Performance of Top Tier vs. Bottom Tier Analysts (Q&A in Comments)

Mod Note: Each day we'll be posting the top WSO forum posts of 2014. This one was originally posted on 5/13/14 and ranks #30 for the year by total silver banana count. You can see all our top ranked content here.

We have gotten a few requests to do a post on what separates a good analyst from a bad analyst. We're going to try and address this in a few different ways but lets go ahead and jump in the from the beginning.

Backdrop: Everyone who lands an investment banking analyst gig is generally intense. They worked hard, got strong marks and prepared for their interviews appropriately. There are always a few people who were simply slotted into the position because their mom or dad is a large figure at the firm but lets go ahead and assume you obtained your position the old fashioned way. The work ethic way.

When you enter your class remember this: 80% of the people you are with are not going to be in Wall Street positions by the end of year 3. This is a rough number, if you're at a great firm such as GS M&A, the percentage will be lower but lets use that as a proxy.

How do these people get the boot?

1) We would say roughly 10% of the hires are simply not good enough at the job
2) We would say 30% of the other candidates truly hate Wall Street
3) We would say the remaining 40% simply failed at politics (as you can see our post on politics was not a joke at all)

With this in mind we're going to go ahead and make sure you avoid being in the bottom 10%. The old mantra on the Street is to "fire the bottom ten and promote the top 10". Lets avoid being in the bottom bucket first.

Bottom Bucket: The bottom bucket is easily avoided. In all honesty, if you have a positive attitude and can add numbers in excel you will avoid being in the bottom of the group. Your political standing will push you through 2 years and the work is no where near difficult. That said, for some the work is actually difficult as a first year analyst! This simply means you are not checking your work. Again to avoid being at the bottom from a pure performance basis (we are skipping politics in this post) you need to do the following:

1) Check your work at least once, this will prevent major errors such as $ in billions when it should be $ in millions.
2) You should respond to emails quickly a simple "Will do" will suffice
3) You should not leave before a Vice President or higher (face time does matter at the bottom of the totem pole)
4) Don't show up late

If you can at least accomplish the above you're going to survive, you won't be paid well, but you'll make it through. You will constantly be assigned the boring/low priority work, but if you want to scrape by and not get fired, you can spread comps, make quals books and create a few pitchbooks that won't have a shot in a million of going live.

Middle Bucket: This is where practically everyone will rank (by definition as well). Somewhere in the middle. Generally here are the guidelines to make sure you are ranked at least in the middle buckets (all of these items should be added to the low bucket analysts skills).

1) You triple check your work. You use a highlighter to make sure all changes in every single markup are done correctly and you never miss any items that are presented to you. Any incorrect items are due to miscommunication/overlap of changes
2) You prioritize your turns correctly. Meaning if a VP and an MD have overlapping comments on the same page. You do as the MD says and inform the VP privately about the overlap once all of the items are completed. You're communicating clearly.
3) You never miss emails and respond immediately since you set up your email to auto alert for new items.
4) You never add items to the turn and are able to say "I was did exactly as I was told" and you are correct. You never miss anything and never add anything either. No one can complain about the quality of the work
5) Any errors by the end of year 1 are minimal/do not exist. What this means is you do not forget to change currencies, you do not have glaring typos and you do not have financial modeling errors. Remedial formatting errors are always going to occur but even those are disappearing.
6) You stay until the last associate leaves (unless you realize he is getting fired soon and does not matter come performance review time), if you're a 1st year you ask the 3rd year if he needs help with anything just in case. Same logic applies to the staffer, asking if items are needed. (please note this is for a new hire, as you get into year 2 there is no reason for this).
7) You prioritize your live deals over your pitch books. (note the bottom analysts will not get live engagements). You also manage expectations appropriately by letting the staffer know when you have overlapping highly time sensitive projects on your plate.

