WSO Podcast | E244: UBS Layoffs | Spending $ | Deal Experience and PE | Weekly Wrapup
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Topics this Week:
0:00 Spending Money
7:30 UBS Layoffs
16:40 Deal Experience and PE
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WSO Podcast Episode 244 Transcripts:
Patrick (CEO of WSO): [00:00:04] Welcome to the WSO weekly wrap up where I talk with my team about the five most trending discussions in the Wall Street Oasis community. Enjoy! All right, everybody welcome to another episode of the weekly wrap up. We have, I think, three topics today. Matt, you can get us started and we'll go from there.
Mathew: [00:00:25] Sure. First topic on the forums this week. I found very fascinating around compensation in the investment banking around the question being posted. What is a single guy or girl do as an investment banking analyst with all the money that you're making? Some of the funny responses that I saw on the forum was one that you think you'll enjoy a lot someone screaming Tesla. So dumping those big bonuses at the Tesla Quarterly or..
Patrick (CEO of WSO): [00:00:49] Buying a Tesla, I don't know or buying a…
Matthew: [00:00:51] Or buying a Tesla. I was thinking giving them the benefit of the doubt and hoping it was Tesla stock versus a depreciating car. But some of the other funny suggestions of what to do with the money or what people have done with their money blew their internship money on luxury hotels getting burned, buying the dip the past year, or losing it all in sports betting. So I know that we've had these conversations a few times around just the amount of money the IB analysts are making in 2022, 2023, especially when compared to when you were an analyst. So you know, albeit funny suggestions aside, what's your best recommendation on what an analyst should be doing with their money? You know, if someone's making upwards of 150 grand coming first year out of school. What are some best practices and tips you should?
Patrick (CEO of WSO): [00:01:35] If you're in New York, they won't feel that wealthy until the bonus hits. If you're living off your base, actually well base salary is high enough where you probably are stacking some unless you're like living by yourself in like a one bedroom apartment or something and spending like five grand on rent. But if you're spending like, say, 2 to 3 grand on rent, you have a few like two-ish on rent and you have a couple roommates to make it feasible, make it so it's not insane. Yeah, you should be able to live off your base as they always say. Live off your base, bank, your bonus. That's what a lot of people say. And then maybe like if you, if it's a good year, you give yourself a little bit of a gift on the bonus side. But if buying an actual like model three, a Tesla or something that's kind of seems kind of crazy, especially if you're in any sort of city, it seems like a big waste of money. And I definitely wouldn't Yolo into XLF like one of our members said, you know buying calls for next week that are expiring next week. That's just gambling. You're just gambling at this point. Hoping things turn out right. So, yeah. Nabil, what do you think?
Nabil: [00:02:44] Well I think same, I mean save a little, enjoy a little. Yeah, I mean in hindsight is easy to say that though. Like when you're in the thing, you tend to end up overspending or whatever. And then in hindsight, Oh, where did all that money go? And then that's when you realize like yeah you should probably saved a little more in that time. So yeah, that's usually what happens.
Matthew: [00:03:06] It's interesting because I find like the investment banking or even just like the high finance careers in general, there is almost like that flexing mentality that exists in more so than I find in other careers so to speak. So I guess the main theme here is try to avoid that quote-unquote lifestyle creep that comes. I guess, as an investment banker, just don't let the ego go too high to your head. Don't be splurging on those Gucci loafers and Hermes ties.
Patrick (CEO of WSO): [00:03:31] Oh, we had people at Rothschild. We had an associate that was just the same loud guy was talking about last week who was like crazy. He was living back and this is like 03. Okay, This is like 2003 he was living in like, I think he had one other person he was living in but it was like a two bedroom, a three bedroom, like beautiful huge. It was like at the time. You know, six grand or seven grand a month which is like the equivalent of like a $12,000 a month apartment nowadays. So like say 12,000 a month apartment like on an associate base. He's making decent money. Right, but like he would be either rumors are here like he partied so hard and he had so much debt that like if he didn't get that bonus, he'd be like…
Matthew: [00:04:16] Filing for bankruptcy?
Patrick (CEO of WSO): [00:04:19] I need like 300,000 at least for my bonus or like. I think he would just rack up his credit card and just go nuts and just be partying hard on the weekends going to clubs and spending on bottles and going out to dinner, spending thousands like on a given night.
