  • what worries do you have about it
  • how will you spend your time? Specifically I'm curious about the social circle as there aren't many young retirees, how you'll keep intellectually engaged, physically active, travel plans, philanthropic desires, all of that
  • roughly, whats your asset allocation in %?

i guess I'd just like to get inside your head a little, and I'm being a little vague as to my thoughts/predispositions because I don't want to lead you to an answer

thanks man!

 

Ciao thebrofessor,

I had been contemplating early retirement for many years before actually pulling the trigger. I wouldn’t say there was any ‘event’ other than a substantial liquidity event. However, it was all part of a plan that had been in place for a long time.

What worries do I have? … Well, this is a tough one. I don’t live with any day-to-day concerns that keep me up at night (in fact I’m sleeping great)! However, there are a few risks that I know I will need to navigate in the future: (1) While I am confident I will not run out of money, I have chosen a very different path than had I continued to work and made probably $50M+ over the next two decades. I don’t regret my decision, but I’ll need to always live with the financial “what if.” (2) I suspect I won’t be employable in PE after a few years pass. What if I hate this life I have chosen? What if I get sick of traveling? What if I end up massively bored? What if I get injured and can no longer play sports, workout, and travel freely? (3) Technology / healthcare can change a lot in the next 50 years. I may find 20 years from now I cannot afford the life-extending synthetic heart. Or maybe they invent a really cool piece of hardware to plug me into the metaverse and I cannot afford it, having to instead settle for the 2400 BPS modem equivalent from our childhood days connecting to AOL! The future holds a lot of uncertainty and it will definitely cost money.

I answered this question above in terms of hobbies / travel / etc. But, as I’m sure you can appreciate, it will definitely involve molto Italiano :)

My asset allocation is theoretical at this point. I made a lot of cash last year that I have yet to invest. I’m concerned about putting it all into the market at once in the event of a recession. My future plan is to essentially buy a lot of dividend yielding, large-cap stocks. I should be able to live off interest/dividends of just 1-2% while preserve and growing the principal. At the moment I’m investing $5k / $10k every day with the objective of having it all invested over the next few years. That’s my equivalent of dollar cost averaging. If the market craters at any point during the window, I’ll go all-in with the uninvested balance. I may also take a portion of it and invest in some high growth stocks or throw it in an ETF, but all of that is undecided at this point. It’s still early in the journey. I also rent out a property and have unrealized carry, so I’m at least somewhat diversified in that regard.

I’m happy to take any advice on asset allocation as I’m new to the whole game.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Quali sono le tue seconde e terze lingue (imaggino che è italiano)? may be incorrect as I'm only like 2 months in...would love to compare notes

I love what you've said about lifestyle creep in the above comments, I see this in PWM too and you're very wise to avoid it

the worries bit I may have to ponder later, that's very interesting. I imagine I have several clients with your LNW, but probably 0 with your net worth at your age that built it themselves

if you've done the math and can live off a withdrawal rate of 1-2%, you don't need to worry about asset allocation that much, I'd personally just have 1-5 years worth of spending in cash/cash equivalents and the rest in a diversified equity portfolio (whatever your style, so long as it's diversified). I say up to 5y because you want to be able to ride out a downturn like 2000-2002 or 2007-2009 and maybe have some opportunistic funds in case you meet my wife's cousin when you're in Rome and want to buy a summer place to visit her (she is single btw). your single biggest risk is inflation, and unfortunately the best defense against that is living below your means and being patient with high quality stocks, just accept low returns for a bit until the Fed gets it under control

since diversification is a guarantee you will not get the highest return possible, there has to be a point. as I see it, the goal is to protect against the following

  • concentration risk - a single sector/stock blows up and gives you a permanent impairment of capital, this can be as specific as a single holding or as broad as TQQQ (because it's all tech)
  • weak stomach - often times having some part of the portfolio that's not sucking as much helps people stay the course, whether this be cash, dividend paying stocks, etc., though this is tough to gauge and is more art than science
  • sequence of returns risk - in most market environments you can be 100% equity with an emergency fund of 1-2y of cash and be totally fine, but if we go through a 2000-2010 or 1970-1980 environment and you're 100% SPY, your withdrawals will eat away your capital if you don't have other asset classes that you're withdrawing from. the magnitude of this is also highly dependent upon your initial withdrawal rate (as in since you're 1-2% of principal versus 4-5%, your risk is significantly lower)

and that's pretty much it. if every investor had a strong stomach I'd advise 100% of the funds not for emergencies to be in stocks (not just public, I also include private in this), and then depending upon your initial withdrawal percentage, have some amount of money in more stable stuff (cash at today's rates, maybe strategic fixed income, HELOC, etc.) so in case we do go through a lost decade you won't go bankrupt or have to go back to work. 

