No, You Can’t Have It All: Why Finance Does Not Guarantee You $10 Million and Your Own Beach in Thailand
“Life is either a daring adventure or nothing. Security is mostly a superstition. It does not exist in nature.”
- Helen Keller
I almost decided not to publish this article.
But it needed to be said.
This one is long – so grab some yerba mate, take a seat, and close your YouTube window before you start.
How It All Started
“I’ve been keeping up with your blog for quite some time now and I’ve noticed that a very diverse group of people eventually “discover” that they want to become a banker (former premed students, engineers, lawyers, entrepreneurs, …).
That said… do you find it odd that so many people always ask you about exit opportunities in the first place when they’re still trying to break into the industry? This makes me suspect that some people have the wrong mindset going into the game (models & bottles).”
Yeah, of course *I* find it odd.
But does anyone else?
No, apparently not – just look at comments like this one:
“Damn… there goes another profession I was aspiring to do go down toilet. I thought the travel involved in consulting was just exaggerated. But I was wrong. I heard from Kevin that consultants at McKinsey travel 50-75% of their time. I’m sorry but I just can’t handle that. My only other alternatives are PE and HF. How are the hours and travel like for each of those professions. I’m praying that at least these jobs don’t screw up my life…”
At least he’s done his homework though: he understands some of the trade-offs between these different options.
But he’s still searching for the magic-bullet solution: a way to become a deca-millionaire with no risk and no 100-hour weeks.
About twice a week I get emails asking, “So, if I work at a boutique can I go home at 10 PM rather than 2 AM each night?”
If you don’t work in the industry or if you haven’t done an internship, I can understand why you don’t “get it” yet.
But then the other day a friend at a top bank emailed me saying:
“Man I’m so tired of banking right now, do you know anything else that would pay me this much and give me much better hours?”
And that’s what pushed me to hit the “Publish” button on this one anyway.
What Do You Want?
It’s a broad question, but most “goals” can be reduced to:
“Become a deca-millionaire without doing much work and also getting my own private beach in Thailand while having the best life ever.”
This brings up a slew of other issues – such as, “Wait, so what then? You’ll get bored in a week of doing nothing” but we’ll put those aside for now.
Based on this goal, you may have already decided that finance is the best route to becoming rich with no risk – and sure, the hours may be bad, but they get better over time, right?
Not so fast.
If this is your plan, you don’t understand the trade-offs between finance, different fields within finance, and different options altogether.
Trade-Offs?
There are an infinite number of variables, but we’re just going to look at the most important ones here.
Pay
This is one of the biggest lures of finance: just work for a few years and you’ll become a millionaire instantly, right?
But it’s also one of the most poorly understood trade-offs: most people in finance save little money, and any money they do save they either manage poorly or not at all.
$500K per year doesn’t mean much when it’s only $250K after taxes and $240K of that goes into models, bottles, and sports cars.
Prestige
I almost cringe writing this one – but it needs to be addressed here.
The secret that no one tells you about prestige: no one in the real world gives a crap where you work or where you went to school.
I can’t even remember the last time I told a stranger where I went to school, even though it’s supposedly one of the top universities in the world.
And not to turn this into a dating column, but citing a “prestigious” school or company won’t attract members of the opposite sex – at least not the ones you want.
Lifestyle
Sure, your life may suck for awhile but once you hit 35 and have $10 million you can just deposit it all in bonds, make $800,000 per year in tax-free income, and then retire to the Caribbean right?
Except I know of no bankers or other financiers who have actually done this.
To quote a friend who finished the Analyst program at Goldman Sachs a few years ago: “Even Partners take calls in between their kids’ soccer games on weekends.”
If you’ve been working that much for that long a period of time, you’re going to be bored out of your mind if you actually “retire early.”
Enjoyment
You might actually get a thrill out of running around and being on-call all the time; you might like traveling every week; or maybe you just want to relax.
So it is relative.
But we can say a few things with certainty: for example, banking has a lot more grunt work and repetitive tasks than other fields. So you’re probably not going to “like” what you do on a daily basis compared to other options.