Matthew: [00:04:38] Can you imagine if social media was as prevalent as it was back then or as now as it and applying that back then. This guy probably would have definitely ran himself broke if he didn't. Just giving the flexing mentality. Now that social media provides.
Patrick (CEO of WSO): [00:04:54] Makes it even worse.
Matthew: [00:04:55] Yeah, it makes it even worse, right? So that's why I mean a question I had for you specifically was this flexing mentality always around in IB than I thought to myself. I think it was, probably got a little bit more amplified now especially on the junior level coming in to have that.
Patrick (CEO of WSO): [00:05:10] I think it's always been, I mean dude there's videos back from like. England 18 years ago, you remember Aj? Have you ever seen that video? There's people who like he's like in his Porsche. He's like, yeah. So there's guys who create videos like.
Matthew: [00:05:26] But was it always being done on the analyst level? I think that might be something that's different where the flexing took place but probably associate VP when you were making the big money. But now when Alice are getting paid pretty sizable though like is the flexing still as common.
Patrick (CEO of WSO): [00:05:43] It’s not that common people know to keep it like down but there's like. There's the occasional person who like makes the mistake of posting it on social media or likes going above and beyond like making it ridiculous. And that's used to happen like once every few years you'd have somebody like show up on the forums and like they'd be emailing me an hour later be like, Please take down the thread and have to keep taking it down to keep getting reposted. So like there's usually people, usually what will happen if something goes viral because they think they're like cool or whatever and they post something and then it's really embarrassing. So yeah, it's a warning to everybody out there. Just be careful, have all your social medias turned to private your profiles and then just even with that, be careful what you share. Assume that your bosses are going to see it.
Matthew: [00:06:28] Yeah, well that's the thing, right? You don't want to be flexing and have your boss kind of seeing that, right? Like they're paying you, your salary.
Patrick (CEO of WSO): [00:06:33] Or your client.
Matthew: [00:06:34] I think It's like that, or even client but it's always like that. At least I grew up in a mindset being like with especially in a work setting. You don't want to be showing up like you're going out and breaking like making all this money flooded with cash. And at the end of day, when your boss is ready to get your check, right? So it's I think it's that mindset. Yeah, if I had to guess I think probably on the junior level now it's maybe a bit more common because of social but definitely have your fun. Just probably if you're going to splurge, keep it to yourself. I think the private life is probably better anyways. Private life is definitely better than the social life.
Patrick (CEO of WSO): [00:07:08] Nabil's a big spender. What do you think, Nabil?
Nabil: [00:07:11] Just stay away from the cameras. That's what we always did.
Patrick (CEO of WSO): [00:07:14] You know UAE, you got some good nightlife there.
Nabil: [00:07:18] Oh, yeah.
Patrick (CEO of WSO): [00:07:19] And they super expensive.
Nabil: [00:07:22] It is, Yeah.
Matthew: [00:07:23] Well let's segue to the next topic here. And I think it's a perfect little segue on. Why you probably should try to save a decent amount of money from your yearly salary is unfortunately a recurring topic on this pod is layoffs. And we saw UBS layoff or at least rumors of layoffs have been kind of creeping through the forums. So you know, I don't know too much on it. But Nabil, you want to kind of give a little bit of context on this, what you've heard on UBS and then Pat maybe provide some commentary on you know in the landscape or just in general for investment banks with layoffs that are going to be coming on how that's going to shape at least the next year or so.
Nabil: [00:08:01] Yeah, I Think UBS just took our Credit Suisse and now at the ATM they just announced and there's rumors is internally that they would be laying off about 20 to 30% of the workforce. That's somewhere between 25 to 36,000 people. Yeah, about a third of them probably are going to be laid off from Switzerland itself. And the rest I'm guessing is more international. So that's in the rumors. But we've already seen the I mean, even in our forums, people are just going on. People are scared like many of them have been laid off, others are still scared. Are they going to keep the jobs or not? So it's an interesting time.
Matthew: [00:08:36] Was it all front office focused when you mentioned that 25% or is that?
Nabil: [00:08:42] No, across the board because they just took over Credit Suisse. I think they're going to go undergo like some kind of restructuring. Just make sure. First off, they're going to try to reduce costs. That's all under the debate, right? Was that a good acquisition? That was the whole agenda of that meeting. People were questioning the, I mean people are still questioning whether that was a good deal or not a good deal. So they're going to definitely try to lower costs and save the business. There's a lot of risk there with that acquisition too. So it'll be interesting to see how that pans out long term. But for now like everyone there is pretty much scared. That's what we're seeing.
