I hope today’s post will be helpful to the following readers:
- Students contemplating a career in finance and wondering whether investment banking is the right choice for them
- Graduates who are just starting their careers and are considering a lateral move into investment banking
- Anyone else who is curious about investment banking and prefers a first-hand account from an industry insider. I am sad to say that the picture presented in the mainstream media is often full of generalizations and inaccuracies
Pursuing an investment banking career is a great way to earn a very decent income early on in one’s life. It can also help you get off to a running start on a journey to financial independence.
Unfortunately, I have met far too many intelligent, hard-working students who choose to forgo this path. Very often, it is because they are misled by the picture painted in movies, TV shows and newspapers.
Don’t get me wrong – there is absolutely nothing wrong with NOT being an investment banker. I would just prefer that this decision was based on facts and not influenced by the picture painted in popular culture and the reputational bashing that persists more than a decade after the financial crisis.
I moved into investment banking as a freshly minted MBA graduate right after the financial crisis. As you can imagine, investment banking wasn’t exactly a popular choice back then.
Fortunately, I was able to access some really good mentors through my school’s alumni network, who convinced me to ignore the external noise and focus on fundamental attractions of the job.
Most importantly, they persuaded me that most investment bankers weren’t the arrogant extroverts with a questionable set of morals.
As a result, I felt confident that I will find investment banking a challenging and rewarding career. I also knew it wouldn’t force me to sacrifice my integrity.
My conviction proved right and I am beyond grateful to have given investment banking a shot. Today, I hope that at least a few of my readers do the same.
Curious what investment bankers are REALLY like? Then read on.
Seven Popular Misconceptions About Investment Bankers You Should Ignore
1. Investment Bankers Are The Smartest Guys (And Girls) In The Room
There is a perception that to be a successful investment banker, one needs to be a quantitative savant who can multiply six-digit numbers in his head and come up with answers to the most complex problems in real-time.
While the industry certainly attracts intelligent people, the reality is that investment banking in general (unless you are in a very specialized field such as trading exotic derivatives) is not a complex science.
As a matter of fact, the problems we solve for our clients are rarely unique – raising financing, defending from takeover bids, acquiring other companies.
While each individual assignment can present its challenges, we don’t exactly spend our days trying to land the Apollo 13. The solutions we come up with are rarely ground-breaking.
Instead, the key differentiating trait of a successful investment banker is the desire to leave no stone unturned to adapt an already known solution to her client’s unique situation.
2. You Need To Graduate From A Top School To Be An Investment Banker
If you look around the floor of any major bank, you will find at least a few Oxford, Cambridge and Stanford graduates. You will also find them to be a minority, and most of them are likely to be in their 40s or 50s.
There are a few reasons for this.
First of all, as much as I dislike it, educational pedigree is still strongly correlated with economic status. And if you are born into serious wealth, it’s highly unlikely you would be drawn to a job where you may be required to work 100-hour weeks on a regular basis (hence #3 below).
Even if you do end up in investment banking, it’s likely you start re-evaluating your choices a few months or years into the grind. The rare exceptions to this rule tend to be offspring from rich families on a mission to prove they can do just as well as their parents.
The second reason is that despite the popular narrative, investment banking is no longer the easiest way to make a quick buck.
The pre-crisis days of 100% cash, 7-figure compensation have been replaced by lower bonuses, deferred stock awards and cliff vesting features.
These days, the most popular path to quick riches is to join a technology major (Facebook, Google, Netflix) and follow that with a C-Suite role at a red-hot startup. Next thing you know, you are frolicking in the shower of VC dollars flooding the tech industry.
Many of the same people who were lining up to join Lehman in 2005 are now beating a path to the West Coast (or the Silicon Roundabout).
Incidentally, this may also explain some of the cultural problems experienced by successful startups.
3. Investment Bankers Come From Rich Families
Save for a few exceptions, you will rarely come across a trust fund kid who is willing to put in the time and effort to be a successful investment banker.