Social Aspect
This one seems like an afterthought: who cares how many friends you have at work, right? It’s all about the dollars!
Well, not quite. Certain fields are lonelier than others – and one untold benefit of banking is that you’ll make a lot of close friends because you spend so much time at the office.
But in most other fields you’re either alone most of the time, or you don’t have close peers.
And what good is money if you have no friends?
Risk
“You might get rich if you start your own company, but it could also fail, you’ll go bankrupt and your life will be over. On the other hand, if you go into finance you will easily become a deca-millionaire with almost no risk of losing money or getting laid off.”
If you haven’t been hiding under a rock for the past 2 years, you know that the second statement here is false.
But you may not realize that the first statement is also just as wrong. The real risk of starting your own company is not going bankrupt – it’s something else that nobody ever tells you about (yes, you have to keep reading to see what it is).
Ok, Now Let’s Get Specific
“Ok,” you say, “but what about all the fields I’m interested in? Why are you saying I’m wrong about everything?”
Investment Banking
Yes, this one is well-worn ground and we’ve talked about everything from stuff investment bankers like to pay to stuff investment bankers don’t like.
But there’s more.
Besides the pay being extremely variable, you should note that most bankers save nothing in their first few years.
$60K-$70K base salary is barely enough to get by in New York, and your bonus just pays off credit card debt. Even at the VP-level and up, plenty of guys make $500K, then spend it all and have no savings.
Think you can avoid that and still save a lot? Peer pressure is tough to resist.
If you really want to “get rich,” you have to stay in the game until you’re at the MD-level, and then be a seasoned MD with regular business coming in.
And that doesn’t happen in 5-10 years.
Prestige? Well, your parents can brag about it to other prestige-obsessed parents but otherwise it has no effect on your life.
Lifestyle: if you have clients and live transactions, you’re always on call – no matter what level you’re at. MDs spend a lot of time answering email and checking their Blackberries “on vacation.”
But despite other drawbacks, banking is good for forming real relationships with people – you spend so much time at work, it would be hard not to. And that keeps you (relatively) sane.
Everyone has heard about “risk” in terms of layoffs and hiring freezes, but actually getting laid off at the entry-level doesn’t matter much: when you’re young you have plenty of options.
But when you reach the mid-levels it gets very, very difficult to “jump back in” if you get cut – which is a big problem when you have 2 mortgages, 3 BMWs, and 2 kids.
Sales & Trading
“Ok,” you say, “so banking is not that great – I know, I’ll do Sales & Trading instead and make as much or more money but also have a life!”
On the surface the lifestyle is better because you work roughly market hours – it can go beyond that, but you’re not going to be pulling all-nighters.
And hey, you can tell people you work at a bank, so it must be prestigious right?
Plus, the social aspect is quite similar to banking: you make a lot of friends because of the environment you’re in. Sure, you might get hazed but that’s just a part of any fraternity trading desk.
And many traders like their work more since there are no pitch books and there’s much less grunt work and coffee-fetching (unless you’re an intern).
So what’s the catch?
Risk and exit opportunities. Most entry-level traders at large investment banks get paid roughly the same, and it’s more dependent on group performance than individual performance.
But as you move up the ladder that changes – more so than in banking, where even a crappy VP might get paid well just because his MD did well.
So yes, if you’re a rock-star trader and can make millions effortlessly year after year, you’re set – but if you have a bad year, don’t say I didn’t warn you.
And no matter what area of trading you’re in, you don’t have as many exit opportunities as bankers: as one reader pointed out, this doesn’t make much sense – but that’s the way it is.
You either stay in trading, trade at a hedge fund or prop trading firm, or you get out of finance entirely.
If you’re an intern or you’re relatively new you can move elsewhere but you don’t have the flexibility that banking analysts do.
Private Equity
Ah yes, the Promised Land: private equity. Better pay, even more prestige, and much better hours to boot – right?
Well, not exactly.
Let’s start with prestige: whereas 99% of people have heard of Goldman Sachs, the average person doesn’t even know what “private equity” means. KKR or Blackstone may sound prestigious to you, but anyone outside finance is unlikely to know them.
