Boutiques vs. Bulge Bracket, Round 2: Underdog Victory?

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Last time we looked at this one (early 2008), things were a lot different.

Major banks hadn’t failed yet, most of the “superstars” were still at bulge brackets, and the economy was better… sort of.

Starting with the key question:

“But are there any cases where a boutique would actually be preferable to a bulge bracket?”

We came to this conclusion:

“The only situation where you might want to pick a boutique instead is if you have offers from multiple banks, are reasonably confident the boutique will give you good work, and just like the people or work environment a lot more after thorough investigation.”

After everything that has happened in the past year, is that still true?

False Assumptions?

The article last year was based on an implicit assumption: that you would actually be able to get offers from both boutiques and bulge bracket banks.

Since we were just entering the recession back then, it seemed reasonable at the time.

But today it’s questionable.

Sure, the large banks are still hiring at the entry level… so if you’re an undergraduate or business school student, you have a shot at landing summer internships.

But full-time is very, very difficult unless you’re accepting a return offer.

And for anyone who doesn’t fit this “entry-level” profile – career-changers and recently laid-off bankers, to name 2 large groups – going to a large bank is somewhere between “pipe dream” and impossible.

What’s Stayed the Same: Work & Exit Opportunities

Last time, we said that working for a boutique was much more random than going to a larger bank: you might get to run an entire deal by yourself… or you might be fetching coffee all day.

Smaller firms always “sell” themselves by promising extra responsibility, but that depends more on the size of the deal relative to what the bank normally does as opposed the size of the bank itself.

If were at Goldman Sachs “working” on the proposed Microsoft-Yahoo deal you wouldn’t be speaking to Steve Ballmer every day – but if you were working with a startup on a $200MM deal (extremely small for GS), you might have their CEO on speed dial.

We also said that exit opportunities were one of the main downsides to a smaller firm – you’ll be at an extreme disadvantage if you want to move to a larger PE firm or hedge fund.

And even outside those 2, you’ll still be at a disadvantage relative to guys with better-known names on their resumes.

Nothing over the past year has changed either of these 2 points: the experience is still more random, and exit opportunities are still a question mark if you move somewhere small.

What Has Changed: Talent, Opportunity & Pay (?)

But a lot has changed as well. Opportunity is the most obvious one: simply put, unless you have top grades at a target school, you’re wasting your time by pursuing bulge bracket offers.

Pay is another area where change seems likely – but exactly what will happen is unknown right now. At a true regional boutique that no one has ever heard of (not Evercore, Lazard, Moelis, etc.) your pay might be 50% of what it would be at a larger firm.

Boutiques are still paying less, but bulge brackets – especially ones that have taken government money – will soon be subject to much stricter regulation.

It’s too soon to discern the long-term effects on investment banking salaries – no one even knows what 2009 investment banking bonuses will be yet – but it’s safe to say that we’re not returning to 2006-2007 anytime soon.

As a result, pay differential between boutiques and bulge brackets is likely to decrease – especially at the junior levels where the difference was already fairly small in absolute dollars.

Talent: Exodus from the “Old” Wall Street?

One of the most overlooked changes in the past year is the exodus of talent from the “old” Wall Street.

Senior bankers at bulge brackets, fearful of increased regulation, lower pay, and limited advancement, have been flocking to newly formed boutique banks and other investment firms.

This is significant because where talent goes, deals follow.

At the highest levels, a senior banker is just a free agent whose main value lies in the strength of his Rolodex – and when he moves elsewhere, he’ll take his clients and relationships with him.

It remains to be seen whether these startups will advise on larger deals, but it doesn’t seem unreasonable: Moelis & Company advised Yahoo! last year and Qatalyst Partners advised Google.

What This Means for You

While the actual work at boutiques will continue to be more random than what you’ll find at bulge brackets, this exodus of talent also means that that may change over time.

You’ll still be at a disadvantage because the bulge bracket guys have much larger “alumni networks” to draw upon, and still have more recognizable names – but that gap may also narrow as senior bankers scatter and move elsewhere.

Underdog Victory?

Looking back on it over a year later, the original question we posed:

“But are there any cases where a boutique would actually be preferable to a bulge bracket?”

