IB or Insurance Agent?
I have quite a decision to make in the upcoming months. As a longtime lurker here, I figured I would seek the community's input. I will graduate from college next spring and have for a long time been planning on going in to investment banking. However, my father owns an independent insurance agency and would like me to work for him until he retires in about 5-10 years at which point I will run/purchase the agency. The agency has revenues of ~ $2.5million and EBITDA of ~$500,000. The single largest client only represents 7% of the agency's revenue and the rest are 3% or below. It is roughly split personal/commercial. The agency certainly can grow quite a bit. To complicate the financials, my dad owns the buildings in which the agency operates and then the agency pays incredibly high rent to my dad. If I were too take charge of the agency, I'm not sure how we would deal with this. A drawback of the agency is that it is located in Indiana, albeit in one of the largest cities.
I have some experience in both industries. I'm doing an investment banking internship this summer and did one last summer as well. I worked at the agency each summer in high school.
So would you go in to investment banking or take the safe route and go back to the insurance agency? Which do you think will provide me with a better quality of life in the long term?
Why do I get the feeling he'd value you getting IB experience before joining his business to take over?
ArcherVice He thinks that having more experience at the agency and with its clients and more knowledge about the industry is more important than what I would gain in IB.
If you spend 2-3 years in IB then that still leaves you another 5 years to work at the firm, which i think would be more than enough to learn the business. Also, you might want to appease your father and try to get into a FIG group, that way you will be getting alot of in depth experience.
All I can say, from an outsider's perspective, is that if your biggest qualm is missing out on the massive salaries of IB... you aren't. That life isn't sustainable, factor in the cost of living, your ability to basically run the place when he leaves and always maintain his guidance will leave you better off imo.
Now we'll wait for the virgin army ( who've never worked a day in their life) to say how foolish that move would be, or how sustainable 80-100hr weeks are... given their experience having pulled an all nighter that one time while playing on Facebook during college.
ArcherVice Salary is a slight qualm. However, I'm more worried about lifestyle. Even though the agency is not in rural Indiana, the location still cannot compare to NYC or Chicago.
Yeah, I would get some experience and then go back if you want to... at a BB now... My father has a business that, right now, I am not interested in / do not feel there is a place for me. But 5 years down the line if I want to move back home and he's looking at retiring after a while, it might be something I would look at in terms of buying it from him when he retires.
...
ArcherVice is spot on. Your concern of lifestyle can be looked at a couple of ways. Yes, Indianapolis (?) isn't going to have the same energy or amount of things to do as NYC, but your lifestyle will be better in terms of hours spent working. As an analyst, yes, you get to live in NYC but you don't have a ton of time to really appreciate much of NYC. And unless your dad's going to pay you $30k or some absurdly low amount, there's a good chance you'll end up feeling like you make a similar amount of money because you won't be paying $1800/mo in rent alone in Indy.
But do what you want. I'd be surprised if your dad said work for me right after school or that option's off the table, so if you really want to work in IB pitch him the skills you'll build and the relationships you'll make and show it as positives. If your main goal is to simply work in NYC (or Chicago) but you are 100% certain you're going to work for your dad's business and eventually take it over, I'd consider a less rigorous job than IB and maybe something more pertinent to insurance, such as insurance. You can still make decent money in insurance in a jr. underwriting role, learn applicable skills and work far less and more predictable hours so that you could actually enjoy living in the big city.
ArcherVice Dingdong08
They both nailed it. Too many reasons to list as to why you should take their advice.
I'll keep it short.
-Work/life balance will be much better working for your father...this will make a big difference in 20-30 years.
-sounds like working for your father you will make pretty good money. Do like I do, and take advantage of the fact that where you live, it's not that expensive to have a good time....travel often, save/invest appropriately, so you can retire early.
the only real value add would be joining a top notch FIG, do 2 years at a FIG PE shop, and return as an executive at your father's Company.
Investment banking itself will not add much value for you. people need to keep in mind that bankers are salesmen and they don't know how to run a business nor do they care to. So to say banking will "teach you" about businesses, well, yes, but not really. Additionally, your father's Company is very small, and as such, it will be very different than the clients you will be working with at a bank.
