Banking 5 and 10 Years Down the Road

Hi,

I go to a target and will be doing full time recruiting this coming fall. I've thought a lot about my career options the past couple years, and banking is one of the jobs that I'm interested in considering after graduation.

I'm hoping that some of the more experienced members on this forum can provide a clearer picture of the benefits in banking, particularly from the perspective of someone ~5 years out (ie just past entry level), or someone ~10 years out (ie early career with lots of experience under the belt).

I'm specifically trying to understand the unique/really strong value adds that entry-level banking offers. Most of what I've heard so far revolve around the following:
1) banking offers a lot of money for someone just out of school
2) banking teaches modeling skills
3) banking refines your knowledge of finance, particularly accting and corp fin
4) banking makes you feel good about yourself/get girls/look good with friends
5) banking opens doors to "anywhere"
6) banking teaches you how to sell things
7) banking gets your foot in the door in an industry where top people easily make a few million a year
8) banking allows you to meet really interesting people

Breaking this down, of these proposed benefits, the ones I'm interested in are obtaining the modeling/finance/selling skills, getting my foot in the door, and meeting really interesting people.

Let's assume that the "meeting interesting people" bit is a semi-unique aspect of banking that I could get if I went to any extremely competitive job. Then we're down to modeling/finance/selling skills and getting the foot in the door.

For modeling/finance/selling skills, why couldn't I just study with a banking friend or read a textbook to get the requisite knowledge? How helpful is banking experience if I plan on doing something else later like business management or consulting? What about investment management/hedge funds? And is the banking-to-PE connection mostly a matter of getting your foot in the door through banking? Or is there some exclusive skill set that I would need to get from banking before making it to PE?

Essentially, I'm trying to play Devil's Advocate here and figure out the longish-term benefits of banking for someone who doesn't plan on staying in the field for the long haul. I know a lot of people who are in the same boat as me, so any words of wisdom would be much appreciated by all of us.

Thanks.

 
Best Response

Let me start by saying that you've obviously done a lot more thinking about your options than most of your peers and most college students in general. Maybe even more than most people in general.

I was in your shoes a few years ago when I was recruiting - I wanted to either work in venture capital or start my own company one day, but VC was near-impossible out of undergrad and I didn't want to take a huge risk starting out.

I interviewed for a lot of finance/consulting/all other sorts of jobs and ultimately chose to go into banking; I just finished my 2 years there a few months ago.

First, I'll comment on your list of "benefits" and then I'll go into more detail on some of the questions you pose.

1) banking offers a lot of money for someone just out of school

SOMETIMES it does... you should not make your decision based on this, because in really bad economic times bonuses can drop to almost 0. Just ask anyone who worked from 2001-2003.

2) banking teaches modeling skills

Yes, but I would argue the more important aspect is that it teaches deal-making and sales skills - you learn how deals come together and how you actually negotiate with large amounts of money involved.

3) banking refines your knowledge of finance, particularly accting and corp fin

Yes, but as you point you could get this through self-study, potentially... I do think you gain a better understanding from applying it in the field though.

4) banking makes you feel good about yourself/get girls/look good with friends

Ok forget about this one right now. A few months after I started, I had a broken-up relationship on my hands, had gained a bunch of weight and most of my friends thought I disappeared.

Sometimes you feel good about yourself, but it's very up and down... one day you're on top of the world, one day life sucks.

5) banking opens doors to "anywhere"

"Anywhere" in finance, yes. If you wanted to do something truly unusual, I'm not sure how much banking would help.

As an example, I now own several of my own businesses. I didn't "need" banking to open these doors for me; I simply went out there and did it. What I gained from banking was more indirect: work ethic, ability to drive to conclusion, softer skills like that.

6) banking teaches you how to sell things

True, though you don't get this aspect as much as a junior banker.

7) banking gets your foot in the door in an industry where top people easily make a few million a year

True, but it is NOT that easy to get to the top and many people burn out long before they ever reach that spot. Others simply don't have what it takes to "make it" and drop out along the way. It's a very high-pressure environment.

8) banking allows you to meet really interesting people

Debatable. It allows you to meet accomplished and driven people... whether you want to call them "interesting" is another matter entirely. :) The people you meet in banking are most definitely more valuable connections to have vs. the average tech guy, for example - and I can say that because I used to work in the industry - but are they as "interesting" as the guy who wrote 10 books and founded a monastery? No.

Now, to address your last questions...

For modeling/finance/selling skills, why couldn't I just study with a banking friend or read a textbook to get the requisite knowledge?

You could do this, but you learn much better by doing rather than by merely studying. The real value is in learning how everything is applied in the "real world."

How helpful is banking experience if I plan on doing something else later like business management or consulting?

It's still useful, but not as useful as if you did something finance-related.

What about investment management/hedge funds?

Banking is much more useful here, though less so than PE. PE and banking are much closer than banking and hedge funds are.

And is the banking-to-PE connection mostly a matter of getting your foot in the door through banking?

Yes and no. That's really the best way to get into PE, but I would argue the 2 fields are really 2 sides of the same coin.

Or is there some exclusive skill set that I would need to get from banking before making it to PE?

You need to know modeling and how deals work, especially M&A deals, before getting into PE. Some consultants break in without this experience but even they usually have to do some studying on their own. Long story short, it's very difficult to get into PE without some kind of "transactional experience."

Essentially, I'm trying to play Devil's Advocate here and figure out the longish-term benefits of banking for someone who doesn't plan on staying in the field for the long haul. I know a lot of people who are in the same boat as me, so any words of wisdom would be much appreciated by all of us.

I would tell you what I tell everyone else on my site and all others who ask me about this: if you want to do finance in the long-term, go do banking. If you want to do something else, you should consider it more carefully before jumping in.

From what you wrote here and the fields you indicated interest in, it probably is a good bet for you, unless you want to do consulting instead (and banking vs. consulting is a whole separate discussion...).

Any questions, PM or email me (address is on my site).

 

Is it unheard of for a fresh bach grad to go straight into PE? I'm a junior who's looking for a PE gig for the summer, and actually preferably for a semester-long coop in the spring. I've knocked on a lot of PE shops' doors with no luck with getting them to take me for a semester. The recurring reason I'm getting from them is that they usually don't take inexperienced people in their firm even to intern - at the least 2 years I-banking experience or currently in B-school. Does anyone know what the deal is here -- is there essentially a very small chance of getting into PE without any banking experience?

 

I've had several friends who went to PE right after undergrad.

However, in all cases they had previous PE/VC internships... it is basically impossible to get in without some kind of experience. Also, almost all of them went to middle-market PEs rather than the big guys.

Place like Audax, for example, recruit a fair number of PE Analysts from undergrad.

Best approach: Look for a PE internship at a small, regional place that is easier to get into and more approachable and then leverage that into FT opportunities.

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