Almost seems foolish to even ask these days, because it presupposes that you can just pick and choose among plenty of offers.

If you’re outside the “standard profile,” smaller firms are your only option these days. And yes, despite all the negativity, you can still find work at them – just like one reader with a low GPA and no finance background did.

But what if you followed “The Track” perfectly and can pick between multiple offers? Is the bulge bracket option still a slam dunk?

Well, the case is not as clear-cut as it was a year ago. If you’re dead-set on moving to Blackstone or KKR, then you pretty much have to go to a bulge bracket – but if your aspirations lie elsewhere, you may want to consider other options.

And should business school be in your future, don’t think that the “prestige” of your firm will be enough to set you apart – bankers and consultants dominate the applicant pool, so you’ll need to stand out on your own merits rather than relying on your employer’s name.

But the best way to do that may be to go to a boutique – because you’ll be better-positioned to actually have a life outside work.

(At least, if you work at a boutique other than Moelis & Co…)

About the Author

is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys learning obscure Excel functions, editing resumes, obsessing over TV shows, and traveling so much that he's forced to add additional pages to his passport on a regular basis.

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79 Comments to “Boutiques vs. Bulge Bracket, Round 2: Underdog Victory?”

Comments

  1. Exit2010 says

    Good article for people trying to go to BB banks. But i would like to ask what kind of opportunities you can get if you’re forced to go and work at a boutique / mm? I completely agree that you don’t have a rubber stamp, sure you can know a lot which will help if you want to go to PE or HF’s but at the end of the day it seems kind of fruitless if you’re at a boutique or mm. What kind of jobs do post boutique / mm analysts get after leaving in 2 years? I have heard of a lot of people simply latteralling to another boutique / mm bank but I am curious to know what else can be done. Will dig around the site for that kind of information as well

  2. says

    You can still go to private equity / hedge funds, but the opportunities will be more at smaller firms as opposed to the Blackstones of the world.

    In fact, PE/HF is probably the most common exit strategy for any type of banker, whether at a boutique or bulge bracket.

    The main difference lies in the size of the buy-side firm you go to rather than the type of firm itself.

    • Exit2010 says

      I agree that most mm banks go to mm pe firms / hfs but what if you want to do something else. I find very little information on leaving both of those options out of the question…

  3. Ryan says

    Do you think an elite boutique (the ones you mentioned) could get an analyst the exit ops a BB can? Like to BX, KKR, etc.?

    • Adam says

      Also, what if you are deciding between say a UBS or CS in a city like Chicago versus an elite boutique in NY, which would provide better PE exits or other sought after exits?

      I am assuming in this case it would make more sense to go with the elite boutique, since the regional BB wont get you to a megafund, but you have a chance of doing that with the elite boutique

  4. says

    It’s happened before but you’re still at a relative disadvantage just because of numbers and the fact that traditionally large banks have placed many more people at those places.

  5. says

    I’d probably go with the elite boutique in that case but again, it depends on what you want to do. The bulge bracket will still give you broader opportunities, but your location will be more constrained to the region you’re in… so if you’re looking to move elsewhere, NY is a better bet.

  6. says

    Other common options are corporate development, corporate finance, and/or working on M&A deals at a company (whether Fortune 500 or startup).

    Some people switch fields completely, but I’d say that those are the most common options for former bankers and certainly the ones that my friends have pursued most frequently.

    Other options: heading back to business school, switching industries completely (e.g. going to consulting, or into sales/marketing at a company or going to a non-profit), becoming a vagabond, or starting your own company. I’ve done a mix of #3 and #4 so I’m probably a bit of an exception to the standard exit strategy. :)

  7. Mike B says

    You have compared Boutiques/BB and I-banking/consulting, but what about I-banking/trading? I’ve been thinking about trading because of the better work-life balance.

    Is trading really paid on almost 100% commision? What exactly do they do and how does it compare to investment banking? And finally, would you recommend it as something to consider as an alternative to I-banking?

  8. says

    At the junior levels at a large bank you do get a salary and bonus but the bonus is much more variable than in i-banking. Prop shops may be 100% commission depending on the size.