Whiskey5 I think that you are right that the IB path does not help the insurance path. I agree with Dingdong08 that other jobs lend themselves towards that such as insurance or possibly consulting.
It's my perspective that you might be better off doing a year or two of investment banking before joining the company. As has been mentioned, being in IB is a sales job complemented by the occasional corporate finance thing, but that's exactly what you need. Owning a business that is so dependent on sales -- like an insurance agency -- is all about solid sales/client relationship management and understanding the finances and operations of the business. If you use your time in IB to really see how professionals curate multi-billion dollar relationships, you'l be in a better position to realise the growth potential you think the business has while understanding the driving factors of its financial performance. And itstead of paying tuition to learn those things, you'll be earning a cool 6-figure salary. Since you're not in it for the brand name (if you're looking for skills), I might suggest Chicago as a city to consider, since its cost of living is so much lower and the smaller nature of the banks/teams will let you become more involved in the transactions.
This will also give you more than enough time to work at the agency some more and become intimately familiar with its nuances.
i have a feeling you never worked in IB
This is the epitome of glamorizing the analyst role in IBD, making it seem like something that it's not.
I would go a step further and say its not glamorizing, its just false information
Other things I have considered as someone in a similar situation: -Any siblings? -Any partners with your dad? Partner have children? Any other equity interests? -What do you do if something goes wrong and your dad's company is no more? -What happens if your dad gets an offer to sell the company that he can't refuse. (Sounds harsh, but that happened with my grandfather/father because the way it worked out... my grandparents would never have to worry about money again. Now that my grandfather passed away, my Grandmother is good for as long as she will be around. My dad couldn't say "Don't sale the company") -Do you want to run an insurance company? -Do you want to live there long term? If you company/your dad's company is there, you cant really leave. Is that city where you could see your self for the next 20 years? -Any people in the company that are important and might not like you taking over for your dad (i.e. a guy who is 40% of sales who would leave) -If your dad is there for 10 years, do you want him to be your boss until your 32ish... or longer? Dad signing your pay checks, telling you what to do etc. - How old is the company? How'd it do when things went bad in the recession. -What is the companies strong points? Are these things I can contribute to?
I think other people made some good points... What do you want to do?
Maybe its an easy decision if your 40, but these were/are the questions I asked/ask myself as a 22 year old.
I have two siblings, but neither is interested in the business. No other partners or equity interests. Company is ~20% of father's net worth so my guess is that he would rather have me set up than take any other offer- even if it's ridiculously high. However, that is still certainly a possibility. I don't really want to, but am willing to since it's relatively easy money; that gets to part of my conflict between IB and this. I think that it is a great place to have kids and a family and a subpar place to be in your 20s. No standout producers. The employees are happy to work their 40 hrs/wk and take home their $25-45,000 annual pay. Company has been in family since 1970s I believe. The company did fine throughout the recession. Company's strong points are split between commercial and personal, no account that makes up a huge part of revenue, and very low payroll costs. My dad has never reinvested much money in the business in a long time simply because he was happy with the lifestyle it provided him and it still is growing at a decent rate. I think that I could pay myself a fraction of what my dad pays himself when I'm younger, reinvest aggressively in the business, and grow it.
Those were just thoughts I had. Just trying to share questions I asked myself to help you answer the question for yourself, which is what has to happen.
The siblings though... there are so many situations I can imagine where they might change their mind and become interested. Or their spouses convince them they should be interested because, like you noticed, it is a easy lifestyle / possibly simple way to step into money. (This happened with my father's siblings... we don't speak to a sister because of it. When my grandfather sold the business my dad owned ~20% of it. The "Why does he get dividends each year / paid in the sale and we don't" despite the obvious "He invested in the business"... my grandmother has a habit of sharing things that didn't need to be shared to her daughters though)
Same thing with my sister, until she got married to a guy who works in a related field. Then "Oh, we hope we can take over when dad retires... Someone has to do that right?" despite her not knowing anything about the business.
But, then again, if the company started in the 70's then there has already be a transition right? How'd that go?
You don't have to write anything in response here... These are just things that I've seen/thought about because I understand the thought process you're going through. I had an investment banker ask me the same in an interview even when he learned of my dad company...
Ultimately, I didn't want my success so reliant on my father. That was my main reason for doing something different.
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