I rarely write on this site any more, but I'm bored and hungover, so it feels like a good idea to drop some hate-filled knowledge on finance aspirants. As the title suggests, finance is for pussies for a number of reasons, but primarily, I think 'finance' is just the safe bet college kids make as they panic entering the workforce. That's what I did, and while it worked out to a certain degree, I often wish I'd had the nuts to start my own business. Ultimately, working for other people blows.
If you are in the business of selling your time wholesale to a company who then sells your services retail to the market, you are poor. Even if you eventually become the CEO of your firm, you still earn money the way poor people do. Sure--you have a more efficient compensation package from a tax perspective than most people, but you still operate under the same work-pay model as your underlings. In the long-run, this has a drain on your psyche that eventually lulls your into becoming just another cog in a machine that you don't control.
That said, if you're going to be a 'cog,' you still want to be a finance cog. If you break down professional services into law, accounting, consulting and banking, there is a clear reason why banking makes more as a service than the others--it is because the other sub-sectors almost exclusively charge clients based on a certain rate multiplied by the number of hours worked. Finance never does that. Bankers want to get paid massive success fees (to be fair, they also want large monthly retainers as well, which is bullshit) because if they had to break down the actual number of hours worked per person on the deal, the fees would equate to many thousands of dollars per hour worked. And when seen in that light, no company would ever agree to such exorbitant pricing. Lawyers, consultants and accountants submit time-sheets with the exact amount of time they have spent on a particular contract to the company in question, and then wait for the company to pay them (typically 30-60 days after receiving the invoice).
Both models are broken, but finance (especially financial advisory where the bank isn't being forced to use its balance sheet to the advantage of its client) is broke as fuck. I suspect advisory fees will take a massive kick in the pants over the next decade. Let's be honest--how hard is it (really) to spread comps, create an lbo model or value a company using a DCF? These are basic skills that any remedial accountant has or can acquire in a matter of days. And with software packages becoming ever better at analytics, formatting and presentation, the tangible work of bankers is going to be almost fully automated, especially at the junior level. It was already happening when I was an analyst, and it will continue to do so over the next decade.
You already have companies like PwC competing directly with banks for financial advisory work by undercutting their competition. Clients have never liked paying massive deals fees, and banking fees are always at the top of the list. For standard M&A transactions, the buy-side is going to continue to pressure fees until they more closely resemble consulting contracts. My suggestion: if you want to be a banker, do some fucking banking, and work in an area that actually leverages the bank's balance sheet. Leveraged finance, for instance, is something that can't be done cheaper by accountants and consultants.
But enough about the pussies that inhabit the world of M&A advisory, and on to the markets.
I was once a trader. Some say I was pretty good. But trading is for moppets. The days of George Soros are over. We now live in the era of algos. If you want to program bots to play the video game that is the markets these days, be my guest, but that's not really trading. The job has morphed enough that it is hardly recognizable by the standards of just a decade ago. And I cannot imagine anyone wanting to wake every morning to fret over some code that may or may not beat some other code on that particular day in some subset of an asset class that few people give a shit about. I'm sure such people exist. They are the same people that send steaks back because they're too rare. They're called pussies. Enough said.
Asset Management and sales have always been for pussies. And PWM is for special snowflakes who lack the acumen to make it into S&T. Pussies all around.
All of the underlying business models for each of these areas of finance is changing in a way that will slash fees and reduce headcount (especially at junior and mid-levels). In my opinion, finance is no longer a safe bet for pussies. It's a silly bet for morons.
So...now you're on the corp side, still working for a boss, working for a company that pays massive fees to bankers, and still doing work that provides arguable amounts of value.
Nice!
I work for no one. If you need the money, I can't blame you for participating in the system. Once you no longer need the money, you gain some perspective. If you never gain that perspective, I'll think you're a moron. If you attain it, you can call me a pussy.
