Best Kept Secret In Finance
What is the best kept secret in Finance?
The worst kept secret?
Confessions welcome.................
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Career Resources
I have a child and no one at my now ex-firm knows. My next workplace knows. Wouldn’t have been possible without the nanny and a supportive partner.
Where do I sign up for a partner like that and where can I hire that nanny?
I have a child that lives with me and all members of my team know.
Mutual fund wholesaling.
what's so special about this?
People on this site look down on it because it’s sales and not “prestigious” but with a good territory you can make $300-500k a year working 40 hours.
This is significantly overlooked. Seeing my uncle do this at a Mutual Fund company was crazy. He made probably double even what some people in the above chain write. His territory was the Southeast (which is not a great territory), but took home ~800k annually.
He flew to the Southeast from the Northeast 5 days/week and flew home. Almost entirely day trips. It was pretty taxing, and he never had too many days at the office. He had the social acumen and sales ability to be successful there. I certainly can't do that, but it is admirable.
Also, he never let anyone laugh at the job he had. He knew it wasn't a super well-respected job. He just showed them his car, his house, and his country club, and then people knew what kind of work he was doing.
worst/best kept secret is that Northwestern Mutual is a scam shop. IYKYK
This is just common knowledge, not a secret
Don't know what you're talking about, they invest $bns in private equity co-invest, mezzanine debt, and bank loans each yr with mm pe sponsors
There's a power shift in M&A where PE doesn't hold all the cards anymore, and they actually rely on maintaining strong relationships with banks to ensure they see attractive assets to deploy capital and drive returns for LPs. Hence the proliferation of various "tipping" mechanisms on transactions. Most people new to or outside of the industry don't fully appreciate how balanced the dynamic is now - particularly with the top firms on both sides.
this is totally true. It reminds me of debt placement brokers in real estate. Why do big firms use debt placement brokers when they know what market rates are already? It is a way to make sure their bids get to the top of the pile when that firm's sales brokerage team is repping the property. A little nod nod wink wink, and you let them know you'll use their debt placement team if you your bid is accepted...all of a sudden your bid is getting serious attention.
In M&A it is different, but maintaining relationships with bankers is important to make sure you hear about assets and that your offers are taken seriously.
Do bankers get a higher fee with those deals, or just more deals same fees?
That's really only up to a point. I'd argue from a risk perspective banks are getting screwed by PE and it isn't even funny. Getting assigned counsel by PE so your own counsel is negotiating against you, having hyper-aggressive terms that constantly get worse (0 pushback if it's precedent, even if it doesn't make sense), the inability to escape from most commitments if there turns out to be a lot more hair, and the general rush to get commitment papers out definitely messes with banks' ability to judge risk in those documents.
That's a really good point for balance sheet banks. My perspective is based on advisory only (my shop doesn't lend).
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Most top PE firms commit significant resources to improve and manage top banking relationships. I wouldn't say it's ever "throwing someone a bone" because that candidly undervalues things quite a bit. I've been part of numerous conversations where PE firms that don't act appropriately in a process or treat someone poorly go on a list and don't see deals for years. Then down the line the relationship is typically repaired with a marquee mandate, multiple buyside tips, etc. When you think about the world of PE and IB, there is a surplus of uncommitted dry powder and thousands of firms, but on the banking side, the top 20 firms comprise the vast majority of the deal flow. A PE firm may higher a bank for 1-3 deals per year, but a bank brings hundreds of "at bats" per year for a PE firm to deploy capital. As poster indicated, there is a lot more balance than there was 10-20 years ago given the proliferation of PE firms.
Most people have no idea what 90% of what they say means or have no fucking clue how to do something or why they do it. Finance has done a brilliant job of creating this illusion of complexity and posing as a field for the intellectual elite in the public eye. In reality, 90% of people are headless chickens without a fucking clue what is going on. That's THE best kept secret in finance.