Pay: despite rumors to the contrary, it’s not dramatically different for most people moving into PE. Yes, if you come in from a banking background you’ll get a higher base salary and possibly some sort of guaranteed bonus, but you’re not going to instantly start making $1 million at age 25.
Yes, Partners at the largest PE firms make 10x more (or more) than the top bankers do.
But very few people make it to the top, the industry is much smaller, and if you’re responsible for one bad investment you could be done.
The risk of getting laid off as a junior guy or girl in PE is lower than in banking – but advancing is just as difficult, if not more difficult.
There is less grunt work than in banking, but just a quick reality check: if you don’t find valuing companies, building models, and doing due diligence interesting, you’re going to hate PE too.
The social aspect always gets overlooked – once you move to the buy-side, you lose that large group of friends you used to hang out with, and your co-workers will be much older.
Yes, lifestyle is generally “better” but that’s not true if you go to a large fund – it’s banking hours all over again. And when you get busy with a deal, you’re going to work. A lot.
Hedge Funds
Much of the above applies to hedge funds as well. The average pay may be higher, but there is so little reliable data on what people at hedge funds actually make that I’m reluctant to say this.
And once again, the lifestyle is not much different from banking at the largest and most well-known funds: You work. A lot.
The risk is even greater with hedge funds, for one simple reason: they have a habit of collapsing.
I’ve been compiling lists of regional banks, private equity firms, and hedge funds, and as I was going through the hedge fund list I kept coming across “As of last year, such-and-such fund has ceased operations” in the “business description” fields.
This isn’t meant to scare you away from hedge funds: it just means that they are more risky than you think, pay is more variable than in banking and private equity (more similar to Sales & Trading), and the lifestyle may not be as good as you think.
Management Consulting
I had already given consultants a good beat-down last year, but hey, let’s give it a go once again.
First, the pay is less than any of the other fields mentioned above – unless you’re at a small prop shop that pays $0 base salary.
It’s hard to say whether McKinsey or Goldman Sachs is more “prestigious” – but the average person is more aware of “consultants” than they are of “private equity guys.”
And then there’s the travel aspect: this seems fun at first, but you quickly get tired of flying to the Yukon Territory every week to “advise” on a new oil drilling project.
Most travel is not that bad – but if you don’t want to be away from home every week, you’re going to hate the consulting lifestyle.
One of the big lures of consulting compared to banking is that there’s less “grunt work” and what you do is more “intellectually stimulating.”
But is that true? There’s certainly more “variety” than in banking but I know plenty of consultants who find it very repetitive and think that most of the “research” you do is just fluff.
Still, on average there’s probably more “fun” in consulting.
Another big lure: exit opportunities. One consultant once told me, “Management consulting is the only industry that gives you unlimited options.”
But ask any consultant who’s interviewing for PE or finance-related jobs, and they’ll tell you a different story: yes, it’s possible to get in coming from a consulting background but it’s significantly more difficult than if you were a banker. It’s hard to “prove” you know how to model an LBO if you’ve never done one before.
It’s good preparation for business school or for “management” jobs at companies, but if you’re coming from a consulting background you’re at a disadvantage next to bankers for finance jobs.
Large Company
I don’t get many emails or comments about this one, probably because no one wants to do it or because you already know the trade-offs.
But I do get a lot of emails saying, “I want to do corporate development after banking to get a better lifestyle. Can you tell me about it?”
My take on it is simple: it’s similar to private equity, but with reduced hours, pay, and upside.
Your chances of getting laid off are very, very low unless you’re at a new startup that happens to fold – but your chances of moving to the top, especially at a huge conglomerate, are slim.
The lifestyle is definitely better than the other options presented here: not much travel most of the time, and the hours are fairly standard except for when you’re working on a live deal.
The other trade-offs vary by what company you’re at and how your group runs – sometimes you might be the only person who isn’t married, and sometimes there’s a bigger group of people your age.
If you go into this after banking – or anything else on this list – you’ll find it very slow since you’re used to constantly running around and being on-call 24/7.
Also, there’s no clear “exit opportunity path” as there is with some of the other options here. Most likely, you’ll end up going to business school or moving to a different company.
