“Inquisitor, I’m at Lehman’s TMT Group currently but I heard that Goldman TMT is way better and that everyone who works there aces their private equity interviews and gets offers at KKR and Blackstone. How can I transition over to a much better group/bank?”

Every week I get questions like the one above. And my reply is usually the same: don’t bother. In most cases, lateraling is simply a waste of time and effort. Around this time of year, though, young investment banking analysts everywhere think about making the move.

Bulge Bracket To Bulge Bracket

This is what people are usually thinking of, and it’s almost always wasted effort. It doesn’t make much of a difference whether you’re at Morgan Stanley or JPMorgan; you’ll have access to the same set of recruiters at any bulge bracket.

You could argue that some groups/offices are “better” (like the former UBS LA) and that it’s therefore better to work for the more “prestigious” offices, but it’s still a lot of effort to switch banks for a marginal gain if you’re going from large bank to large bank.

Reasons To Make The Move

If you can’t stand your investment banking group and want nothing more than to end your misery in a violent way every morning when you wake up, then you might have an actual good reason to make a lateral move to another bank.

Even in this scenario, though, you should confirm there’s nothing you can do to improve your situation, such as switching teams or groups, before you decide to swing through the jungle of finance to another bank.

Another reason might be if your bank is collapsing, or your group is collapsing and everyone else is switching banks anyway; in that case you don’t really have any choice.

Issues To Consider First

If you make a lateral move you’ll have to start over at another bank, both literally and figuratively.

Depending on the banks involved, you may be forced to start over as a 1st year Analyst. This “demotion” is more common going from a smaller bank to a larger bank, but the real issue is not the demotion - it’s the loss of time in the recruiting process.

Since private equity firms and hedge funds conduct interviews a year in advance of start dates, you will have to stay in banking for 3 years rather than 2 if you switch to another bank. If you’re a masochist you might want this or you might be fine with it, but most people making the switch don’t realize this and are horrified when it hits them.

In addition to the harm done in terms of recruiting, you’ll also have to build “mind share” with senior bankers once again and prove yourself capable so that you work on deals rather than pitchbooks.

Boutique Or Middle Market To Bulge Bracket

This is typically the only lateral move that makes sense. While you can definitely get good experience at a smaller bank, you will have better access to recruiters and exit opportunities at bulge brackets.

So if you ended up at a boutique or middle market firm due to economic conditions, because you came into the recruiting process late, or because you made a career change long after graduation, going to a bulge bracket may be a good move.

Just make sure you are certain you want to stay in finance for the long-term. Otherwise, it’s once again a waste of time/effort because having Goldman Sachs on your resume vs. Piper Jaffray isn’t going to do much for you if you move back home to help out with the family farm business.

But You Should Still Think Twice

Even if you’re 100% convinced that you should move to another investment bank, I would still urge you to think twice before you do it. Make sure all of the following are true before jumping over to the other side:

• You are willing to be an investment banking analyst for 3 years rather than the standard 2.
• You are 100% certain you want to stay in finance for at least another 10 years.
• If you have a team conflict or can’t stand your current group, there’s nothing that can be done to remedy that at your current bank.

Be Wary Of Headhunters

Recruiters will always be looking to make lateral moves happen because they make a commission if they get you to move somewhere else.

So if they’ve told you that the other group you’re considering moving to has Aeron chairs made of gold, exit opportunities beyond your wildest expectations, and yes, even a daily allowance for not only meals but also models and bottles, you should be careful.

You’re probably being sold.

Sure, if you are interested in moving anyway and have some good recruiter contacts who can make it happen, go ahead and use them. But if they’re pitching you on moving from Goldman to Morgan or on moving from Gleacher to Revolution Partners, there’s probably something you don’t know.

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Tags: boutique investment banks, bulge bracket, investment banking, investment banking analyst, investment banking exit opportunities, lateral hires, middle-market, understanding investment banking

Posted on Thursday, April 10th, 2008 at 12:20 pm.