I think we've all already come to the conclusion that Investment Banking certainly doesn't pay as well as it used to when you adjust for the cost of living, but is it still prestigious and does it still have good exit opportunities? Does breaking into banking mean you're a special, unique, snowflake (yes, probably the snowflake part).
I have an interesting side of story to tell, which many bankers will probably disagree with, and I hope you'll hear me out.
Investment Banks are really behind the times when it comes to recruiting / employment. In any other industry we would likely consider this a serious risk to the future viability of the industry, but because of the sheer number of monkeys chasing "prestige", "exit ops bro", and (financial) models and (coke) bottles, these companies have an endless supply of hardworking drones with a slightly (if that) above average level of talent.
Let's be honest, the reason 90% of people think investment banking is cool, is because it sounds cool (even to people who aren't in finance).
I hate to break it to you, but the prestige of investment banking is a marketing ploy and most people probably got suckered. It is actually one of the least interesting jobs out there and I'm frequently told by other bankers that it's such an easy job that any kid fresh out of high school could do it. Banking is basically a glorified powerpoint / sales job.
I know many of you monkeys are probably already going apeshit and will have difficulty seeing clearly, but please try to get to the end of the post (you can do it, I promise).
For the following reasons banks end up with high turnover and mediocre employees:
1. Relationship-based recruiting
2. High availability of better jobs (seeing many top PE firms hire analysts out of undergrad)
I will now begin breaking down my assumptions into digestible, logical pieces, while simultaneously making all of monkeys go wild for your entertainment. You can expect to see some really interesting feedback in the comments, most of it ineligible, but some will be valuable.
How Investment Banks Recruit
Investments Banks, unfortunately, recruit based primarily on relationships:
- Did you go to school where we recruit? (40%)
- Do I know you personally? (25%)
- Have you done investment banking before? (20%)
- Can you meet with me 3 times and not be weird? (15%)
That's pretty much it. If you can meet 3/4 of these requirements and apply to enough banks, you're pretty much in banking. Maybe not at your dream bank, but definitely at a bank. It's not hard, I promise (unless you go to a non-target).
I don't really see anything prestigious or difficult about any of that.
Some people might argue there is more or less to it, and I might agree, but I would still say that the weight of the first question matters more than anything else when going into banking and that's one of the reasons weaker candidates get in.
Why target schools produce the mediocre students
The silver spoon kids will really disagree with me here, but banks don't recruit at target schools because the students are outstanding year after year. Banks recruit at target schools because students were phenomenal in one single year and have since worked at the bank while helping their alma matter break in.
The first students to ever break into banking for their schools are some of the top students to ever graduate from their school because they broke in against all odds. These students are the cream of the crop. They had to network and jump through x10 the hoops any other student would have to, to get into banking because they were competing against people who could answer question #1, #2, and #3.
Their school likely didn't even tell them what banking was... They had to teach themselves. Sometimes these students break in and sometimes they don't. Their still likely phenomenal for the sometimes superhuman things they accomplish.
After a school is successful at becoming a target school it develops a relationship with the bank and future students have a MUCH easier time getting in. No longer do they have to compete in 5 competitions, be president of 2 student organizations, have a perfect GPA, pound the ground networking, while working 2 full-time jobs, and just be an all around outstanding human being to break in.
Students from target simply need to go to the right school and not be a complete idiot and their pretty much guaranteed a job in banking. They don't even need to be a finance major. Don't believe me? Check out how many kids from target schools with liberal arts majors made it into banking.
I realize some people may argue that getting into target schools in itself is prestigious, to which I would argue that it's simply not. There is nothing difficult about doing SAT prep and overpaying for an education which has little to no real world value.
There is nothing prestigious about getting into banking either, it's about who you know inside the bank and how well you know them. It's about what school you go to, not the quality of person you are and the level of talent you bring with you.
Breaking into banking doesn't make you smart (unless you come from a non-target) and it doesn't make you talented. There is nothing special about bankers (sorry snowflakes)
The only good thing about investment banking is that the name sounds cool even to people outside of finance. We want to work here because of the way people look at us with admiration when we tell them what they do only to be disappointed when the inevitably ask "what stocks should I invest in?". The only ones left to admire us at the end of the day are other monkey's trying to break in, and all of this depends on us continuing the narrative that investment banking is prestigious. Meanwhile, we're beating ourselves over the head. It's not so bad, only a few years, right?
We spend 100 hours a week for two years where we sacrifice our health, our hair, our loves ones, self-development, and the precious joy of life. And for what? Exit ops bro?
Good shops are cutting out the middle man
People keep talking about exit ops for IB and I keep wondering what the hell their talking about. PE, VC, HF, and corporate development (really, you are going to spend 2 years in a hell-hole to stay in finance?). Thats pretty much it and you don't really need to do IB to break into most of them anymore.
Frankly, boutique and even huge, reputable PE/HF are starting to cut on the middle man (bankers) and recruit straight out of undergrad.
Why would they wait and get someone from a bank when they could mold the undegrad's from the start and cut down the hours for the associates while paying a fraction of the price for the work? It's easier to learn how to perform on the buyside from actually being on the buyside. Being a glorified excel / ppt monkey will only get you so far. I think in the coming years we will see more of this behavior.
Anyways, congratulations to everyone still in school who won't have to put up with any of this in the future.
Thanks for reading
Well, I think that's all for now folks - back to work. Feel free to go apeshit or grab some popcorn and watch the monkies defecate themselves.
If you have any other suggestions on what I should write about in the future, feel free to leave some in the comments below.
Hope you enjoyed my post!
Just wanted to say that I actually work with a lot of investment bankers and they are actually some of the smartest, funniest, most hardworking, well-spoken people I know. Were they they smartest in their class? I'm not sure, but they are phenomenal people.
Would they have been successful regardless of what career path they chose? Probably. Could they have spent their first two years our of college doing something better? I have no idea.
This post is for those that are debating going into investment banking or choosing to jump in simply because it's prestigious. Tons of groupthink going on this forum. Most kids on this forum seem to be going into IB simply for the name with no idea what the work actually entails. It could be a horrible decision and a waste of time.