That’s why most investment bankers are either middle class (i.e. reasonably well off but not rich enough to be able to avoid working altogether) or from blue-collar families.
The latter tend to rise through sheer intelligence, willpower and hard work. What they lack in pedigree they make up for with street smarts and a willingness to do whatever is asked of them. That means cancelling multiple holidays in a row or taking conference calls while their wives are in labour.
If you end up working for one of these bankers, you should fully expect to make similar sacrifices along the way.
4. You Can Get Rich Quickly In Investment Banking
While the industry has certainly lost some of its stardust over the past decade, the reality is that investment bankers are still a very well-remunerated lot.
Given the compensation levels – and despite a more onerous bonus deferral policy, one would expect bankers to accumulate a sizeable nest egg in a reasonably short period of time.
In reality, you are highly unlikely to come across a banker who managed to save up enough to retire after a couple of years in the industry. While lifestyle inflation is often to blame, there is also a host of legitimate reasons for it, many of which apply to other professions as well.
You can certainly start from scratch and build a sizeable net worth as an investment banker. I would be surprised if you were able to do it in just a couple of years.
5. Investment Bankers Are Cut-Throat And Political
When I walked into the first investment bank I worked for, I expected to land in a highly charged, politicized environment where I would have to watch my back every day.
To my surprise, I found the vast majority of my co-workers to be polite, down-to-earth and helpful individuals. Some of them became my best friends.
Of course, office politics becomes more important as you climb up the ranks and your pay increases.
You need to proactively manage your stakeholders, build alliances with your colleagues and constantly highlight your achievements to the world. But it is no different to what you would have to do if you were rising up the ranks in any other large or small organization.
I won’t lie – there are exceptions to the rule and I have found myself dealing with some pretty unpleasant situations over the years.
But you would do yourself a disservice if you were to avoid the investment banking industry solely on the basis of workplace culture.
6. All Investment Bankers Are Confident Extroverts
Investment banking is a people business. Sooner rather than later, you will need to pick up the phone and call a client. You will need to present to C-suite executives and corporate boards. And with time, you will be expected to take clients to lunches, dinners and social events.
However, over the long run, success in investment banking is largely determined by the quality of your ideas. You can be as charming as Barack Obama, but if you don’t add value for your clients, they generally won’t waste their time with you.
And if you do bring something of value to the table, they will always take your call and accept your meeting request.
When it comes to social events, most clients just want to have a good time while interacting with interesting people with whom they share a common set of interests. It can be sports, politics, family or charitable work – things most people are interested in anyway.
If being around other people makes you uncomfortable, investment banking probably isn’t for you.
At the same time, being an extroverted social butterfly is definitely not a pre-requisite to being a successful banker.
7. Investment Bankers Have Fantastic Social Lives
As you progress up the ranks, relationship-building becomes ever more important. As a result, you will be expected to do a lot of travel and client entertainment.
Ahh, the world of business class flights, Michelin-starred dinners, sporting events – can it really get any better?
The “perk” that gets old quickest is business travel. All it takes is a few days of waking up at 4am to catch a 6am flight out of Heathrow or having to go to NYC a couple of times in two weeks. It becomes especially challenging once you start a family.
It sure is nice to go to Wimbledon every year – as long as you don’t have to jump on an urgent conference call and happen to miss the match point.
And enjoying that wagyu steak gets just a little harder when you are staring down the barrel of a long night reviewing documents and clearing hundreds of emails that are piling up in your inbox while you are having dinner.
Meeting, getting to know and helping clients can be incredibly rewarding. But please do yourself a favour and don’t get into investment banking because you like to use the corporate Amex.
To sum it all up, being an investment banker can be exhilarating, challenging, frustrating and rewarding – sometimes all at once. I will not be a banker forever but becoming one is the second-best decision I have ever made (marrying my wife was the first).
I sincerely hope that some of my younger readers will follow the path as well. However, please do it for the right reasons – and with your eyes wide open.
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
Find out more about me and this blog here.
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