    We’re featuring an article on trading in the coming weeks that answers some of your questions so keep watching for that – it’s a bit hard to go over everything in detail in the comments. It can be a good alternative to banking but the exit opportunities are more limited (you either stay in trading or go to a hedge fund) since the skill set is so specialized.

  9. Mike B says

    Great, I will look forward to that. In terms of the base pay you mentioned though, about how big would that base salary be?

  10. says

    Maybe $50-60K at a bank, and less at a prop trading firm, some of them will pay close to 0 or make it all commissions-based.

  11. Dave H says

    Loved the joke at the end about Moelis. So true. Hours were north of 120 a week most of the time.

  12. Rory says

    I’m surprised that you made no mention of default risk. This is less of a concern than it was a year ago, but as someone who is at the tail end of B-school summer recruiting (yes, it was a long season for many this year) I can say that it was definitely a real concern for many of us. As you said, in this market you’ve got to take pretty much any offer you can get, but I know people who have offers at places like Merrill and Citi who spent most of the semester worried that: 1) Their offer might be riscinded outright, 2) the bank might go under or come close enough that it screwed everything up, 3) The bank gives no offers at the end of the summer. The people headed to places like Evercore and Lazard were feeling a lot less stress about these kinds of things. Part of this is also that most b-school candidates plan to stay in banking, so exit opps to PE is not a primary concern.

    I also think that there is a growing class of what I would call “large-cap boutiques”—places that have been hoovering up talent from the top banks and are (or will soon be) going after the biggest deals. Greenhill/Laz/Evercore, obviously, but also places like Moelis, Perella Weinberg, Centerview, etc. With this shift in talent I think you will soon see a lot of formerly mediocre boutiques, as well as new startups, popping up on some of the front-page deals.

    • says

      Yeah, this was more focused on Analysts but even lots of Associates ARE concerned about exit opportunities (despite what they say in interviews of course) and actually want to move on from banking anyway.

      There’s a reason I left the industry when I did. :)

  13. Eric B says

    How are exit opportunities at some of the MM Banks like Sagent Advisors, Peter J Solomon, Harris Williams, and Rothschild? Is pay the same as BB?

    • says

      You won’t get into KKR coming from any of those, but you can still go to smaller PEs/HFs etc. People always find somewhere to go, but they’re not going to the top places afterward.

      Pay is usually about the same at the better known and more established MM banks, but bonuses might be a bit less depending on the year.

      • Eric B says

        From what you’ve said before, it sounds like KKR and other megafunds aren’t a good option unless you want to work 90 hours a week throughout your entire twenties…

        What about firms like Audax, New Mountain Cap, Berkshire, Hellman/Friedman, etc? I have looked through the websites and there are some associates from smaller banks. Would going to one of the banks I mentioned put you in decent position for some of these MM PE firms?

        • says

          Yeah definitely possible. Just be careful because even some of those PE firms you mentioned work a lot as well – Audax, in particular, has the reputation of being fanatical about work.

          Had a friend there who was doing banker hours for his first 2 years…

  14. John says

    What about exiting to VC? Would it necessarily be an advantage to work in SF or Silcon Valley if you go the banking route and want to exit to VC?

    Also, what about working at a boutique like Qatalyst vs. a bulge in NY? I think Qatalyst in particular works with a lot of VCs like Kleiner Perkins, so i’m guessing if the firm likes you, they’ll put you up for those kinds of VCs, but wanted to get your opinion.

    • says

      Yes, it’s a big advantage to be in the SF area for VC. Qatalyst and other tech boutiques are probably more helpful than large banks in terms of getting VC opportunities as well.

  15. Joseph says

    Is it safe to say that there are bulge bracket investment banks, and then everyone else? For instance in my cover letter I refer to a bank as a boutique (even though some of their deals are >$1B, they only have 65 bankers, and thus are a boutique). Do you think this bank would get mad if I refer to them as a boutique (even though they are)?

    • says

      The line is always blurry, but I think that’s fine. If the bank itself refers to itself as a boutique then you’re fine doing that… and if you’re talking about Evercore/Lazard/Greenhill/Moelis etc. those are all considered boutiques.

  16. Matt says

    I was wondering about a few smaller boutiques that are recruiting at my school. Guggenheim Partners and Davis Capital. I have an interview with one of them and was wondering if you knew anything about either of the 2.

