Banking vs. The Buy-side: 10.5 considerations

Mod Note (Andy) - We're reposting the top discussions from 2015, this one ranks #19 and was originally posted 11/21/2015.

In the forums I see a lot of questions and comments contrasting banking and the buy-side.

It seems many of you are thinking about all the right topics, and I want to share with you some of my insights from my own career at Goldman and Carlyle as well as from working with clients on both sides of the street.

Here's 10.5 things I wish I knew earlier in my career:

1. Buy-side envy

Many bankers have buy-side envy because it is generally considered a more interesting, lucrative, and higher status job. While in some cases it is true, it's a false generalization (as many buy-side shops are here today and gone tomorrow), and it certainly isn't true for all people.

Banking and the buy-side are very different jobs and many bankers will achieve far greater success sticking to what they are good at, rather than leaping to the buy-side in pursuit of what they perceive to be a better opportunity.

Rather than thinking of one side of the street as better than the other, see they are different. What's better or worse for you depends on what best suits you.

2. Do you like blondes or brunettes?

You don't want to choose a life partner by segmenting the entire population according to hair color, and you don't want to do the same with the two sides of Wall Street.

It's false to generalize either banking or the buy-side. There are only specific jobs working for specific people at specific banks or buy-side shops.

Just distinguishing banks can be hard. A job at JP Morgan is similar to a job at Goldman Sachs, but your experiences might be very different. The same is true comparing a BB to a boutique bank, or a big buyout shop to a middle-market fund, or a large hedge fund to a startup manager.

So rather than generalize about the sides of the street, step back and think about what specific opportunities are right for you?

3. What is right for you?

We all want to do what we love with the people we love doing it with. But perhaps more than that we all want to win and feel successful.

That is more likely to happen when you put yourself in the right seat for you. If you are great at banking, why would you give up using some of your skills to move to a buy-side role that might not play to your comparative advantage?

Think about that. Whether it be at a bank or on the buy-side (or anywhere else), what seats would you most enjoy and be best positioned to win?

4. What vision are you driving towards?

There are two reasons to go to Wall Street. One is because you love the job and the other is because you love what the job will do for you. What is it for you?

Some people absolutely love the idea of being a senior banker. Others dream of being a king of capitalism like Schwarzman or Dalio...

Others are simply looking at this as a shorter term track. They're not dreaming of being on Wall Street for forty years, they might not even know what they want, and what matters is their current job keeps them driving in the right direction.

What is that vision for you and how is your current job getting you there?

5. What experience do you want right now?

You want to be focused on where your career is driving you but you also want to be getting the most from you experience today.

What matters to you right now? What type of job do you want to be doing? What sort of people do you want to be working with?

What do you want this job to do for you? What do you want it to be doing for you in your life today? Where do you want it to be moving you in the future?

If you're only thinking about your current job as a short-term step, this might matter less or more...

6. Don't be fooled by the hours

It is often assumed that you have a better lifestyle on the buy-side. In some cases it is true, but again, be careful not to generalize.

One of my Goldman buddy's laments that even after a decade his hours at KKR are as bad as banking.

Similarly, in interviewing with a mid-market fund for a senior position, the partners have gone out of their way to warn my client of long hours. He regularly receives emails from the managing partner at 2:00am to prove the point.

hedge fund jobs that work market hours might offer a better lifestyle trade (but even then the more junior IPs are likely working longer hours), but in exchange for hours you're saddled with the strain of living with Mr. Market...

In all cases it depends on the job, so you want to get specific to the firm and culture..

7. Nor the comp

You might say that compensation is generally higher on the buy-side but that's not necessarily true.
Comparing associate comp it is generally true, but if you're thinking about your long-term career track it's harder to compare.

A great appeal on the buy-side is the potential upside you get from investments in the fund. The downside is those investments might go south, and your economics are tied up for the duration of the investment.

The same is true with carry, which means higher switching costs and reduced flexibility.
Banks (and HF) tend to be more cash oriented year-to-year, although banks too have been increasing the portion of comp that is tied longer-term equity incentives.

However you see it, I suggest keeping comp low on your list when comparing the two. Besides, if you're serious about wealth creation, you must get in on the ground floor (e.g. joining a rising boutique or fund) or start your own shop!

8. The grass is never greener

For years I dreamed of moving from banking to the buy-side believing that it was somewhat of a cure-all for the perils of banking...

Wrong! In joining Carlyle there were aspects of banking that I was delighted to have left behind, but there were also things that I didn't realize I would miss, such as being part of a bigger team and working with diverse clients.