Entrepreneurship
I have a theory that everyone who goes into banking secretly wants to start their own company instead. I get a lot of comments and emails that start out like this:
“Hi, I want to stay in banking for 2 years and then use all my money to start a company afterward. Do you think this is a good idea, and if so which group do you think I should be in?”
No, that’s a stupid idea because: 1) You will barely save any money over 2 years. 2) Banking is terrible preparation for entrepreneurship.
This one is almost impossible to write about because it depends on what kind of company you start – offline, online, products, services – and whether you aspire to be the next Google or you’d rather just start a bar with your friends.
But there are 2 important points that no one else ever brings up:
- The real risk is not going bankrupt or ruining your life, but rather wasting time going nowhere.
- This is the loneliest of the options here, because you don’t have peers – you’re either flying solo, or you have employees.
Yes, you could completely fail, but your life isn’t over – this happens all the time in Silicon Valley and everyone bounces back. More often than not, you might spend months or years on something and not get much traction – so you don’t get rich, but you also don’t lose everything.
On the social aspect: even if you end up with employees, you can’t really “hang out” with them. Especially if you started everything alone or with 1 other person, it’s quite lonely.
Pay, enjoyment, and lifestyle vary so much by what you do that it’s impossible to generalize: you could work 100 hours a week and hate your life, or you could treat your business as a simple part-time job.
If you’re wondering why everything I do is online, it’s for exactly those reasons: offline requires far more work, doesn’t give you as much leverage, and restricts your lifestyle a lot more.
Cliff’s Notes
Ok, that was really long. And maybe you didn’t read everything.
So here are the major points:
- Wanting to stay in finance for “just a few years” to “get rich” or “have enough experience to do something else” is a poor strategy. You’re not going to be rich after that short a time – and if you want to do something else, be like Nike and just do it.
- Most finance-related jobs entail a lot more risk than anyone ever talks about. And the lifestyle never matches what people with “normal jobs” get, no matter how high up you are.
- If you want to reach the top of anything listed here, it requires work, sacrifice, and risk. This doesn’t happen in “a few years” – it happens by spending 10-20 years or more excelling. There’s no magic bullet.
- The social aspect of all these options is huge and it’s something that almost everyone ignores. Hopefully you’re thinking about it now.
- Be aware of limits on exit opportunities. Hardly anyone tells you, for example, that once you’re at a specialized hedge fund it’s tough to move somewhere that uses completely different strategies.
So, What Should You Do?
Hey, I can’t give you all the answers.
I’m just like Fox News: I report, you decide.
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I enjoyed reading the post. I think I missed the section about why ibanking is a good career choice though…;)
It’s not – this site is just a long con that tricks you into going into ibanking, of course…
so what is a good career choice in your opinion?
Drug-dealing is a perennial favorite.
They have long hours too. And think of the exit opportunities.
Consider reading Levitt & Dubner’s ‘Freakonomics’, precisely the chapter ‘why do drug dealers still live with their mom?’. At least get a business degree before you enter drug dealing, otherwise you’re looking at 300 chips/month… Then again – unless you’re not all that bright – that comes tax free!
You are hilarious
Do people consider/categorize capital markets as banking? What about doing LevFin if it’s under capital markets?
Yes, all of those are considered banking: http://www.mergersandinquisitions.com/equity-capital-markets/
Probably my favorite article on the site.
Is it realistic to think I can work a “less prestigious” job in financial services (wealth management or commercial banking maybe, something to pay the bills) while simultaneously building an online business selling products?
Long term I want to work for myself, but I’m worried about not going anywhere as outlined above. Is it possible to hedge my bets, or do I really need to dive in head first?
If you work somewhere like wealth management or commercial banking, then yes, you will have enough time to work on side projects. In banking / trading / PE you probably would not (don’t ask how I started this site while still in banking, it was a unique situation).
So I gotta ask, how did you start this site while still in banking?
It wasn’t that hard because back then I wrote much shorter articles, didn’t do interviews, didn’t create comprehensive training programs, etc. so it only took a few hours per week. And it started during a market downturn so I wasn’t that busy.