I honestly don't agree with this. Basically brand new to the industry, but the individuals who come off as the most intelligent are the ones who clearly do the most reading and are the most well-versed in situations or transactions that relate to the current one at hand.One's ability to synthesize information is a skill that isn't talked about enough. While reading and just being in the know isn't technically hard or difficult, it's definitely what separates the confident from the non-confident, and even further the great from the mediocre.
People in finance just know more about what’s going on in the finance world than people who don’t.
Success in the industry isn’t easy. It takes a lot of time and effort.
I can't count you how many times in this business I've built super detailed models only to have them shot down by some dimwit who says, it's X multiple. So it's too expensive. We're not doing it.
Any concrete examples you can give? Really hasn’t been my experience at all honestly but curious as to what to what you’re referring to.
Just literally listening to folks talk. Scroll up and read the post about the balancing of relationships between banks and PE firms. And also take note of the subtle, but thoughtful, prediction that PE firms will regain bargaining power in the future.Without knowledge, like real knowledge in your head, you have no information to synthesize which means you have no predictions or connections to make. Their knowledge could give them an edge in the future. Whether that be making the right career path decision, or preparing to navigate the evolved space.I give folks credit. And my goal is to be like them. I want to be in the know.
You mean it's not really rocket science?! It's very funny how average a lot of people in the industry are.
Think you meant hairless
Affirmative.
I tend to disagree with this. I think most people know what they’re talking about and are quite intelligent. What finance does, to your point, is make it sound much more daunting and overly complex to make themselves sound smarter. They use complex acronyms constantly to slow people down and they use big words or obscure words to make it sound more challenging. I’ve always felt that way about the word “tranche” or acronym “CDS”. Yes they’re words from The Big Short, but I have friends watch that the movie and they’ll say “why didn’t they just say that”.
This can be applied to almost every white collar job not just finance
M&A rarely generates shareholder value for strategic acquirers compared to financing internal projects
M&A is just an expensive fun Hobby
The IPO process whereby people (and by this I don't necessarily mean pension funds) get primary allocations is a scam for rich people. Free money to those who need it the least.
Once again, this comes down to relationships with ECM bankers. Having the inside track never hurts. Especially a critical understanding of the book making and allocation process.
would argue it's different. in PE, you're not getting a favourable deal that's cheaper than market because you know the advisor. you just get invited to the process. in an IPO, you get a price below what it is priced at for the IPO.
I work at a complete no-name highly specialized boutique IB (<10 headcount) and would get laughed out of the room if I were to encourage people with good experience to apply to my firm if they didn't know comp.
In my mid 20s, gonna clear probably $550k this year as an As1, averaging maybe 30-35 hrs/week of work, if that.
Well now you have to spill the beans
It's a pretty nice set-up - we do very specialized work and get a lot of word-of-mouth business, so we need minimal pitching to get to our typical 3-5 deals per year. Partners/MDs probably take home 90%-95% or so combined and the remainder gets paid out to the junior working group. Everyone is pretty satisfied with their comp, so it's not like there's some constant huge drive to get more business.
I was lucky enough to be able to negotiate deal-by-deal bonuses rather than one end-of-year bonus, and I'm currently getting between $100k - $150k per deal, which really isn't a big deal when you only have working groups of maybe 2-3 people per deal, including the MD. Additionally, the reality is that deals aren't all that much work outside of the occasional sprint 90-hour week. There is plenty of downtime during S4 review periods, etc. for public M&A where we really aren't doing a whole lot, so there are lots of time periods where we are just doing some light BD (literally 2-3 hours of work in a given day, not including conference calls).
I have a great rapport with my team, there are very few mouths to feed (like I said, 2-3 per deal, fewer than 10 in total), and nobody really seems to care enough to fill in downtimes with constant pitching. I am a little concerned about future upward mobility beyond the VP level and exit ops, but for now, I can't imagine going to another bank/role to take a paycut and work 2-3x more hours, especially in the overly structured contexts of a major bank.