Similarly there were aspects of the buy-side that I simply didn't enjoy...there's a reason that you meet plenty of people who hate their jobs on the buy-side as much as they hated banking...

Again, it's not about finding greener pastures, but where you will more enjoy playing. Some of this comes down to your attitude.

9. Know your criteria

We all have different things that are important to us.

In joining Goldman Sachs, I had been an intern at JP Morgan. I enjoyed the firm and the people but I joined Goldman simply because it was the best bank on Wall Street. That was my criteria-the best job I could get.

When I joined the buy-side I interviewed only at two firms. Even though I could have made more money at Oaktree I joined Carlyle for other reasons...

Whatever they are for you, know what criteria matter to you and compare the jobs accordingly.

10. Diligence, diligence, diligence, diligence, diligence...

Honestly, coming out of school, it is near impossible for you to distinguish different jobs inside the same bank let alone compare and contrast banks and buy-side shops. Your best diligence comes from experience which is why internships are incredibly value. But, even then it can be hard.

In turning down Oaktree and joining Carlyle I made a mistake which was only possible to see once I had already started my job. Doing your diligence from the outside is hard and you want to go to the extreme to get a sense for what the job is really like once you are sitting in the seat.

Don't just talk to people who are in their jobs (and especially those at the firms who are trying to sell you), but talk to people who have left that shop, and find people who have tried different jobs on different sides of the street and get a sense for their experience and what might be the right fit for you.

10.5. Either way master the craft

I end with the 0.5 because I am reiterating the point that I leave you with in all of my threads. What matters most to creating success in any seat on Wall Street (and everywhere else) is that you get serious about mastering your craft.

Whether you are in a BB or boutique bank, a large or small buyout shop, a HF or anywhere else on the buy-side, step back and figure out what it takes to win, and train yourself to get what you want.

No matter what you are doing, it is always more fun when you are WINNING!

About Geoff: A former investment banker at Goldman Sachs and investor at the Carlyle Group, Geoff Blades is an advisor to senior Wall Street executives, CEOs, and other leaders on corporate and strategic matters as well as topics of personal and professional development. He is also the author of the only book you ever need to Do What You Want on Wall Street.

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Comments (13)

Nov 16, 2015 - 11:12pm

Why so much MS? All of this is accurate to some degree. At the end of the day, master your craft if you want to do well.

I think- therefore I fuck
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Nov 18, 2015 - 12:13pm

Great post - thoughtful, insightful and accurate.

I just switched to thy buy side from IB (M&A) myself - analyst in IB to associate in PE. The hours can be worse, but I have gotten more flexibility than in banking (i.e., not nearly as many false deadlines or hand-holding / check-ins). The hours are highly dependent on the cycle / current deal flow - I've been crushed, because I'm going to have two platform investments completed within my first six months (a nice clip!). I felt in banking, they could always find something for you do.

Despite the comparable hours, I do find the work more rewarding / engaging, because you are looking to accomplish something more tangible / long-term rather than transactional. I think the best part about PE so far has been the amount that I've learned - it provides an unbelievable forum for knowledge absorption and honing your ability to make decisions (and knowing which questions to ask to make informed ones). On the banking side, it was always about "how do we make this company look better?" and in PE it's more along the lines of "what is the actual story here, and can we drive value and make money?" - different approaches, though you use similar mechanics to work towards them (i.e., lots of PowerPoint, modeling, etc.). This different viewpoint (in PE), in my opinion, is better for long-term career development if you choose to transition to some other area of finance or journey into the entrepreneurial realm.

I'm definitely happy with my decision to make the switch, but as OP suggests, it's all about individual goals, strengths, viewpoints, etc.

Compensation could always be better, but I'm "just a money-crazed little shit in an environment the befits my high-minded ambitions."

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Nov 21, 2015 - 10:48pm

This post doesn't contain as much information as I thought it would. Long on platitudes, short on useful material (eg anecdotes or actual comparisons of the roles).

Those who can, do. Those who can't, post threads about how to do it on WSO.
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Nov 22, 2015 - 12:20am

Just to offer another perspective, I recruited for PE and received offers at a few top groups but decided to stay on as an associate. I know these days it's almost a given that analysts move on to PE, but there are plenty of reasons to stay on.

Nov 24, 2015 - 3:03am

Some of your points are valid, but overall seems like you are just cherry picking specific examples to support your argument, rather than holistically looking at the pros/cons.

As you point out, there are places on the buyside where the pay isn't as good, hours are longer, culture is worse, etc than you will find in banking. However, if we are making generalizations, there are many more places these things are not the case, especially as you rise through the ranks. To pretend this isn't the case is misleading to people reading who don't know better.

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