This is the high level overview. If you can accomplish the 7 items above and avoid large amounts of complaining... You will be in the middle of the pack. You will go from making Public Information Books, Price Volume Charts, and Company profiles to... slowly spreading comps and building DCFs... to finally being tasked with live deals + M&A modeling and creating information memorandums. You're not going to be fired unless there is a major downturn, you'll get a bonus that isn't a "Please quit and leave the firm bonus" and you will likely have a few options as you near the end of your 2 year stint. Some of you will simply quit Wall Street, it is brutal as we all know, others will go to the buy-side and a few will enter a corporate finance position related to finance.

Top Bucket: Since this is Wall Street Oasis, we already know that many of you simply skipped to this portion. Simply read the 7 points above and include them into the list of items that will help you jump from middle tier to top tier. Notably, we assume you already have a positive political footing at your firm all of these items are moot if you do not.

1) Know your MDs nuances. For those that are on the Street already, you know what this means. One MD likes XYZ color scheme better and changes the template consistently. One MD likes his comps organized by Enterprise value instead of organized alphabetically. One MD prefers the medium sized alligator clips instead of the small sized alligator clips. One MD prefers circular call out boxes instead of square ones... You get the idea. You have a note pad and take care of all these nuances in advance.
2) You position yourself to get on the big deals. What does this mean? You purposely work at 90% of effort level so if a big hitting MD is about to land a large deal and you are aware of it, you simply step on the gas for a week, finish your work and suddenly "Ta Da" you're the analyst best positioned to work on the deal. Funny how that worked out right?

(side note: we wanted to call this smart analyst instead of good analyst because some of the nuances involve strategizing and have less to do with perfect work)
3) Adding some basic value. This is a slippery slope and is something you should be aware of as you enter month 9 to the 1 year mark. At this point you have a strong handle of a few sectors and now you can help make mini suggestions to the team. A great example? If you are on a sell side transaction and need to find an EV/EBITDA multiple that is slightly higher, you track down a comparable company to add to the comps. While small, this value add is going to show the team two things 1) you are paying attention to the project and 2) you took the time to learn about the space
4) Adding some larger value. Using a buyside engagement instead, you can flip the same point (number 3) around and suggest a different method to coming up with a valuation. While multiples and a DCF are great, you can try and dig up a few historical transactions that used a different method. For simplicity think about user growth on an internet stock or perhaps making adjustments to cost savings (synergies) because of specific site consolidations or clear overlaps in product lines that may have been missed. This will show the same two points and may also give you at least 1 more item to look at when arguing your case for valuing the entity. Again, please note, this is a slippery slope and make sure you softball the idea to them. If your MD historically does not care about the opinion of a junior (at all) go ahead and ignore this one for a live deal.
5) If you touched it you are responsible. Remember that if you are at the bottom of the totem pole, you're going to be thrown under the bus quickly if things go wrong. Therefore if you are working on a pitchbook and an associate decides to create 2-3 extra slides... Check them. No matter who creates the additional item, check it anyway because if it is incorrect you will be blamed. Naturally, you will have conflicts at some point in the process, but you need to minimize them.
6) Step into the associate role when appropriate. Notice we are doing this indirectly with point 3 and 4. You want to assume some additional responsibility during the process whenever possible. This should only be done when your associate is MIA or is tied up with a more important task. Start small such as taking over a few research items or slides when he/she is jammed and you'll be awarded appropriately. This is a step for 2nd and 3rd year analysts. Do not do this when your associate is involved and engaged in the project.
7) Clean Modeling. This is the final step and quite difficult to accomplish at all times. When working with your team try and jot down how to build the model so a new set of eyes can quickly navigate the spreadsheet. Take the time and do the following: 1) minimize input cells, 2) build model out to simple inputs/formulas allowing the user to change input cells, 3) set up to be printed clearly, 4) clear labelling of actual numbers versus estimates, 5) set up to print all items cleanly.

Note: Actual numbers and estimates become complicated as some historical data may be missing. Try and use a clean labelling system such as a yellow highlight for the first draft and adjust going forward. Keep it simple. Keep it simple. Keep it simple.