Matthew: [00:09:20] Yeah, well so now if you were an intern coming into that for instance, like this summer is your first year internship with UBS and their investment banking division, any recommendations there? So obviously maybe you're getting an email suggesting that role is no longer available for the summer. What's your best feedback or at least advice on how to kind of navigate that situation?
Patrick (CEO of WSO): [00:09:41] Yeah, obviously if you were at Credit Suisse had an offer, obviously you should be looking be talking to people even if you're at another bank, smaller middle market regional bank that has a commercial arm you should be talking with warming up your network if you haven't, just in case. Yeah, I think just across the street it's going to be a pretty tough summer for interns just in the sense of the when banks went and offered internship seats, none of this had started. So remember, they're offering internship spots sophomore year for junior summer. Literally over a year ahead of time. So when you're offering like the number of intern seats, when you're trying to judge like the number of intern seats you need or interns you want and then deal flow dries up and suddenly like there's a financial crisis where banks are failing. You can imagine like let's say you have a group of 100 interns coming in. Maybe you wish it was only 50 and you don't know what to do with the 100 interns. And then you know at the end of the summer, you're not gonna be able to extend to 100 offers or even 90 or 80 which would be typical. But it's probably going to look closer to 40 or 50. And even that you're probably like just doing it to keep some sort of rep. We do have statistics on intern offer rates in our company database. For those of you that are curious if you have like two offers at Bank X and Y, you can always go to the Wall Street industry reports.
Patrick (CEO of WSO): [00:11:16] You’ll get industry reports. There's an aggregate or there's company review page. And on there you can look at like percentage of interns receiving full time offers across banks. So you can get a sense like some banks are like historically 95%. So they're you're probably pretty safe because they're still going to try to like keep that rep. But if you're at a bulge bracket or a middle market bank that was historically in like the 60 to 70% range, I can pretty much guarantee it's going to be sub 50% this year. So that's the other thing that's tough. I had when I ran the live stream. And I think yesterday, the day before yesterday, people were asking like how do I get an internship? And they're like already juniors and I'm like or, how do I recruit full time for senior in my senior year? And I'm like look it's too late for banking. Almost for sure, I don't say anything's impossible but it's going to be almost impossible if you don't have that junior summer because the people coming out this year out of internship there's going to be hundreds if not thousands of kids who have a top internship on their resume that just weren't getting a seat because there just wasn't enough. And all those people are going to be gunning for like the 20 or 30 lateral seats that are open across the street. So it's going to be pretty, it's going to be a bloodbath.
Matthew: [00:12:40] Yeah, well not I'm hopeful this doesn't occur, but obviously UBS is a pretty big player in the overall financial services industry. Do you think we see or maybe some other firms kind of doing some layoffs as well? I thought I saw don't quote me. But I thought I saw something with JP Morgan maybe discussing potential layoffs but, what do you guys think both to be on? We see this maybe happening to some other banks in the coming months like some more contagion.
Patrick (CEO of WSO): [00:13:08] I think we've already had some prior to this. And then I think, yeah I think it gives cover. The more people that do it and the more things, the more it's easier for the execs to justify like cutting like 5000, 10,000, whatever it is to save costs.
Matthew: [00:13:24] Do you think we still see the same thing we saw last time? Or in like the 0809 recovery or when there was that big steep downturn that bonuses were still record high. We still foresee maybe that coming for like the senior execs at the firm. I'm just…
Patrick (CEO of WSO): [00:13:38] Oh yeah, I don't know.
Matthew: [00:13:41] It's what I'm trying to get at is it…
Patrick (CEO of WSO): [00:13:42] Depends on earnings.
Matthew: [00:13:43] People from away, right Pat? So I know we've had this conversation where you were in business school actually when the last big real financial crisis occurred. Do you see any similarities now in terms of just like the overall outlook maybe just like on an internal reflection, like I know we had this convo you're saying there in business school the whole world seems like it's crumbling. You're sitting there. Am I in the right spot right now in business school? What is the next year look like? I feel like it's maybe some similarities this year where a new an individual maybe with an internship looking was all stoked and now sees like financial services struggling and or pulling back to what was, how did you navigate that back then? Is it just kind of like…
Patrick (CEO of WSO): [00:14:23] I wasn't even recruiting man, I was Wall Street Oasis all the way. I was like I want to go move to Argentina for a year.
