Analyst Class: 10 Years Out

Wow this was not funny at all

prove it 

Hey! Credit unions aren't all that bad.

DDTG

nobody in PE? did you work for a local credit union?

LOL, a few of those guys had stints in PE but I started at a boutique that wasn't a feeder to the buy-side. Looks like everyone did ok regardless.

I'm also from a BB - tbh I think luck has just as big a part to play as anything. For example, one guy I knew who just made principal at a MF got his promotion from being the key guy on an investment that netted the firm a huge payday when they exited in 2019. But if they'd held on one more year until 2020... let's just say it would be a different story. Obviously that's not in any way diminishing his hard work and skill - but unfortunately, you need both of those and luck as well (Malcolm Gladwell's "Outliers" is a fantastic book on this).

When you say "made it big" - I mean, the top 10% I mentioned are doing very well financially but they're still not multi-millionaires (maybe will be in a few years to be fair). Also they've traded pretty much all of their 20s and a number of them appear to be suffering in some way either physically or mentally from the constant overwork. I guess most of the guys I knew from my analyst days I would class as successful bankers (and certainly your average person on the street would think earning $300-500k is incredible) - but no-one I know is going to be the next Schwarzman or Ackman anytime soon.

Good question - I think it depends on a couple of factors:

a) Market environment - in the bull market of the past 10 years, banks have generally been increasing headcount (or at least there has been no real pressure to reduce headcount). Whereas if there is a sustained market downturn, these guys will probably be the first to be cut - for their salary/comp level they generally add less value than an associate or 2nd year analyst. However I've seen guys above me who were made VPs 6-7 years ago and are still in their role (even though they have no real chance to move up). So very market/macro environment dependent I would say.

b) Competence - a VP is ultimately an "execution guy" meaning their role is to manage the transaction and make sure it all progresses smoothly. Surprisingly you get quite a wide range of competence at the VP-level (at least in my experience, with the IB bankers I've worked with on the PE side). On one end there are guys who were presumably good analysts/associates but now think they've paid their dues, and seem to spend most of their time forwarding emails to their juniors without adding much value themselves. In my experience on the PE side these guys can be painful to work with, and frankly I'm surprised they stay in their job (presumably they're good at "managing up" and taking credit internally).

On the other hand, there are VPs who really add value. Even though they will struggle to become rainmakers (and thus get promoted) they have become what I call "execution gurus." What I mean by that is by this stage of their career they really know their sector/specialty and all the various issues/roadblocks that will come up in a deal and how to resolve them - and at the same time are technical enough to still dip their toes into the modeling and thus can explain to their clients/external parties the model outputs and what affects them. Personally I really like working with these guys - as even if you have a rockstar analyst/associate who builds an amazing model, they probably won't have the necessary career/sector experience to fully understand all the roadblocks that can come up on a deal (whether they be structuring/lending related, or legal/regulatory and requiring the lawyers' input).

So in a good/neutral market environment, from my experience I see the latter group staying at their bank for a long time. Because even though they're expensive and don't bring in new business, for an MD they are well worth their salary - as the MD can just bring in a deal and toss it over to the VP to manage/run, knowing it will be handled very competently. Of course for this type of VP there is the question of do they want to spend a decade-plus of their career doing all the work for an MD who takes all the credit and makes the mega-bucks, while they're earning $500k. By the time most get to this point of their career however, they probably have a family/kids etc so taking a 50%+ paycut to go into corporate development may not be an option. And PE firms don't generally hire from IB at VP-level, since by that time (rightly or wrongly) they seem to view VPs as too "entrenched" in the sell-side.

With the former category, if these guys are good at internal politics they often seem to stick around for a number of years. If they're not so good at politics/managing up, I tend to see these guys move to steadily smaller banks over time - one example is a VP who was at a BB for 4 years, then moved to a mid-size bank for a couple of years and then a small boutique for another year or so. He's just joined a fintech startup now. So it seems like there's always the option to move to smaller firms if they get forced out.

I’m old enough to see patterns. The VP/Directors in this bucket will continuously trade down in banks until they churn out. 2-3 lateral moves in 5 years. Sometimes the lateral results in a promo, sometimes not. The comp hit associated with moving to corporate is very substantial and people will try to push it out as long as possible. 