Time to get paid. If you're doing all of these items with a positive personality and good political footing, you are going to be in great shape. You will be well positioned for an associate promotion (you're already assuming responsibility when needed) and you have the right deal experience (because you correctly left room on your plate when the deals came through).

Congrats.

Nitty Gritty and Summary: This is more of a top level view with ideas on how to outperform relative to your peers. Notably, even though we have laid out the blueprint most will get burned out and not execute, this is good news for you. Try to establish a rhythm by getting the mid-tier skills down by month 4-6 and then transition to becoming a stronger analyst after your mid-year review. Why? This way they believe your 2nd half performance was due to their criticism.

Why?

As you can imagine, all of your bosses are narcissist to an extent.

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For any other questions/comments feel free to post and we'll try to address any performance related items. Remember the jist 1) prioritize, 2) rapid response, 3) error free, 4) show you care and are learning and 5) step into more responsibility when the time is right.

Comments (32)

 
May 31,2014

Nice, I liked it. While this seems geared towards those searching for an associate promotion, I assume this applies to those looking for strong recommendations for PE firms as well.

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7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

 
May 31,2014

I'd assume that 80% are gone because most leave for greener pastures (close to 100% at many top firms) - PE, HF, corp dev, not because the associate promotion is tough to make, no?

 
May 31,2014

Yep should have been a bit more clear here, as noted in the comment by kimchi as well.

The percentage is lower, ie: more people end up making it on the Street and end up exiting for better options. (A bit obvious if you are at the top shops).

With that said, if you're getting the associate promotion (offer) yes this means you get better exit opportunities.

This post is geared to two people:
1) trying to get the best buy side opportunities
2) trying to get promoted

The people trying to get promoted likely get a bad rap around here but is a great option for middle market type firms (think a piper jaffaray) in that case an associate promotion can be more lucrative than a mid to small size PE firm in a lot of cases.

Hope that clears things up.

Finally, yes roughly 80% don't survive 3 years on the street. You can make the number better for bull markets and worse for bear markets, but you will be surprised when you see lots and lots of people quitting Wall Street altogether.

 
May 31,2014

Could you expand on your point regarding associate promotion vs. small PE at a mid-market firm? Is it because the pay would be better?

 
May 31,2014

I've heard (anecdotally) that a good MD will end up making more money than a huge proportion (one MD on WSO said 90%) of his/her peers that move to the buyside

 
May 31,2014

Sure. Basically the top PE shops pay well + have great opportunities. (KKR, Carlyle... You know the drill).

However, if you are at a mid-sized bank, then you may want to be an associate instead of going to a mediocre buyside PE firm.

If you are an associate in IBD you are making $200-275 at a mid firm (give or take). In a mid sized PE firm you may only hit the low end. Ie: you may be getting paid the same or even slightly less. (Remember associates are paid all cash where some mid sized PE firms may relate some comp to deals - which of course may go south).

If you get promoted you are also more likely to get top tier again, why? You are clearly well liked and you have a lot of momentum going for you both politically and performance wise.

This is a bit different from the same old IBD - buyside - MBA/greatness route.

So simply throwing that example out there becuase getting an A-A can be a great opportunity especially if you like the firm, the hours are not crazy and you actually enjoy the work (to some extent) in investment banking.

 
May 31,2014

This is great, I will definitely refer to this in the future

 
Best Response
May 31,2014
WallStreetPlayboys:

When you enter your class remember this: 80% of the people you are with are not going to be in Wall Street positions by the end of year 3. This is a rough number, if you're at a great firm such as GS M&A, the percentage will be lower but lets use that as a proxy.

GS M&A?? Where can I sign up

 
May 31,2014
KimchiNoodleSoup:

GS M&A?? Where can I sign up

LOL they only take laterals from DLJ M&A n00b ;)

Get busy living

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7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

 
May 31,2014

How many people comprise the 'we' of WallStreetPlayboys? I've never seen anyone else use 'we' in a post here. We taught that technique to our Equity Research Analysts...it always sounded more authoritative when 'we' had an opinion, instead of 'I' had an opinion.

