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Boutiques vs. Bulge Brackets

Wall Street is just another version of high school: there’s the popular crowd, the athletes and cool kids, the freaks and geeks, and then everyone else.

At least, that’s the attitude of many bankers when you talk about boutiques: they’re the kids that no one else wants to sit with at lunch time.

But there’s a difference between attitudes and reality, and a lot of what you hear about boutiques vs. bulge brackets is not accurate – so let’s clarify a few points right now.

The Categories of Banks

The most common mistake is grouping all boutiques together regardless of reputation, size, or prestige.

Working for Lazard or Evercore is completely different from working at a true regional boutique with 2 employees.

Here are the proper categories:

Bulge Bracket Banks

These are the largest global banks in the world – Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, UBS, and arguably a few up-and-comers.

These banks have the most people and resources, work on the largest deals – usually over $1 billion USD in size – and have the most recognizable names.

Middle-Market Banks

These banks may have a presence in other countries, but usually focus on one region – especially in the US and other developed markets.

They have fewer people than bulge bracket banks and work on smaller deals – under $1 billion USD and often under $500 million.

Examples of middle-market banks include Piper Jaffray, Jefferies, Cowen, and Houlihan Lokey.

Elite Boutiques

While bulge bracket and middle-market banks may have many divisions, such as sales & trading, equity research, investment banking, asset management, and so on, boutique banks usually focus on M&A (or Restructuring) Advisory.

“Elite boutiques” advise on larger deals – often working alongside bulge bracket banks – and have reputations on-par with the bulge brackets.

They don’t have as many people, but the experience itself is much closer to bulge bracket banking than it is to working at a middle-market firm or regional boutique.

Examples of elite boutiques include Lazard, Evercore, Greenhill, and Moelis & Co.

Regional Boutiques

Regional boutiques are more limited to one region or city, and have fewer resources and people than the other bank categories listed above.

They advise on smaller deals than everyone else as well – under $100 million down to $10 million USD.

Often they specialize in a niche like healthcare or technology, and they find clients solely via relationships rather than competing in “bake-offs.”

Boutiques vs. Bulge Brackets: The Main Difference

As you move from bulge bracket to middle-market to regional boutique, your experience gets more random.

Some people argue that you get “more responsibility” or “more client interaction” at tiny boutiques, and that’s true sometimes – but you also get stuck fixing the printers and making coffee more often as well.

Elite boutiques should be in the same category as bulge brackets: there’s far less random work and more “real” banking.

You could get a lot of exposure to modeling and run a deal by yourself at a regional boutique – or you could end up playing FarmVille out of boredom the entire time.

You tend to do more financial modeling and technical work at bulge brackets and elite boutiques because you work with larger companies.

Larger companies are more predictable and easier to model, whereas the small and family-owned businesses you see at regional boutiques have more limited financial information and perform more randomly.

Middle-market banks fall somewhere in the middle – there’s more structure and technical work than at regional boutiques but not as much as at bulge brackets.

What’s the Better Experience?

If all you have is an offer at a regional boutique, take it.

But if you can choose between a bulge bracket and a smaller firm, go with the bulge bracket for the brand name and improved exit opportunities (see below).

If you’re at a non-target school or you’re already working full-time, focus on regional boutiques and middle-market firms because your chances are much higher – but otherwise, aim for large banks.

You may actually learn more and get a better experience at smaller banks – but you have to take into account the brand name and future opportunities when making decisions as well.

Where’s My Bonus?!

Pay is similar for analysts and associates at bulge bracket banks, elite boutiques, and middle market firms.

Base salaries and bonuses are standardized (see “On the Job” for more information there) and you don’t see a dramatic difference in pay until you get to the VP/MD level.

At regional boutiques, pay is greatly reduced – for example, bonuses are often 50% of what they are at larger firms.

So if you’d earn a $70K base salary and get a $60K bonus at a bulge bracket bank, you might only make $50-$60K base salary and earn a $30K bonus as an analyst at a regional boutique.

That happens because there’s less money to go around – if your bank advises on $10 billion deals, they earn much higher commissions than if they advise on $50 million deals.

Hours & Lifestyle

Repeat after me: banking is banking is banking.

If you think you can go to a regional boutique and work 60 hours a week rather than 100, please abandon your dreams of breaking in right now:

  1. Hours may be slightly better at smaller banks, but your schedule is still unpredictable and when you get busy with deals you will still burn the midnight oil.
  2. If you want to do investment banking in the first place, you should be motivated by the experience and what it will do for you in the future – not the lifestyle, which is non-existent.

Please do not go to a smaller bank because you’re seeking better hours – go to a smaller bank if you don’t have access to official recruiting channels or you do not get offers at large banks.

Beloved Exit Opportunities

Here’s where you see the biggest differences – bulge brackets and elite boutiques give you the most options, whereas you’re more limited at middle-market firms and regional boutiques.

If you have your heart set on the largest private equity firms in the world, like KKR and Blackstone, you need to be at a well-known bank.

You can still move into private equity or hedge funds elsewhere, but you’ll go to smaller funds rather than places with $20-30 billion under management.

And at regional boutiques, you need to be extremely proactive because recruiters won’t come looking for you – it’s easier to make a lateral move to a larger bank rather than jumping to the buy-side directly.

My Own Opinion on “Exit Opps”

Too many prospective bankers plan the future way too much and assume that they must work at Blackstone or else they’ll be failures and will need to commit suicide.

Once you actually start working, you’ll change your mind about what you want to do as you understand the industry in more detail.

What you do day-to-day at different funds is not that much different except that you work banking hours at the largest ones.

I recommend large banks not because you “need” to go to a huge PE firm, but because working somewhere with a well-known name gives you more options in general.

So, Which Bank Should You Work At?

Easy: wherever you can get an offer.

If you only have an offer at a regional boutique, don’t be stupid and turn it down to join the Peace Corps just because you didn’t get an offer at Goldman Sachs (unless you really want to join the Peace Corps).

If you have multiple offers, go to the most well-known bank.

Is there any reason to choose a smaller bank over a larger bank if you have the option?

No, not really – at least if you’re a new analyst or associate.

If you’ve already worked in the industry, it might make sense if you want to specialize in a specific niche, or you have more connections or a better team at a smaller bank.

How Do You Break In – At Boutiques and Bulge Brackets?

A couple questions always seem to come up when we get into a discussion of boutique vs. bulge brackets…

First off, if you want to cold-call boutiques to break in, how do you find their contact information in the first place?

The best source is the list of 10,000+ banks, PE firms, and hedge funds worldwide in The Investment Banking Networking Toolkit – you’ll also get dozens of email templates, sample call scripts and informational interviews, and more when you sign up.

You could also do Google searches or ask for help on WallStreetOasis – Capital IQ is another option if you can get access.

Interviews themselves are not much different between boutiques, middle-market firms, and bulge brackets: they depend more on your level of experience rather than the type of bank you’re interviewing at.

So the Investment Banking Interview Guide applies no matter where you’re interviewing – and that’s your best source for hundreds of questions and answers, sample interviews, how to tell your story, and more.

Got Boutique?

If you want even more on boutiques vs. bulge brackets, you can check out a few other M&I articles on the topic right here:

Good luck, and let me know which bank you end up at!


Mergers & Inquisitions
Breaking Into Wall Street

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