No worries. I think that last point I made is really something you learn with age (not meaning to sound patronizing here). What I mean by that is at 24 I thought I would love to work at a MF to make the mega-bucks - and I wouldn't mind working weekends/to 1am in the week every day to make VP/Principal there. I didn't get any MF offers so never had that opportunity anyway, but even now as a single guy at 31 I find having to work all weekend much worse than I did in my mid-20s. I can't imagine what it would be like having a family and working at a MF.

I think basically the opportunity cost gets much higher the older you get. Other threads here on WSO have covered this much better than I ever could, but essentially when you're in your early/mid-20s the opportunity cost of missing evenings/weekends is relatively low compared to the salary/future prospects IB gives you. Don't get me wrong it sucks working late into the night and at weekends - but if you're a single guy at 21 what would you be really doing then instead anyway? Watching Netflix or going for drinks with your buddies? Ultimately it's not the end of the world if you miss a few of those because of work. Not going to the gym does suck - but even with a busy IB schedule you can usually fit in a decent amount of exercise most of the time.

By contrast, by the time you get to your late 20s/early 30s - you've put up with working late nights/weekends for a number of years already, and you probably either have a family or are in a serious relationship or looking for one. And even with an understanding partner, having to cancel weekend/evening plans at last minute does put stress on the relationship. Must be even worse with young kids I can imagine.

Also even if you're a single guy like me - by this point a lot of your friends are married/have kids, so it's not like you can phone them up on a Friday night last-minute and get everyone to come out. For my friendship group at least, we now have to plan guys' weekends away/nights out well in advance - so cancelling on them at the last second would suck (I've had to do that a couple of times unfortunately).

Again I'm not saying one option is right and one is wrong - obviously most older guys at MFs and IBs have a wife and kids, so it's obviously far from impossible. I'm sure it can be stressful though. So I can certainly understand why people - once they have the career springboard that 2-3 years in IB gives them - go to work for F500 companies or join startups. They're still earning great salaries by the average person's standard and get a significantly better lifestyle. Each to their own I think.

Probably around a 50/50 split I think (obviously not exact but just off the top of my head). Neither option is better - I think a lot of it depends on your personality type. In IB you are on the sellside but also a pure "deal guy" - i.e. you work on a transaction, it closes and then you move on to the next. Whereas in PE the deal itself is obviously a huge amount of work, but that's just the start - you now have to make sure the company is effectively managed by working with the C-level execs at the acquired company, and work towards an eventual exit in a few years. Also in PE the best deals are often the ones you don't do - last thing you want to do is overpay for an acquisition and subsequently realize you're not going to make your expected returns. Whereas an IB guy doesn't care - you just want to get the deal done.

I can see the appeal in both sides - personally overall I prefer being on the buyside in PE, but I can also see why the people I've known have stuck to IB. Working on deals usually means intense hours but it's also one of the best/most exciting parts of the job. By contrast doing quarterly valuation reports, working with portfolio execs to implement operational changes etc can be interesting but can also be deadly dull at times.

Thanks! Good question - I think the answer is it depends. On the one hand in PE you’re on the buyside so investment performance is really the only thing that matters - there’s considerably less bs/obsessiveness with making sure a slide deck is perfectly formatted for example, as seniors only care that the numbers are right. On the other hand, you have a lot of new painful responsibilities (quarterly valuations/reporting for example) - and from what I’ve heard from professional acquaintances, at MFs you can be stretched painfully thin (even by IB standards).

In banking on the other hand, you still have to deal with all the client service bs and make sure you (or your juniors at least) format a slide deck perfectly. Having said that, by the time you make VP/Director (or even 2nd/3rd year associate) you’ve hopefully worked on enough deals that you know exactly how things play out/what is required - and that model/slide deck that took you 6 hours as an analyst can now be done in 1.5hr. Also you have juniors below you to pick up the slack (whereas as an associate in PE you will likely still doing everything on the model etc).

So tbh if you’re a VP/Director in IB, if you’re lucky you might be getting away with working 60-70hrs a week and making $500k a year - which is a pretty good ratio I would say. Certainly most IB VPs I know aren’t working 100hr weeks. Of course they are sell-side (ie in service to the client) so can still be very prone to getting passed last minute/weekend client requests from their MD. Although at least as a VP your job will hopefully just be managing the associate/analyst over the weekend, rather than spending hours both days grinding away.