Cough cough. BS.
Same here. Going to break $300K as a first year. Some days I don't work at all.
Where? Can u list comparables or suggestions?
Location?
New York, but we've been remote since early 2020 and will continue to be for the foreseeable future, so I temporarily moved to a LCOL city to help save more and have nicer weather.
Hey man uh where do you work
Agree, non-name specialty boutique banks are such sleepers...work 50-60 hours a week as an A2 and will clear 180k+ this year. Firm is <40 people. Sure, that's not as much as other banks are paying, but if you look at it on a per hour basis, it's much better. We never really pitch and get a ton of word of mouth referrals
Just wanted to say I was the one who threw most of the monkey shits because it is so aggravating to watch you guys talk about everything but where we can find jobs like this 💀 y’all some menaces
Sell side research. Pay is great, work is way more interesting, and hours are way less than IB.
How’s the pay progression?
Equity research?
Even better, buyside research at top AM. Better hours, culture and pay.
Any significant difference in comp between equites and credit roles?
Pretty sure, everyone knows about buy-side research. It's just that the seats are near-impossible to get at a top firm.
SB’d ....except you deal with equity sales trash
sell-side research is more of a formality than a value-add
The amount of crimes I have committed.
If the SEC isn't looking to put you away for decades it doesn't count. A guy I knew used to be the head of currency for a big bank years ago. He "allegedly" gave trades that went well to clients he liked and trades that didn't to clients he liked less. Let's just say that the SEC doesn't like that. (not legal advice)
Anyway, my secret is that everything is broken and being held together by duct tape and bailing wire. Even the big index providers are guilty of this. We also have a few funds run by guys in a shed. I tried to replace one of them a few years ago, but none of the big providers could build a better index than this guy could from his own experience, and we engaged every one of them more prominent than Solactive. In other cases I've seen major providers just calculate an index we track incorrectly for months. (that was six months of board memos to fix, and would have been much worse if we hadn't been lucky enough to outperform) and then there's the story of the PM team that just forgot to rebalance a fund once. (they got fired)
If I catch a case, I hope it's DOJ and not SEC. Go big or go home.
Curious, is giving someone faulty insider trades just to fuck them over a crime? That's hilarious
PWM honestly. Work from anywhere, clear $1-2M if you’re good, rarely more than 40 hours per week and take vacation whenever you want. I guess the work isn’t for everyone though, you have to be a people person.
I will say yes or no. The rebuttal will be in my comment below.
So true IF you are at the top. Know plenty of folks (parents) with huge books at GS, MS (PWM not retail) and Merrill PCG pulling in seven figures and barely working five days. Then you can flip your book to ubs or another firm which will pay 2-3 times trailing gross to come over with a higher net payout. However, no one starting now will ever build those kinds of businesses. Too late. I don’t think anyone under 30 in that business will ever be able to build what people on their 30s, 40s and 50s did. Or to inherit huge books whenever senior members on their team retire.
