Why do IB directors change shops?
This is an outline of the motivations I've seen for senior IBankers to change shops, whether in the same type of role or into a different role (eg from TMT ECM banker to debt banker). This is based on my 9 years in IBanking, preceded by 6 years as a lawyer working with IBankers, servicing the M&A and ECM markets. Disclaimers come at the end.
This is a response to notthehospitalER's thread "What's more lucractive?" (//www.wallstreetoasis.com/forums/whats-more-lucrative). However, this post ended up being lengthy and covered some ground that thread wasn't looking into, so I thought it better to post as a new thread.
I've set out a non-exhaustive list of the motivations I've seen, based on a relatively brief amount of reflection this evening.
There's a lot of overlap between many of these motivations, with some being subsets of others. Most people are motivated by a combination of some of the motivations plus others I haven't identified. I'm sure I could think of more if I put my mind to it.
If I had more time (and motivation), I'd have a more systematic explanation. But I don't have either, so this is what you get.
You'll see that it's not all about the filthy lucre, although the love of mammon (and positioning yourself strategically to maximize the future lucre) is a big factor. The two other factors the frequently play a role are ego and self-fulfillment.
#1. Career blocks/changing the game
You've gone about as far as you can at this particular investment bank and you can't see your way to the next level.
There can be a few reasons for this, like:
- you don't have the skills/psychology - eg when bankers with fined honed deal execution skills hit a level of seniority where they are expected to start making rain/bringing in deals and realize they don't have the network for this and/or the desire to wine/dine/network/schmooze/fellate clients
- your IB wants you to do less of A, B and C (usually execution work) and do more of X, Y and Z (usually rain making work), but they aren't giving you enough juniors or support to do that
- the organization is not structured to enable you (see motivation #2)
Maybe you can see your way to the next level, but realize that you'll have to damage yourself too much to smash through the roadblocks.
So you go to another shop where you know the roadblocks won't be as big. Or, as I've seen sometimes, you think "anywhere has got to be better than here" or "a change is as good as a holiday", you roll the dice and you hope the roadblocks won't be as big at a new shop, or a new outlook will make them smaller. Or, if you're moving down market in terms of prestige, what is a B grade at your current shop will be an A grade at the new shop.
Alternatively, you could change the game – eg move out of TMT advisory and into pure debt advisory. It's sometimes easier to do this moving to a new shop rather than in-house, whether because positions are only available somewhere else, because the new shop won't insist you stay in your current role like your existing shop might or because of some other reason.
#2. No man (or woman) is an island - career blocks created by organization weakness/structure
You may be an expert in a particular sector or product, but for some reason you're working for a IB that has no reputation for that sector/product expertise. Perhaps you had a BSD who was also an expert in the sector, he/she left a few months ago and the market perception is that all your shop's credentials left with him.
That makes it very hard to open doors and very hard for you to bring in the business that you know you could generate fees from.
Alternatively, this could be like one of the situations in #1 – your organization has weaknesses or structural problems that are preventing you generate as much business as you should be. For example, you could be bringing in a ton of PE opportunities, but the PE fund raising team only managed to raise LP funding for half as much as you need, or you're cursed with an investment committee that is too conservative for your tastes. I'm veering into more PE, less IB realms here, but I do PE within an IB, so you'll forgive me. Exercise your imaginations if you need a more IB example.
So switching to an IB that doesn't have these limitations – even if it's down market – may make sense.
#3. Career blocks higher up the ladder/your competition
You're a great banker working at a great house. You'll could generate a lot of business. You could do the best deals.
But there's a problem.
There's another guy with the same skillset and he's perceived as #1. All the good deals go to him. You get the scraps.
Or perhaps you're waiting patiently for the director one title above you in your team to move on, but she just won't budge.
Again, switching to another IB makes sense.
Perhaps you would like to go to an IB with the same or better prestige, but your choices are subject to the market. If you can only find the role you want down market, then down market you go.
#4. Ego – there can be only one
I don't regard myself as a grunting alpha male. But there are many in the IB industry who are. Reading WSO has revealed levels of psychopathy and "I want to be an I-Banker but have no idea what it involves other than lots of money" thinking that I wish shocked me, but unfortunately doesn't. So I'll put myself into your shoes.
You are an alpha male. You want to be the BSD in your team/division/IB. But you're stuck at a shop where this guy has an extra few inches on you. Everyone watches at his swagger and doesn't pay you as much attention as you think you deserve. It burns you up inside and the risk/reward on hiring a hitman leaves you just a little too uncomfortable.
So what do you do? You go looking for IB where you can be the BSD, even if it's down market. After all, for some it's better to be the king of the shits than the shit of the kings.
#5. Profitable guy in a less profitable division
OK, you're the BSD, you're raking in the business, everyone knows it, everyone loves you, the CEO mentions you and your deals at every shareholder presentation and every internal conference. You are the rockstar.
But the rest of your division is not performing as well. So, every bonus time, you find that some of the bonus pool that should be coming your way is being leeched off to support bonus payments to other teams in your division or even other divisions.