That is one other positive of being on the buyside - while the workload can be equally intense in PE, the fact you’re not serving clients can mean you get a bit more flexibility over your workload (for example in PE often you can juggle/move things around if you really need to keep a weekend free). But having said that, often you get urgent requests from principals/MDs which basically are the same fire drills as client work in IB.

So to summarise in my personal opinion (bearing in mind I haven’t worked at VP-level in IB or at a PE MF, but know/work with a lot of guys that do), I would rank the worklife ratio as follows:

1. MF PE - probably the worst/most intense as you said. You get some advantages from being buyside (eg can juggle work around, less bs stuff then banking) but these are most likely outweighed by the sheer number of deals you’re working on, and the fact you don’t really have any junior support beneath you. Most of these guys likely regularly doing 80-90+ hrs a week. But pays the most.

2. IB VP/Director you’re still in banking, so all the downsides of being beholden to the client remain. But at this point you’re experienced enough that models and decks and other deal stuff is generally pretty straightforward - plus you have a team of juniors below you to take on most of the load. I’m sure there are a lot of busy VPs still working 80+ hrs a week - but if you’re competent, lucky and have a good team below you, then you may only be doing 60-70hrs a week while making $400-600k+.

3. MM/LMM PE - this is what I do. I’m probably still working similar hours to a bank VP and for less pay, but at the same time I also have the advantages/efficiencies from being on the buyside (less time wasting work, not beholden to clients just my seniors, being able to keep certain weekends free easily barring emergencies etc).

Only 1 guy is 'freelancing' actually, he's still in finance, but basically he's contracted with a very specialised VC shop and is paid based on deals he's bringing in

80% finance or finance related

20% corporate (BD or strategy) 

Sure, happy to share. I spent ~ 3yrs at a growth equity fund after A-A promotion at my previous BB. I would say PE/growth equity is not for everyone and certainly not for me. Upside might be there (at least 5-7+ yrs staying with one fund) with more control of your time given you only need to pitch your own IC, but some issues are:

1) portfolio management can be really boring and time consuming; when most of us back in sellside were fancy about being responsible of the operational / portfolio management, it in fact means spending quite a mount of time preparing valuation reports with the auditor/fund admin (not much value); when it comes to certain cases that do involve intense operational improvement, you wont be surprised that us ex. bankers are quite useless providing good advice to the owners, therefore tend to be frustrated with lots of pushback from the mgmt.

2) buyside is a long game and if adjusted for the risks (ie. deals go bust which happens more often than you think), your avg. payout will likely be lower than your peers back in IB, and the career path to at least director level is typically easier than PE (all my peers at MFs/UMMs are stuck at senior associates level after 6-7 years, some might be promoted to VP/Principal if lucky in the next 2-3 years, but by then your peers at IB will be director with an army below them)

3) this one is more Asia specific; unlike US where there is a established market for MM, in Asia the gap between MFs/UMMs and MM/LMMs is huge both in terms of pay and fund size. There are 2 implications: 1) you have to stick with MFs/UMMs to maintain the high pay but to bear the same if not worse lifestyle vs. IB, but as I mentioned most of my peers cannot get promoted to VP or above anytime soon, then they need to move to smaller funds which comes to my next point, 2) MMs/LMMs are having a hard time raising new funds given all LPs these days are being conservative, so they tend to add exposures into their existing large GPs, which will result in much less pay at these smaller funds. Based on my chat with those MFs peers, they just cannot take that kind of pay cut hence still stay.

So I was lucky that I got hired back to another BB that valued my time at buyside and didn't discount me at all and gave me a VP position at their TMT team. Things have progressed well given huge amount of activities in the capital markets.     

Bottom line is I do see some of my peers are happy with being at LMMs/UMMs given the lifestyle. PE is still attractive to some people but they need to have the right expectation, because most of us moved to buyside during analyst years when most of us didn't really know what we want.

Not sure if this got posted 2x, one is at a family office & on lower end of comp spectrum. I do have a friend younger than me that has a sick FO role and clears $1mm - he’s got the dream role.

Other friends are at structured equity / co-investment funds. One role is a bit unique because he got in at the ground level for a fund that ripped. He’s also an awesome guy and deserves the success, but for sure the exception rather than the norm.