They're also automating software development itself, law, consulting, sales, web development, analytics etc. You didn't have a single unique idea in that entire disgrace of an essay you wrote. You took some pent up anger, extrapolated some things that are happening in every industry and spat that in the direction of your miserable past. Congrats.
I think some of this is fine, but operates under the assumption that one should care about how they make money (and being in control). Some don't see their job as something that needs to be super satisfying, and instead find other ways to be fulfilled. Therefore, banking, as a decently interesting job that requires no hard skills and pays really well, is pretty appealing.
Investing will always be there so I think it is still useful to know finance.
I think the thing to do now is to be curious.
Also starting your own business isn't easy.
Was hoping you'd shit on insurance too.
!
You're a pussy.
brotherbear, you have a point, but to be honest, your writing is terrible, which is why your point will be lost on 99% of WSO readers. Yes, IB is a safe bet. Yes, working for an employer is a terrible strategy for getting rich. But, the way your post is completely incoherent, and I don't mean that to be rude or anything.
One thing that I just want to call out is your (incorrect) point about fees. I think that you're dead wrong. I don't know how your employer thinks about fees (I'm sure your corp dev team uses outside advisors), but in my experience, both from my IB stint and my corp dev experience, not a single company chooses their advisor based on a misguided belief that said advisor has some secret M&A knowledge or some real advantage over their peers. All else being equal, advisors are primarily chosen as a "check your ass" in case shit hits the fan. When my firm needs a quality of earnings done, for example, we choose one of the Big Four instead of a regional accounting firm, not because the Big Four produce better work, but because if our acquisition goes belly-up, we don't want our board or our investors asking us, "Why did you choose RSM instead of just going with KPMG?". The same goes with buyside M&A advisors. Yes, JP Morgan is charging us more than Deloitte corporate finance would, but we don't want an investor reading our press release for an acquisition and thinking, "Wow, these guys couldn't afford an IB?" or an analyst asking our CEO that question on an investor call. The difference between what a less prestigious firm and a prestigious one charges for accounting or M&A services is not night and day.
But, the real reason why your message will be lost on 99% of WSO is because you failed to recognize your audience. Even if IB fees go down, and even if analyst pay gets cut, IB will still offer exit opportunities and a learning experience that very few career paths can offer. 99% of WSO readers are college kids hoping to break into IB. If you were writing to business school students considering an associate role, I might think otherwise, but most of WSO is not trying to build a career in banking. Fees going up or down will barely (if at all) affect most of your readers.
I would argue against your point on fees. Deal advisory is not like other professional services. Law, accounting, audit, etc. all play an important role in solving on-going business problems. So, the fees that are paid are very quantifiable, given that the professional is doing a good job in producing results within a reasonable set of time. Whereas in banking, advising on a M&A deal does not ask for the same kind of restraints around paying you for your time. Advising on a deal is the most thankless ass-wiping that a person can do, other than taking care of your own kids. These company corporate heads and founders bitch and moan about every little point, and will destroy a deal over it too. That would mean that your month's and hundreds of hours of labor would be totally wasted if the advisor does not have a cool head and is willing to put up with such elementary behavior. The point that the company argues over is so small that they are likely to actually still be interested, but just nervous about making the huge decision. Bankers are artists in putting these things together through execution. So, yes the success fees should be large, unlike in law where you're just combing over the details, stringing up lengthy legalese and then bringing the parties together to sign; a legal problem, only requiring a fixed set of duties to solve and complete.
I don't know a lot about the other fields, but if you take a Harvey Spector for example (I know there are roles like this at law firms, but don't have a better example on hand), this guy got paid similar to a banker. Most of his earnings--which were huge--were based on 'contingent fees' versus billables, because he didn't work like a normal lawyer. This guy was a handler or a fixer. Bankers do this sort of work where you're putting together a deal that could work, so long as the two parties get along during the due diligence period.