By Large Company do you mean Corporate Finance? Because it doesn’t really sound that bad. Working normal hours while making 70-80k sounds good to me. I’d love to hear some thoughts from you on Corporate Finance.
Yes. 70-80K seems like a lot if you’re in college but then you graduate and realize that half goes to taxes, leaving with you little for anything besides rent and food in most big cities. So as you get older you realize that you need something higher-paying to live more comfortably.
Hello. I am 14 and in eighth grade. I love this site. My dream job when I’m older is investment banking. Many of my parents’ friends are bankers, and they tell me they somewhat like their job. I’m great at finance for my age, know all about stocks, bonds, futures, etc,, and I know what people are talking about when they bring up GS, MS, JPM, etc. Is there any advice for me, even at 14, on thinkg about how to get a job later in investment banking?
Thanks.
Yes have fun, enjoy life, and stop thinking about banking
:)
Thank you!
How about the pay/lifestyle ratio in private wealth management/private banking? Thanks
As mentioned in the comments above, it’s similar to working at a large company, with better hours and reduced pay. The ceiling is much lower than in banking.
On Sales and Trading (and I can only speak for London) if you’re on an equities desk as a salesperson or a trader this is the ONLY job I know of in finance providing you are at least average if not good/great/excellent where you can become a millionaire by 30 and be in home for tea every day.
A family friend of mine is an equities trader at a top US bank and he frequently leaves between 5-6pm every day. No later than this. Market shuts at 4.30,people stick around usually for half hour-one hour to do some research, shoot the breeze and head home. Thats the only ‘perfect’ position in finance you can find. And even this has trade offs since if you have a bad year esp at this bank or even make 1-2 weeks you’ll be canned. Exit opportunities I BELIEVE are so overrated. I know plenty of S&T people who left and are doing good things bit still in finance i.e. PM, HF traders, Private Equity, other unique buyside jobs and a couple are now setting up their own shop aged 26-28.
So is your friend an agency or a prop trader?
Hi Brian,
I have been a regular reader of articles on your site.
In most of your articles you have mentioned how bad hours can be in a IB related jobs, like 2am kinds and all.
Honestly i cant figure out how can someone sustain that kind of schedule. Even a 9am to 11pm, seems to be so challanging. Is it how worst it can get, or you are referring to some extreme situation?
It is not like that every day… see the day in the life series. Drugs and killing people also help to relieve some of the pain.
Not sure why did you want to put that second sentence in there. But honestly that sounds RUBISH..
Relax, it’s a joke. Inquisitions = violent, just the theme of the site
have been reading up your website and i find the subtle humor extremelely entertaing and i like.
I agree – humor is what gets us through, keep it up!
Hi,
I went through few of your posts and found them really helpful. I appreciate the time and effort you are putting in here.
I am a Software Engineer right now and looking for a career switch. I like investing in stocks, mutual funds etc. but don’t want to it. The reason being I am a creative kind of person and would love to do something in which I can utilize that potential e.g. create a new financial product/service or anything of that sort.
In the long run I want to be an entrepreneur in the career I enter. I am ready to put in long hours, sacrifice social life and live on low pay for till the time I am learning.
Can you please suggest me a relevant career in finance/ out of finance.
Best Regards,
JOHN
That’s sort of vague – you want to start your own company but you also want to work at an existing company? I would just start your own thing if you want, do it as a side project at first and minimize expenses until you have something generating profits. If you’re looking for an idea you could d any number of jobs in finance, PWM or trading are the most relevant if you like investing.
Thank you for replying.
I want to work for some company to gain experience and industry insights. When I think it is the right time, I would venture out on my own.
I like investing but I don’t want to make it my profession because it involves analysis, analysis and analysis. Trading will not work for me. Please suggest me a career where I can utilize my creativity. If you can give specific examples, it would be helpful.
Best Regards,
JOHN
Maybe work for a prop trading firm, learn about tech and investing there and then go launch your own thing. Unfortunately nothing in the investing world is really “creative.”
Hi Brian,
YOur cite: nothing in the investing world is really “creative.