people told me that when I started cold calling at 25 (in the shadows of the GFC). I smiled, thanked them for their thoughts, and then got back to work
I coach new advisors at my firm, younger people are getting it done, I personally know someone in a T2 city that hit $1mm a year (income, not revenue) before 40, 100% by himself. just because it's rare doesn't mean it's impossible. too many new advisors lack focus, discipline, and the right attitude to get it done, but I see it working time and time again. it's just not easy
now, do I think there will be another marty shafiroff? no. but I do think plenty of new FAs entering the business (provided you're at UBS/merrill/morgan) with the right tools can get it done and build businesses like you're discussing, let's see how, and this may or may not be a real example. someone starts at 25, brings in 5-15 clients a year worth ~$1mm each on average, billed at 1%, 70% ROA, 45% payout
25 - $10mm AUM, $100k revenue, $31,500 commissions
30 - $80mm AUM (5y of $10mm new asset years plus some referrals & market growth), $560k revenue, $252k comm
35 - $150mm AUM ($100mm new money plus referrals & market growth), $1.05mm rev, $472k comm
40 - $250mm AUM, $1.75mm rev, $787k comm
this is a very real path that I've seen personally. it sounds like a huge mountain when you hear "oh yeah so and so manages a quarter billion and makes a million a year" but when you break it down year by year ($10mm new assets isn't a huge amount, it's good but it's not going to get you office recognition), you can see it is very doable, provided you think long term. most people are just too wrapped up in happiness by comparison that they say "no fuckin way I'm gonna accept making less than $100k at 25 to be a stockbroker"
Trust me on this. I'm pretty qualified to speak here. The best kept secret is not private wealth management. It has a 95% drop out rate and perhaps the worst industry in finance to START your career in. I know plenty of late 30's early 40's dudes with CFAs/MBAs who maybe clear $200k working for a dumb ass financial advisor at Ameriprise. You should think of these financial advisor teams today as overly proliferated, crowded, and large teams have essentially become small businesses/ institutions within banks managing hundreds of millions or billions of dollars with several analysts, CPA's, dedidcated tax attorneys, a 40 year old woman that focuses on "women in wealth" or divorcees etc. Now... imagine becin little Johnny Tsuanmi here who just graduated from UCLA with his Joseph A. Bank trying to build a book and compete against the team I just described.... lol
But the best kept secret, and hurry because it won't last this next decade, is a high paying job as a Private Banking Analyst, Private Wealth Advisor at one of the structured analyst programs at JP Morgan, Citi Private Bank, or Goldman Sachs. Just those three. The ones are Morgan Stanley, UBS, Wells Fargo, and Merrill Lynch are not good and will either be operational in nature or one that makes you knock on doors like Johnny Tsunami.
The JPM/GS/Citi programs pay you north of $120k all in your first year allow you to become a participating member of an actual wealth management team, and allows you to achieve the traditional corporate wall street ranks of analyst--> associate-->VP-->SVP/Director-->MD. Now you've worked here for a decade+, are a SVP or Director and manage $800 million of AUM from relationships that were given to you by the bank's other business lines. You never had to go to the local little league playoffs on a Saturday morning and hand out your business card. No. You were working with the Equity Capital Markets team or the Tech coverage bankers to secure the Tech CEO client who just IPO'd and had a major liquidity event. You are now his financial advisor.
Best part it, you do this for long enough at these banks, were you are a salaried+bonus employee, then you say fuck em and leave to go to a wirehouse (MS/UBS/Merrill) or RIA where you triple your income potential overnight by becoming a commissioned based broker. You've had a decade plus to save up a couple million bucks, marry a hot chick, buy a house etc. So you can take a change on going commission based.
thebrofessor might have an opinion here. There's plenty of stories like this lately. The large banks hate when people like this leave. But there is nothing they can really do. Word gets out that the hot shot advisor switched companies. Sure, he won't be able to actively call his old clients for a couple of years due to his non compete, but when they a high net worth person finds out that their advisor switched firms they're smart enough to go on google and find out where. There's nothing to stop you from answering the phone and having your door open when they move their account to you.
This has literally been happening a lot lately, and it is truly one of the last "Get rich quick" schemes around.