    Davis Capital is headquartered in Chicago and Guggenheim in NYC; very small boutiques. Any information on exit opps that would come from working at these or what pay might be like?

  17. John says

    For an undergrad junior, how do BBs look upon regional boutiques (i.e. not Lazard, etc.) experiences compared to internships at BBs when it comes to full-time recruiting? How big is that gap in their perception?

    Thanks.

    • says

      There is a gap, but its smaller than it is for full-time experience. Any type of investment banking is better than nothing at all. You will still get interviews at large banks even if you worked at a MM or boutique bank for internship.

  18. Ashley says

    Okay, its late 2010. Deals are picking up. Would you still describe the opportunities for career changers and laid-off bankers going to large banks as pipe dreams?

  19. Jon says

    What are the leading banks for middle market transactions in the healthcare and life sciences sector? … What banks have filled the shoes of H&Q and Robert Stephens?

    Appreciate your help.

  20. Mary says

    Thanks for the article! I’ve done a few years in IB and would like to change firms. Some BBs are getting a lot of bad press at the moment (eg UBS). Are the exit opps still better there than at a top, sector specific boutique?

    I appreciate the help!

  21. Dre60 says

    I was offered an opportunity to work as an independent contractor being a business analyst for a Middle Market Investment Bank. It’s non-salaried (100% commission) work from home office.
    It entails calling up/prospecting private companies and determining if they want to sell their business and then presenting them to investment banks.

    Is this good investment banking experience?

  22. mmd says

    Thanks for the article! What are the chances of getting into BB or Elite Boutiques after working for a year in a regional boutique? How should one go about it?

  23. Eric Lee says

    Nice article! I am curious to know your thoughts about Nomura (in New York) vs bulge brackets and boutiques. They seem to have a balance sheet like the BBs and are really trying to build their practice. However, they don’t seem to be established yet and in this economy they might be worse off than boutiques like evercore and lazard. If someone had offers from nomura and evercore/lazard, which one would you suggest they take? Any reference to bonus would also be helpful.

  24. Aaron says

    Great article!
    I am currently a junior from a US target school. I am going to intern in Rothschild Hong Kong M&A team this summer. I am definitely trying to secure a return offer. Just wondering how BBs view my experience at Rothschild and how hard is to apply FT to BBs either in Hong Kong or NYC?

  25. King Kong says

    Hi,

    I would love to hear your thoughts on Guggenheim FI ST. Is Guggenheim considered a solid boutique?

    Thank you so much,

    • M&I - Nicole says

      Yes it is a solid boutique with a good reputation. I am not familiar with their culture so I would suggest you to network with their team to get a better idea of what working there is like.

  26. NewIntern says

    I will be interning at a BB in Institutional Sales in San Francisco this summer. I am wondering a few things:
    1. Since my role is more market-focused, what would be your advice to excel at the internship aside from the usual (reading the WSJ, Financial Times, Bloomberg etc.)?
    2. Any clue of the chances of getting a full time offer in San Fran vs the large number of NY interns employed by the bank? (Can I hope for less competition because it’s not NY, or do they typically give FT offers to a smaller proportion of interns at these satellite offices?)
    3. This may sound odd, since I have worked very hard to get this internship, but I have little direction for my career path going forward…I know the article talked a bit about exit opportunities based on internships and junior analyst positions, so I’m wondering what would be some potential paths you’d suggest for an intern (aspiring full-time analyst) in institutional sales (within Investment Management) in San Francisco going forward?

    • M&I - Nicole says

      Congrats!
      1. Get along with the team and relax. Have fun! When you’re happy, you’re probably going to be easier to work with, which means that there’s a higher likelihood your team will like you. Since you’ll be working on the sales desk, its crucial you demonstrate your communication skills, ability to sell, network and get along with people. This comes from managing your emotions.
      2. I can’t really comment on this one because I don’t have enough facts/info.
      3. You can move to the buyside (AM, HFs), or continue doing sales, which is a pretty fun job if you love the markets. http://www.mergersandinquisitions.com/institutional-sales-convertible-bonds/ may be a useful article for you.