But what about VC in new technology or product?
You have to source something really new, haven’t you?
What about PE-as direct investments? if you want to get EBITDA 50%, you can’t rely only on the same product or services. You have to create-advise-implement some competitive advantage (not only finance engineering)? Or you have to be a leader on your niche?Right? So you need sourcing new ideas, consulting and development.
is it creative way in investing world? you can get a lot of ideas during the process that can help you in your own project.
what do you think about it as an industry insider.
In practice most VCs do not do that, they operate more like pure financiers. There are some exceptions but mostly investing is not creative work where you’re making anything.
Question – My goal is to start my own business. I already have entrepreneurial experience so I know everything it entails. I have a finance degree and want to get a job that has good hours so I can concentrate on building a business while I save some money.
So, is it ok to take a back office job so I can have more free time to do this? The only thing that draws me to IB is the prestige and the fact that I might make some good contacts that will eventually help in my business. The long hours in IB seem like a hindrance to my entrepreneurial goal. Your articles make it seem like working in Operations is the kiss of death, but if staying in finance isn’t my goal, is it ok to work in back office? Thanks.
In that case BO may not be that bad, just make sure you don’t get addicted to the paycheck
What do you mean by get don’t addicted to the paycheck? Salaries aren’t that high in BO and there’s hardly a bonus, right?
Addicted as in “Oh I have cash flow coming in, I don’t have as much motivation to go do my own big idea anymore.”
Thank you for this article. I was wondering if you could elaborate on why investment banking is terrible preparation for entrepreneurship. I have a friend who is an I-banker and told me that I-banking would provide me with great skills for entrepreneurship. My goal is to have a small business in something that is not that innovative. (not really sure what yet, but probably in something like real estate)
What do you do in IB? Take care of random administrative tasks, fix commas in pitch books, and be the go-to monkey for senior bankers. It doesn’t teach you anything about finding market opportunities, developing a product, or inspiring/recruiting/managing people, all of which you need for entrepreneurship.
anything about finding market opportunities, developing a product, evaluation of projects,make connections with head of banks, funds, all of which you need for entrepreneurship.
you could find in VC or direct investment PE (middle or small)?
Restructuring?
you could give advise how to use more efficiently of distressed business or assets. Increase capitalization and profit.
Is it creativity or routine? It looks like creativity for me. So Brian, what is your thoughts?
I don’t really consider that creative work in the same way that writing a novel or a screenplay or composing music are creative. You’re just doing business and making decisions which doesn’t really use the same part of the brain.
Thanks for your articule. How about the asset management firms like Fidelity, Blackrock and some investment management arms of investment banking? I hear it is less demanding than IB and less risky than S/T. Is it true?
Yes there is some truth to that. Still not a walk in the park but asset management is a compromise in terms of pay and lifestyle.
Hi M&I, i made a lot of research on “Life as an M&A”. It is good u provided with a realistic life of an M&A (Investment Banker).I appreciate it.
Am an seeking for an entry level position in Investment Banks Or Boutiques.Am confused, whether to choose M&A or Portfolio management( Starting with Equities Analyst), Private equity or Hedge fund manager as my career. As am interested in ALL the above mentioned streams, am confused which one to choose as my career, and the thing is i would like to make regular bulk cash inflows, i.e earn millions of dollars.
So can u explain me who from the above mentioned list earns lots of Dollars on the long run.?And the advantages of choosing a particular field(which u’ll suggest) and the opportunity cost of losing another field.?And who enjoys lot both in monetary terms and social life ?
thanks and regards
Sudhakar.
Um I think you missed the point of this essay – there is no perfect solution. See this as well: http://www.mergersandinquisitions.com/investment-banking-hierarchy/
I really like this article. Thank you!
I’m planning to work in a finance field for 2 years and then hopefully I could get into a good MBA program. After MBA, I want to work in Asia. Do you think I should break into IB or consulting? Thanks!!
http://www.mergersandinquisitions.com/banker-vs-consultant-why-the-banker-wins-with-a-knockout-in-round-1/
http://managementconsulted.com/consulting-jobs/question-of-the-day-management-consulting-versus-investment-banking/
What about real estate private equity or working for a REIT?