You're still getting big bucks, but not as big as you think you deserve.
If you're ultra-alpha, this may outrage your self-centered sense of "justice".
You want what's yours. So you go somewhere more profitable or possibly down market to where there is a comp/bonus structure which is more "fair" by your standards.
#6. Ego – don't feel you are getting the respect you deserve
You're a BSD, but people don't fawn over you as much as you think you deserve. The CEO didn't mention your killer deal or the fees you brought in at the last internal conference. The junior analysts don't quake in fear and awe when they are in the elevator with you.
Perhaps you didn't get the new title that you thought had your name written all over it.
Or it could be a case like #4.
So, you leave your shop to go somewhere where people will value your invaluable contribution, presence and BSD. Even if that means going down market. Even if that means taking a pay cut – for some, respect is more valuable than money, particularly for those whose self-respect hinges on how they think others perceive them.
#7. Escaping perceptions to recreate your career
Perhaps you slogged it out for a few years in the TMT team and recently did a few deals in debt restructuring for TMT clients. You loved it and you think you'd make a greater restructuring I-banker, whether servicing TMT clients or any industry sector clients.
Problem is, everyone at your shop has pigeon-holed you as a TMT banker. Sector teams like Resources, Infrastructure, Industrials, Renewables all look at you oddly when you try to get in on their restructuring deals – "This ain't an internet stock, get lost".
So, time to change shops. If the only opportunities are down market, or the only IBs willing to give you the freedom to start afresh as a restructuring bankers are those down market, then down market you go. This may also mean taking a pay reduction, with you gambling that you'll quickly prove your ability, generate business and catch back up.
Alternatively, this could be like case #2.
#8. Walking away from a mess you created/dodging the millstone
You did a deal that went bad. Very bad. Your CEO visited you personally and told you that you need to fix it and you're not going to see any meaningful bonus until that job is done.
Your choice – stay and fix it or cut and run.
Most bankers will cut and run to another IB.
This case also often overlaps with #7.
#9. Office politics
You're in competition with someone else for a role, but they have a better internal network. Perhaps they are the favoured golden child of someone higher up.
Perhaps you were gunning for sector or division head, but didn't get the role and are now chewing on gobbets of bitterness and resentment.
Fuck those guys. You change the game and bug out to another IB.
#10. Trading your rolodex for 3 months gardening leave and sign on bonus
You're a relationship banker. You wouldn't know how to open Excel, can barely lift a pen, but you have a fantastic client network and a rolodex that is highly valued.
One problem – it's been 2 years since you brought in your last big fish and people are starting to wonder if you're really worth the high salary.
So, you do the rounds while other IBs can at least remember that last big deal had your name on it. You represent access to a client network that other IBs want. Often, those IBs will gamble that you have a hit rate of 1 massive deal every 2 – 4 years, so poaching you may pay off.
You also get 3 months gardening leave and a sign on bonus out of it.
I've seen this happen a lot in the China-servicing IB market (cf JPMorgan paying Wen Jiabao's daughter $80k a month for access to her relationship network).
#11. Trading on the brand of your alma mater
You're not a BSD. You're a middling I-banker destined for a middling career at a high prestige BB. Maybe your career prospects look questionable.
So, you interview with some less prestigious IBs, dazzle them with the BB name on your business card and hope they don't ask too many people at your shop just how good you really are. Perhaps they'd be happy with a middling BB I-banker in any case.
#12. Leaving because you're not delivering P&L
Sometimes overlaps with #10, but can happen to good I-bankers as well due to downturn in their sector, some of the cases above (eg #2, $3, #8) or just bad luck.
Next bonus round looks dismal for you.
Time to jump ship. Another IB will welcome you with a sign on bonus, perhaps a bonus guarantee. And you get 3 months gardening leave and fresh start where no one reminds you how little revenue you brought in last year.
#13. Leaving before people catch on that you're an idiot
A lot of overlap with #10 on this one, as it tends to happen a lot with relationship bankers.
You've outlived your usefulness to this organization and you suspect they will realize that very soon.
Jump before you're pushed.
#14. Lateral move with a promotion beyond your ability
You want to move up and up, onward and forward to the heights on the IB world. Next stop – division head.
But perhaps your talents are really deserving of the success you want. The shop where you've worked for the last few years is probably familiar with your limitations.
A new shop is probably not.
May that other shop has a division head vacancy?
If the other shop is less prestigious, a little of case #11 could be active here too.
#15. Time to go into management
You've worked on the factory floor generating business and executing deals long enough. I-banking is generally a younger man's game with hard hours and hard work/play.
You've started spotting more than the occasional grey hair. Perhaps it's time to move into management. After all, you've always been a strategic thinker and you have some great ideas on how the business could be run better.
Your IB doesn't want to give you a management role, or doesn't have an opening for you.
Time to jump ship to somewhere that does.