 

(1) While I am confident I will not run out of money, I have chosen a very different path than had I continued to work and made probably $50M+ over the next two decades. I don't regret my decision, but I'll need to always live with the financial "what if." (2) I suspect I won't be employable in PE after a few years pass. What if I hate this life I have chosen? What if I get sick of traveling? What if I end up massively bored? What if I get injured and can no longer play sports, workout, and travel freely? (3) Technology / healthcare can change a lot in the next 50 years. I may find 20 years from now I cannot afford the life-extending synthetic heart. Or maybe they invent a really cool piece of hardware to plug me into the metaverse and I cannot afford it, having to instead settle for the 2400 BPS modem equivalent from our childhood days connecting to AOL! The future holds a lot of uncertainty and it will definitely cost money.

I know you're not taking questions, but as someone trying to plan for early retirement it's such a relief to see that these considerations (which many people would call overthinking) are not unusual

 

Really appreciate this and genuinely enjoy reading your posts as they are very insightful/relevant.

I’m always curious about these and I have no agenda here. It would just be great to hear from you.

1) What was your best day, week, or month in your career? Basically, where everything—or mostly everything—went your way.

2) What were the top 2-3 surprises in your finance career that you could not believe happened (whether good or bad)?

3) If you had a magic wand, what—if anything—would you have changed about your career?

Thanks again!

 

1) That’s hard to say. I don’t think of my career in terms of days / weeks / months. I think of it in terms of key events. There are a few that stand out though:

- When I was 26, I was put on the board of a portfolio company that was underperforming (write down). Over the course of 18 months, did an acquisition that doubled the company’s earnings and put it on a growth trajectory. The partner wasn’t involved because it was a failing investment and I got to basically do an entire deal on my own. Definitely a ‘fake it til you make it’ scenario where I was negotiating a purchase agreement for the first time. Ended up selling it for a strong gain within two years. This company was definitely the one which made me feel like I was actually good at my job.

- When I sold my first portfolio company where I played a key role from the initial deal all the way to the exit. Was a really good feeling having seen it through the full cycle. It was subsequently followed by my first $1M+ carry payment, so the combination of the two had me on cloud nine for awhile.

2) Eh, there were a number of surprises, mostly negative. It was one of the reasons I decided to retire early — I didn’t enjoy working day-in, day-out with some people. On the flip side, it is amazing how fast a portfolio company can go from ‘bad’ to ‘good’ or from ‘good’ to ‘bad.’ I was always surprised when companies that started off as losers turned into great investments, and of course the reverse.

3) Hard to say. If I were being truthful with myself, it would be walking away from unvested carry at a couple different points in my career. In hindsight, I gave up an 8-figure sum. Probably shouldn’t have walked away from that. But I’ve mentally put this behind me and am very happy with where I ended up financially.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Good answers. I'm sure you have covered 3--perhaps indirectly--in other forum threads, but it would be interesting to get in your head a bit on the decision process that led you to walk away from the unvested carry. Of course, I can completely respect your privacy if you'd rather not answer.

Thanks again, man. Really good color in this thread. 

 

Congratulations on your success. Along the way, you've positively influenced the lives of countless finance professionals, myself included. I sure hope this isn't a farewell post, and I selfishly hope that in your retirement you may continue to find yourself in this corner of the internet.

We're pretty similar in age. I've observed mostly two camps of peers: those who have "dug in" and stuck it out at a firm (IB or PE or consulting), gutting out challenges in growth pains or leadership or whatever; and those who have not, climbing the ladder by lateraling or moving firms. On the balance, it looks to me that the most successful at this age are those who jumped around very early (first 2-4 years post-undergrad) until they found a lane/niche/team that was a good fit, and then stuck it out there through thick and thin. Does this foot with your own experience, or that of your peers?