A family friend of mine does this at one of the banks you mentioned and loves their job. I think they're an associate now
mostly agree with what you're saying. couple of things with this that deserve more nuance
1. PB is equally as hard to get into as IB and easy to stay in, whereas PWM is incredibly easy to get into, but incredibly hard to stay in. completely different glidepaths/probabilities/etc. think of PWM having the same likelihood of success (and I'm strictly talking revenue generation) as starting your own business, versus PB is a salary + bonus job, no eat what you kill here
2. clients at PBs are stickier to the bank than clients of PWM, the loyalty is to the person for sure, but the bank has many many claws in there, from proprietary product, favorable lending terms, etc., it's much much more difficult to pick up and leave from PB to PWM or to have the level of autonomy in PB that you do in PWM. sure at the top, but a VP in PWM is immensely more free than a VP in PB, in terms of control over client base, schedule, etc. the fact that many of their clients come directly from the bank instead of clients you go out and get makes them less sticky to you. not saying this is a bad thing, it's just a different thing
3. good luck retaining clients if you didn't cultivate the relationship yourself. also the way these deals work is you get some insane amount of money (like 3x revenue) to switch firms provided you bring over 100% of your clients within 5y. now, a team from JPM joined our office and is doing OK at this (2 MDs, 1 ED at JP), but the sticker price rarely matches the eventual reality, and part of me thinks it's the nature of PBs being so sticky and having their claws so deep in their clients with proprietary stuff that can't easily move, in comparison with someone moving from UBS to Merrill, which is infinitely easier
in summary, PB and PWM is a bit of a false dichotomy in my opinion from the prospective employee's standpoint. PWM is unstructured and entrepreneurial, so if you want total autonomy and all of the upside/downside that comes with that, it's the place to be, full stop. if you want less risk, higher barriers to entry, don't mind giving up a little autonomy, and want a predetermined path, PB is a better route, but again it's as difficult to get into as IB. think of it like this - there are nearly zero brokers making $2mm a year in a PB that could pick up and move and take 100% of their clients with them, but there are probably hundreds in PWM (maybe even in my firm alone), but there are also no 40 year olds making $60k in PB just trying to build a business like there are in PWM, so PWM has more spread, but PB has more safety.
finally, 2 more things. those teams that are "overly proliferated, crowded, etc." idk how true that is. our team manages about $1bn and there's less than 10 of us and we consistently are winning business. there's too much variability to say "this is how all teams are structured" there's just such a wide spread, and since I sit on various committees within my firm that look at highly effective teams, I know this to be true. also, if you're building your business in your 20s as I was, you won't be in competition with those huge teams, their clients don't pick up the phone unless they're upset (and some of those mega teams have absolute dogshit service models, I know this personally), but it can be done, I'm an example of this, and while you won't find me in barron's lists for my state, we're doing OK. just because something is low probability doesn't mean it's impossible which is the rap PWM gets on here a lot (not saying you said this, just responding to people who have said this in general).
What is PB all-in comp like at the associate and VP level?
A backdoor roth IRA contribution consisting of your startup’s pre-ipo shares - priced at a fraction of a penny.
Buying 1.7 million shares of PYPL for $1700 comes to mind.
Fuckin' Peter Thiel. God damn, that man is smart.
It wouldn't surprise me if SPAC founders/sponsers were engaging in the same strategy.
More like lucky
Private Credit (until 2018/2019 or so)…
Shhh!
PC funds for high-yield?
Please explain. Why’s this the case?
Superior risk return vs. PE or public markets (10-15% net IRRs with 1L or uni security), better hours than banking with 80-90p of comp (can scale exponentially on originations side on a good year), still get to wear your buyside shiny tin hat and kill deals you don't like, minimal operational / admin work unless your portco is melting down
Best kept secret? It was just interest rates, the whole time, for 40 years..
Hope interest rates rise and fuck boomers
High rates would be bad for everyone. Keep em low. Just none of that negative European trash (negative rates).
can't out myself like this. But the best kept secret in finance is that I left a small portion of poop (mine of course) in a plant on our office floor. Good luck finding it. You have a couple Euro BB offices (think UBS/DB) to search from.
That you can go long beta in a growth sector during a bull market and charge 2/20 and LPs will beat down your door to throw you capital.
The best kept secret in finance is working for a national/international bank in a satellite office (LCOL). Make the same $$ and work on the same deals, but pay less in taxes, rent, food, going out etc. Can save > $100k as a first year.
True but quite shortsighted
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