#16. Time for a change/new challenge
OK, we're now moving from the less ego- and lucre-driven motivations into more of the lifestyle/personal fulfillment motivations. This may make some of you guys feel a little bit uneasy and your brains may scream "DOES NOT COMPUTE" as you wonder how endless champagne room sessions and snorting coke off writhing nubile bodies could not make a man eternally happy.
Sometimes, happiness is not entirely dependent on money.
It can be hard to believe, but sometimes a nice new sports car will not increase your net happiness, particularly not when you're second wife wants a divorce, your 17 year old daughter just got arrested with a baggie of co***ne (which she nabbed from your stash) and your 14 your old son hasn't spoken to you since you divorced your first wife.
That pontificating aside…
A lot of people get to somewhere in their mid- to late-30s and have thoughts like "It's been fun, but I want to learn something new and have new challenges", "This is getting old, I want to try something new" or "This is killing me, I've got to get out of here".
In some cases, this may mean getting out of IB altogether. This is a well trodden route, with many I-bankers going into CFO and COO roles, consulting or other careers.
In other cases, it may mean staying in the IB industry, but moving into a different area. For example, see case study #A below – a debt I-banker moving into a middle office credit role.
Or, you could stick in the same sector/product, but change geographies or client focus (eg move from big deals to middle market).
Often that career change can involve changing to another IB.
This was the point I made in notthehospitalER's thread and I'll reproduce my comment here:
"Why else would senior bankers move to lower BB banks other than getting paid more? It definitely happens often"
Quality of life? There have been times in my career where I'd happily take a pay cut to have more time not at work or less job-related stress.
I don't even have kids. I can imagine many bankers who want to spend more time with kids shifting from BB to mid-tier so that they can slow down the hamster wheel and spend more time with their kids.
It may be hard to believe for 20 year old kids gunning for IB roles, but - even for many people in IBs - it's not all about the money.
Big bucks may buy you lots of ho***rs and blow, but you will soon hit a point where a nice new car or a bigger TV set won't actually make you any happier, but having a wife you love, kids who actually want to spend time with you or time to read that book you've always wanted to read will.
You may be motivated to change IBs, particularly to move down market, so you can get on a slower treadmill – lower revenue targets, Monday morning meetings that start half an hour later, less demanding clients, lower execution load, less phone calls at midnight.
You may get paid less, but you're also more relaxed and more able to do the things that make you happy (other than work).
Unless what makes you happy is swimming in filthy lucre like Scrooge McDuck. If that's the case, then party on at your current IB.
So, now to the case studies that I've witnessed.
Case study #A
Clare was a senior director in a sector team who had worked on some big deals in the past in one region. Clare moved to the IB's HK office to run one of the teams there. It was good timing, as ECM markets were booming at the time and she had a good run with some IPOs, middling success with some other deals.
Clare had her eye on the regional division head role. She thought some powerful people back in head office would support her for that role.
Her backers withheld support and it didn't happen (see #6 and #9).
At the same time, a loan deal that Clare had done went bad. Bad enough that the CEO told Clare that she wouldn't see a bonus until that deal was fixed (see #8).
Clare chewed on her bitterness as she now reported to the regional division head sitting at the desk that should have had her name on it. Daily, Clare dealt with her damned deal and was reminded that it was a long time before she would see the bonuses of old.
So Clare jumped ship.
Case study #B
Paul was a relationship banker at an IB with a China-focused business. Paul's family and university classmate connections had helped him bring in some big deals. Paul was also 2iC to a very well connected relationship China I-banker, Dan. Paul had worked on some big deals that Dan had landed and picked up some of the credit for them.
However, Dan left a few years ago.
Since Dan left, Paul hadn't landed any notable deals. Paul was getting nervous.
There was a vacancy for a division head at a regional IB that was less prestigious than Paul's current IB.
Paul met with the regional IB, overplayed his role in Dan's deals and landed the division head role. Think #10, #11, #12, #13, #14 and #15. Paul also had a preoccupation with maintaining face, so likely a healthy dose of #4 and #6 as well.
God, I really didn't like Paul.
Case study #C
Bob was an M&A banker at a BB. Good at executing deals, but not much of a generator of new business and no management experience. Bob had probably gone as far at the BB as his skills would take him (#1). Bob had some interesting interpersonal skills, which also meant many other I-bankers at his BB were not fans of him.
A less prestigious IB was looking for a new regional head. Although Bob didn't have that sort of management experience, he looked good on paper and looked ready to step up to the role. Bob thought he was ready (see #15).
The second IB took Bob on, only to quickly discover that Bob was not leadership material, a pretty poor manager of an IB division. Bob was an example of #14.
So that all said, some disclaimers:
- I haven't been entirely systematic about this, so there is a lot of overlap and this is a non-exhaustive list. I'm sure I'll wake up tomorrow and think of 3 – 4 motivations I missed out on.
- This is based on my experience in IB. I'm sure there are many common motivations for leaving that I've simply not seen.
- I don't see what I've written as particularly insightful or highly analytic, but I think it may shed some light on office psychology and politics for WSO monkeys who are just beginning their careers.
- I've spent too long typing all this up. I can't be bothered proof reading it.
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