Did any of you guys work at Lehman? (bleed green)

 
May 31,2014

I think that it's standard practice for research.

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

 
May 31,2014
Anihilist:

I think that it's standard practice for research.

It certainly is now.

 
May 31,2014

And that's how it's done.

 
May 31,2014

This is so good, thanks for the tips

 
May 31,2014

I think most of these tips can apply to both IB and S&T, but are there any tips specific to the S&T side of the business?

 
May 31,2014

It's applicable across the sell side.

We focus on IBD here becuase 90% of the questions/pms/emails we get are on banking.

If you are a sales guy, you know the goal is to 1) find he best sales person to become friends with, 2) prioritize the top dogs in terms of work, 3) TIME SENSITIVITY

4) if you want to be higher up, do all the diggin yourself and find who the good research analysts are
5) start helping with the low importance accounts, help drop a. Few 3 sentence emails/voicemails to lower AUM clients
6) slowly help with slightly larger accounts
7) take diligent 100% ACCURATE

If you're an actual trader... Then all this matters significantly less, make the firm money. Period.

Good luck!

 
May 31,2014
WallStreetPlayboys:

"I *was* did exactly as I was told"

jus sayin

as someone about to start their analyst stint appreciate the post, really helpful tips.

 
May 31,2014

Haha yeah got typos in here. Hopefully not a ton.

RE: GS M&A example you guys know the point here. If you work at GS TMT or xyz great bank in a sector group, the best analysts get the M&A deals. Splitting hairs.

PS: if you're actually nit picking on the example or a few typos you're going to rip your hair out on the job. Bankers have terrible handwriting and short hand a lot of things, hell should have added that to the post... You should be able to intrpret the point without annoying the hell out of your VP/md when the message/point was clear.

 
May 31,2014
WallStreetPlayboys:

RE: GS M&A example you guys know the point here. If you work at GS TMT or xyz great bank in a sector group, the best analysts get the M&A deals. Splitting hairs.

On the contrary, the early reference to a non-existent "prestigious" group is a chip on credibility from the get-go. Plenty of useful information in here, but my quick impression is that the author(s) aren't as informed as they portray.

"For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

 
May 31,2014
NorthSider:
WallStreetPlayboys:

RE: GS M&A example you guys know the point here. If you work at GS TMT or xyz great bank in a sector group, the best analysts get the M&A deals. Splitting hairs.

On the contrary, the early reference to a non-existent "prestigious" group is a chip on credibility from the get-go. Plenty of useful information in here, but my quick impression is that the author(s) aren't as informed as they portray.

+1

My bullshit detector goes crazy every time this/(these) guy/(guys) post.

 
May 31,2014

For clean modeling, if I cannot find a good mentor for modeling within the office, is there any good resources you would recommend for training? Thanks in advance.

P.S. - have BIWS, but the focus of that program seems to be more how-to-start-modeling than how-to-build-clean-models.

 
May 31,2014

I would second this. Lots of material for beginner modelers, not so much for best practices/"clean modeling".

 
May 31,2014
Darbley:

I would second this. Lots of material for beginner modelers, not so much for best practices/"clean modeling".

Also interested ...

Don't waste your life only thinking about money and prestige

 
May 31,2014

Great read, thanks. any particular tips for how to make it in a large cap PE fund straight out of undergraduate ? how to "add value" and secure promotion to associate ? thanks

 
May 31,2014

Great post! Thank you for this!

 
May 31,2014

I'm sure it varies by bank, but what % of the analysts are in each tier?

 
May 31,2014
 
May 31,2014

Can you do a similar post for Associate? Or one on how to make it as a first year Associate?

The dragon dozes off in the spirit which is its dwelling.

 
May 31,2014