So, I disagree that bankers are only selling away their time. The fees they earn are warranted because it's hard to quantify that human quality that bankers are able to bring to the table to actually close and get deals done, which is actually a lot harder than people would think.
Agree. To further your point on fees: banks ONLY get paid on the success...so all of the pitching, all of the hours just trying to win the deal in the first place (uncharged), all of the BS is for nothing, which ultimately gets made up for with a successful mandate.
Yes, the final deal can be quick on the buyside if you have a motivated buyer that just wants to come in to check their ass, but when you manage that relationship from IPO to sale and everything between, there are hundreds, if not thousands, of hours wasted doing the boring, dead-end work that analysts dread.
OP, let's say you put in 1,000 work hours between Analyst(s), Associate(s), VP(s) and MD (which is probably nothing if you're really managing a long term relationship and through realistic junior turnover), and you get a $5mm fee for selling a company, that's still $5,000/hr, which I would argue grossly underestimates the overall time commitment to get to that fee. But even at that rate, for the number of firm resources and hourly billing you would see at any other major law/accounting/consulting firm, it's not much different.
Pussies, pussies everywhere.
You should really stick to one point at a time.
I really don't care what someone so insecure about how much money they make thinks about anything either. A Walmart cashier who talks honestly about their life is a lot less of a pussy than any rich person who claims working under people means you're a failure. Anyone grounded in reality can see right through that type of talk.
So much is wrong in this post, where to begin.
Sure, if you think it is so, then it is so. People have different ideas of what they should do career wise and in their lives. Some people think they are better than other people for x, y and z reasons, as an example you can look at yourself and the first comment posted. We all judge people in one way or another, so it's not really a big deal people will simply judge you for the areas you choose to judge on and so on.
Disclaimer: I didn't read a single word of your post.
You spend a lot of time on a finance forum collecting fake internet points for someone who thinks finance is for pussies
Not sure if I'd call it "for pussies", since "pussies" generally can't handle working 80+ hour weeks for bosses who may be some of the biggest assholes on the planet, but...
You do have a point that it's a terrible strategy for getting rich. However it being a safe bet is part of the appeal. It's a great way to build a good base skillset while you figure out exactly what your strongest skills are and build a useful network of contacts, add a brand to your resume (yes, it's stupid but being a "banker" adds credibility when you try to lead a new venture), and learn sales skills
If you plan to get rich the ladder is generally a terrible way to do it. You need to build up EQUITY to build wealth. Banking is valuable because it's a good place to get your initial experience. Afterwards you should be looking to transfer to a smaller, growing organization where you can come into a leadership position.
I agree with OP on the conceptual level. This is coming from a young guy (who would be UG except he left)
While I can't speak for the more specific parts regarding the industry (e.g. justifying the fees, etc) and feel that the opposition here has a point based on what I know, I can say that the minds attracted to finance are often very misguided and indeed "pussy". I have voiced this since before even starting college and perhaps it's because I was/am too critical but I hate seeing all my peers so gassed up about on a herd mentality about this pursuit into a corporate atmosphere where they're happy to slave away on Excel.
No seriously, I think it's reflective of a major issue particularly surrounding independence of thought. It's not just us finance types, it's the opposite extreme as well - hipster girls with cut bangs, for instance - everyone wants to fit desperately fit the subculture they find safety in, instead of thinking for themselves.
I frequent the new finance memes that are taking Instagram by storm. Admittedly, they're hilarious but the issue is the many people commenting. They'll brag about shit like their knowledge of Excel shortcuts and literally take it as some sort of status symbol. In that way, finance does unlock the spineless pussy in young men who suddenly equate their DCF modeling speed and intimacy with Excel with their ability to attract 10s, earning potential, hell, even manhood.
It's a sad sight. Everyone seems to forget it was macroeconomic acuteness, big picture analysis, relationships, and old-fashioned salesmanship that created the titans of industry and names we know and I feel that this is what OP is trying to get at.
Finance should be a means, not an end.
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