Matthew: [00:14:29] And yeah, but still I mean if I was with WSO and I see the whole financial services industry collapsing. I'd even be worried just from…
Patrick (CEO of WSO): [00:14:38] We had members on the site be like. Oh, Wall Street Oasis is done. Like I'm like actually we have record highs traffic because everyone's trying to figure out what the hell is going on. Yeah, we actually saw that a few weeks ago with SVB failing, like we saw traffic just accelerating and spiking. So it's kind of like a counter-intuitive thing. But when like financial services is struggling, people need more of an edge and you get that edge at that insight from a community. So yeah, it's kind of counter-intuitive but like, yeah for I know. You know my classmates at Wharton were very kind. It was very a nerve wracking time and people kind of just buckle down and the expectations of where they were going to end up and where they ended up. I think there was kind of a little bit of a disconnect that everyone had to realize like well we're lucky that the economy's even surviving. So I don't think it's going to be that severe of a downturn. I'm hopeful it's not. I think we learned some lessons last time although we definitely could. It really just comes down to inflation as far as I'm concerned.
Matthew: [00:15:39] Well I guess it's good to kind of see the job market then. I thought I saw some headlines today. I think the job market's a little bit softening with some more layoffs and even just these conversations in the financial services space now. So I do think to our point that we had last week with you guys saying you do want to see the labor market cool off. I think we're probably starting to see that slowly. Obviously, a lot of this macro information is dated backwards.
Patrick (CEO of WSO): [00:16:04] Is that unemployment still under 4%? That's the question, I don't know.
Matthew: [00:16:09] Well it seems we won't know that. That's the thing right, that's I guess the interesting with macro. Everything's always it's always delayed, right? So technically speaking right now currently it could be. Right, we just won't know until whatever that might be two months from now which is guess the struggle with the Fed. Obviously you're trying to make moves off of two month, three month old data. Which is obviously difficult but yeah, let's hope that this theme of layoffs every week slowly starts cooling here. So we have some different topics to discuss. But let's pivot here to the last one. We'll keep this one short. This one was mainly an interesting conversation in the forums around just experience level. It looks like it was the individual was talking about making the pivot from investment banking to the private equity realm. Any suggestions guys, on how to kind of get that real tangible experience that makes you stand out when recruiting private equity? I know we had some preliminary conversations around industries do make a difference but now I guess from that point of view. If you are in a difficult industry group that maybe doesn't have good deal flow or is maybe not a very universal or common deal group. What would be your suggestions on how to get that tangible experience to make that jump from investment banking to private equity?
Patrick (CEO of WSO): [00:17:20] Yeah, I think the OP was just really nervous because they're like don't have any deal experience. Is theoretical knowledge enough to make it over and this is actually more of a problem because private equity is recruiting so early. So like if you're on cycle you come right out of banking. Most people don't have banking deal experience. So like you often as an applicant for private equity, if you're going on cycle oftentimes you're talking about like your deals that you did on your intern in your internship. That's why having the right internship matters so much and getting the right deal. So like it's probably not the theoretical knowledge isn't just enough to get to private equity. I think the competition is high enough. There's enough kids who are lucky enough to get on deals where they're going to sound better on average and it's going to look better in terms of what they did that like it's kind of a little. There's a lot of luck involved in terms of like where you get staffed and stuff. So it sucks if you're dealing if you're haven't gotten any deals. Think you can lateral internally. That's great but like, that's not an easy thing to do either.
Patrick (CEO of WSO): [00:18:23] So it's like easy to say. Oh yeah, go lateral to a deal team that's really busy. One thing you could do is if you're like it depends on the firm but you could go to the staffer and be like, Hey I'm doing a lot of pitches. You could just talk to and be like I was hoping to get on some live deals or anything. Maybe across groups or across products that could help work on from teams that are struggling or that have maybe they need more help. And that way you can try to get at least 1 or 2 deals on your resume. I think once you got 2 or 3 it's enough. She was like enough. But like especially if you're, if you kind of have more time and you're actually going in depth on it. So like, are you doing the actual, are you running the model? Can you talk to the M&A process? Can you do? Can you talk through that? I think that'll show up well in interviews for the buy side.