"Son, life is hard. But it's harder if you're stupid." - my dad
 

First, this isn’t a farewell post. You should continue to see me here making contributions where I can.  Anyways, definitely a great question!

I’ve seen both paths work. I switched firms a few times, generally due to geography more than anything else. Had I skipped my MBA and just stuck it out, I would be a much, much wealthier man. I even liked the people too, but I really wanted to get my MBA and spend time abroad. So ‘digging in’ and sticking it out just wasn’t for me. Others I know worked their way up from associate to partner at just one PE firm.

I will say, looking across my peer group, one of the biggest indicators of success is overall firm performance versus individual performance. I personally think it is pretty hard to get fired in PE if you’re well liked by your colleagues and getting your work done. It is a ‘team’ sport, so very hard for people to assign blame for bad investments to a non-partner or even a partner. The more talented people do tend to get promoted faster, but not a heck of a lot faster, because promotions often occur around fund cycles anyways. So ultimately when a fund is deploying capital quickly, growing AUM, growing the team, generating carry, this creates opportunities for the non-partners to grow their own wealth and position. If I were to advise someone who was solely focused on climbing the ladder, my best advice would be to hitch your wagon to a successful, growing firm. Obviously much easier said than done and requires a lot of luck, but this seems to be the best indicator of success. (Note: it also means you should consider jumping ship if your firm is struggling to deploy capital / raise a fund etc.).

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

I don’t really read books on investing. I personally didn’t find that they were useful in my actual job — most of the lessons taught weren’t applicable to PE or I had already learned on the job.

Most of the books I read are either for pleasure or psychology / personal development (I hate the term self-help, which is often used in place of personal development!) Two that I found very memorable were (1) Moonwalking with Einstein and (2) Stumbling on Happiness.

The first is a book about memory recall. There are a whole bunch of them out there, as well as TED talks, that essentially promote the idea of a memory palace. The idea is essentially using unusual images that you associate with things you need to remember. It works shockingly well and I’ve always been a promoter of the method.

The second is a book about happiness. I’ve read a number of books on happiness but this one is the one I liked the most. I read it very early in my career. It would be impossible to even summarize it appropriately, but I do recommend that everyone takes the time to truly assess what makes them happy in life. Most people are very bad at predicting what will make them happy in the long run, so we all end up in a constant pursuit of things/experiences, only to be disappointed or dissatisfied shortly after getting them. I’ve am constantly doing a lot of introspection and adjusting my life to fit what ultimately makes me happy. In fact, this is how I’ve managed to avoid ‘lifestyle creep’ and was how I came to the conclusion that I should pursue early retirement.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Thanks for the questions itdoesntmatter. To avoid repeating answers, see my response to Symfuhny above (it was the 3rd or 4th question in the thread).

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Congratulations on such a successful career.

With most of your life still in front of you what will you do now that you don’t need to work 100 hours per week? Will you just relax in a low COL country? Would you use some of your retirement money for angel investing or otherwise still contributing to finance but without a full time operating role? Would you use your name and connections to directly back a start-up? I bet a PE veteran joining a start-up as the CFO could secure hundreds of millions of funding just out of your personal contacts.

 

Thanks Holder. I’ve had a number of opportunities present themselves. I’ve had past executives I’ve worked with offer me a finance type role, an opportunity to build a startup with an MBA classmate, and a bunch of other opportunities that wouldn’t typically fit someone with my profile. At the moment I’m enjoying my retirement too much to even contemplate doing something professionally. There are a couple of PE-type roles that I would consider doing, but unless it is something really exciting, I don’t plan on jumping back on the corporate treadmill.

Random, but I’ve also thought about becoming a twitch streamer (for fun, any money would be upside). Ultimately I don’t think I will because I’m not really interested in signing up for days in front of my computer.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Again, I appreciate your insights. Is the retirement more an indefinite sabbatical? In the sense that you aren't ruling yourself out of the workforce just yet and would consider rejoining whatever industry in a suitable role? For example, if a hypothetical CFO role opened up for you at a reputable company / a company which you were passionate about, would you take it? And if so, would it only be between after a set number of years or something? Thanks

 

Thanks CompBanker, really enjoy your contribution to this forum. Had a few questions: 

1) How was your stint in Europe? 

2) What were the main differences in working in PE in Europe vs. the US? 

3) Will you be returning to the United States? Or staying in Europe? and why?