  27. Manuel says

    if one hates lending, is a boutique the way to go? (i.e. no matter what group you land in, it will always be advisory). how hard/easy is it to avoid having to deal with internal risk committees at banks (i.e. only work purely on advisory roles in which the bank takes no risk)?

    • says

      You could look at it like that, but there are better reasons to go to a boutique (i.e. cultural ones instead). Not sure about internal risk committees, but yes if you do advisory roles only you can generally avoid them unless there is a staple financing or something.

    • M&I - Nicole says

      Yes, you can say that because most boutiques don’t have that capacity like JPM (with a commercial banking division) that can lend to corporates. In most cases, you’ll land in advisory/financing. In terms of dealing w internal risk committees, I am not 100% sure though I think it varies a/c to the deal, the issuer & the structure of the bank. Some banks maybe stricter than others re getting internal risk committee involved in a deal.

  28. Whartonelite says

    Elite boutiques like evercore, guggenheim and moelia pay better than BBs and often place better into pe/hf. Hours are generally worse though. They are also expanding- moelis hired a solid amount of 1st years and i think guggenheim will be just under 20 for 2014 full time analyst class. The elite boutiques have leaner deal teams so junio guys do more work but learn more and generally do more m&a/rx than BBs that take the balance sheet related deals like a financing or ipo

  29. peter says

    Hi,

    Currently, I have got 3 offers from HK.
    Could you give some suggestions if I want to move to an MM, MB ib lane or BB if possible later in 1-2 years:

    One is from an local boutique,subsidary of a big asset management firm, about 20-30 people. their businss lanes includes: debt placement, M&A.
    But not sure the size of their deal flow. The most disadvantage of this offer, is that they do not provide any training scheme as the other two.

    The second one is from raiffeisen bank, recently upgrade as an branch. Their business lane is more concentrated on business bankings though.

    The last one, i get offer from pwc auditing service in HK.

    Personnaly, I like the pwc the most, as it will provide training scheme on accounting and I can possbily switch to its TAS.

    • M&I - Nicole says

      Congrats on your offers.

      Yes if you’re interested in IB, perhaps PwC may give you a better name/credibility and you can potentially move to TAS. If not, you can apply to grad schools & break in.

      However, the first option isn’t bad either if it is a subsidiary of a big AM firm and includes debt placement & M&A. If you get along with the team there, I may actually prefer the local boutique versus PwC given the nature of the work and it may be more related to IB work (and you don’t have to wait a few years and deal with the uncertainty of transitioning to TAS)

      The second option is ok though I’d rate it below the aforementioned options.

    • M&I - Nicole says

      This article was written in 2009 but it’s even more applicable today as bulge brackets increasingly pay less in cash and boutiques are more and more appealing.

  30. P says

    Hi,

    If you had to pick between Moelis and say a mid-market firm such as Canaccord or Investec – which would you pick and why? Moelis seems to have a pretty strong reputation at the moment and is working on some really big deals. Canaccord on the other hand, work on smaller deals and probably doesn’t have the same exit opportunities…

    any advice would be much appreciated :)

  31. Wass says

    Hi. Keen follower, first time poster. I decided to post this here, as it seems to be somewhat still active. I know quite a bit about IBD but not so much on FICC. Anyways, my question is as to whether the experience at a boutique firm for a trader is similar to BB? And also, do you see technology wiping out the needs for traders? (match buyers and sellers cutting out the need for humans).

  32. BC says

    Hi,

    I graduated in a top Asian college 1 year ago and am working as a fund sales in a top asset manager (surely one of the best brands globally in traditional AM), based in an Asian city. In fact, my aspiration is on investments and the reason why I chose this offer over some other S&T positions was that I would like to take advantage of internal transfer. However, I feel that the skill sets I am getting in my current job are not that relevant (mostly some superficial analysis and stories pitching).
    I have got an offer from a regional boutique and they do have deal flows (in terms of quantity they are not bad, though the deals are small).
    Do you think this can be better than my current role? I plan to do an MBA some time later anyways, unless I can directly switch to an investment role.

    Thanks

    • M&I - Nicole says

      Yes if you want to move into IBD. But if you’re going to get your MBA staying at your current role is fine too.

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