Matthew: [00:19:12] Yeah, makes sense. So when you mentioned lateral is going to be difficult for a different deal team. I'm assuming that's obviously internal laterals but any thoughts on doing like an external ladder lateral to maybe a separate deal team? Do you think that's probably going to be a little bit easier? I would assume so.
Patrick (CEO of WSO): [00:19:29] Different firm you mean just jumping companies.
Matthew: [00:19:30] To a different firm…
Patrick (CEO of WSO): [00:19:31] You can, but then you're kind of. You can, but you're like every jump you make from company to company is a little bit like you're burning capital like you're burning political capital because you're either stuck there. You either can jump again after under a year or a year but then you're kind of stuck at your next place.
Matthew: [00:19:50] Now if the end goal..
Patrick (CEO of WSO): [00:19:53] You go like six months, nine months…
Matthew: [00:19:55] Isn't that fine? If the end goal is to get the private equity, you're going to be leaving the firm.
Patrick (CEO of WSO): [00:19:59] Yeah what happens now at the PE fund is going under or it's not going well whatever and you have to go again. Good luck recruiting if you've gone six months a year, six months, nine months. We were gonna be like, What the hell? You know what I mean? So that's the bigger thing is you're kind of you're starting to narrow your option value. If you start hopping too much like it just traps you a little bit more. On if you make a mistake, you have to sit with the mistake for a couple of years which is hard to stomach man. If it's a toxic environment or the funds really going under or like it sucks to have to be stuck in that environment. So yeah, I don't know. I think ideally you're staying internal. You're staying at the firm for at least a year and a half, 18 to two years. If you can get a job a year out. There's a lot of kids leaving banking after a year, but they're going to a fund that's well known or whatever. And so that's fine. To me that's fine because you're going to be at the PE fund probably for at least a couple of years. Yeah, so it depends. I don't know if you guys agree.
Matthew: [00:21:00] Yeah, no, I agree on the idea being like you need to get that deal experience. Like the question being like, is it theoretical knowledge enough? I don't think it is because rather than like the theoretical knowledge anyone could brush up on that or study that to become good on those specific topics. But I think what a firm would be looking for is how you, what the deal process, or what the deal exposure in general is like how you manage and nuances of each deal. I think we've seen that from our own conversations that we have with firms that every deal is going to have its own nuances. So there's nothing that's going to be like a cookie cutter. So from like a knowledge perspective there's nothing that's going to be applicable to everything. I think having that deal experience showcases how you overcome. Whether it's specific nuances or ways how you got in a client from A to B through that deal experience. I think is way more important than the theoretical knowledge that you could study.
Patrick (CEO of WSO): [00:21:51] I mean anyone can take our private equity interview course and you can go through private equity cases and know what actually makes a good deal and talk to it and become better at that process. But if you don't have the transaction experience in your resume then it's gonna be like, well when have you done this? It's like, okay here like so when have you actually put this in?
Matthew: [00:22:09] Or just because transactions are never as cookie cutter as they seem, right? I think anyone's going to see that and you could apply that to anything in life. Nothing's going to be as simple as it seems. So it's how do you deal in that or how do you operate in that actual environment? I think is the more important piece rather than knowing what an MBA is fun stuff. You could all know that. But if you don't know one, how to push it forward to some there needs to be some sort of customization or whatever you want to call it to the deal experience. That I think is where it's for a triumph. So I think..
Patrick (CEO of WSO): [00:22:38] I think 80% there in terms of knowledge 80, 90% there. But in terms of like being the most competitive candidate, unfortunately is a lot of luck involved. And you need that deal. You need those deals. Yeah.
Matthew: [00:22:49] Yeah or even just how you again work within the team itself, right? Like when you're compiling a team.
Patrick (CEO of WSO): [00:22:55] Unless you're on cycle recruiting then the expectations are low because it's like. Hey, we know you just got out of training but then even then like. Okay, what did you do at your internship? Like what was that deal? Yeah and you see kids they know how to put it in the like our free template the experience. Interns will put their internship first and they'll have like transaction experience as an intern because they know that's what PE wants to see. And so they know how to put it in that specific template. So yeah.
Matthew: [00:23:22] Yeah, makes sense. All right, well I think we'll call it on this conversation guys. Great three topics this week and we'll look forward to connecting next Thursday.
Patrick (CEO of WSO): [00:23:31] Nice guys, talk soon. And thanks to you my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick@wallstreetoasis.com and till next time.
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