Probably about the same as normal PE… working for a REIT could be interesting, I think there might be potential for higher pay than at a normal company but still below PE and IB. And it’s much more deal-intensive than doing bus dev at a big company since REITs are constantly acquiring and disposing of assets, so I’m assuming hours would be more intense as well even if not as bad as IB.
Brian,
You mentioned that people “think” PE hours are better, but they aren’t exactly much better. What about Mid-size fund PEs? Will the hours be much better? But far less pay? (How does Mega fund PE pay compare to Midsize fund pays?) And does not going to a mega fund hurt my chances at top B-Schools? (Wharton, HBS) Thanks
You might be doing 60-70 hours per week there instead, so maybe free weekends. These days pay may not even be that much different, maybe $200K vs. $300K or something like that (much more of a difference back in the bubble) you can still get into top business schools
It seems that so many people are counting on being done with their 2 yr stint to break into PE, but according to your article the reality is that people are still going to have to deal with long hours. Based on this and my question prior, do you think it’s better to go to a small/mid sized fund as opposed to a megafund? Also, I’d still want to go to a top bschool
It depends what your goal is. If your goal is to have the most prestigious name possible, go to the mega-fund. If you care more about making a good amount of money and also occasionally doing things outside of work, go to the smaller fund.
Can you give more detail about how much a financial analyst in a smaller PE fund would get paid, and how much they would work per week?
Are there many job opportunities for an analyst in smaller PE funds and would it be likely to get into these not coming from IB?
http://www.mergersandinquisitions.com/private-equity-compensation/
http://www.mergersandinquisitions.com/private-equity-recruiting/
I was wondering what you would say about working in “Venture Capital” with regard to the categories of “Pay”, “Lifestyle” etc. that you have outlined above?
http://www.mergersandinquisitions.com/venture-capital-on-the-job/
Do you believe in psychometric (aptitude) testing to see if you’d be a good fit for finance?
I know your website talks about merely needing to do a lot of grunt work, get along with co-workers, take long hours, etc.; but, I’m hoping that there’s a global, proven way to see finance is right for me.
While I know trial-and-error is the most common way, I think that a person’s experience can vary so much it needs to be coupled with some more rigorous (mathematical-like) theory.
Any suggestions?
I don’t really believe in it but then I am one of the most cynical people on the planet so tend to be skeptical of such things. Best way to tell if its for you is with an internship
First off, I want to say your site is great. I think that M&I’s solid evidence-based judgments, combined with a great commitment to personalized services, makes a big difference in what site I choose. I hope the site never loses is it’s dedication to both.
Secondly, my question asks about the positives to investment banking. Are there any other serious pro’s (besides the social aspect)?
The author of the site admits he is cynical (even though honest and objective). However, I’m guessing there are some other pro’s, if the data is looked at (i.e. a higher salary rate than average, etc.).
Thanks for the consideration
You do learn a lot, and yes you get paid well for a recent graduate. And it positions you for lots of opportunities in the future.
Know anyone in/anything about quantitative finance? I’m an Engineering student, interested in a maths/stats/computing approach to investment. (Maybe, oh maybe, if I come into this field from another angle, I’ll avoid all the career downers that you list above… or I’m guessing not?)
Yes there are some quant finance articles here if you do a search for “automated trading” and “trading” in general.
Hey Brian,
I’m working at a small PE shop and pretty much everything you said about them are true. I was hoping for more active involvement in strategy and operations by working at a small shop, but that’s not happening. Any thoughts on starting your own PE firm? Difficulties (of course client sourcing)? Is it worth it?
Almost impossible unless you have grey hair and a long track record. If you want to start something, start a normal company – much easier and little capital required for tech/internet stuff.
Hi Guys,
I know that the authors like to over-dramatize some quotes. However, I was wondering if someone could give me a figure about how much bankers really do save?
I know exact data is impossible to come by; an estimate or range would do.
(i.e. normally a first year analyst saves between 10-20K, or 10% of his income; a VP saves 40-60K, or 10% of his income, etc. would be a great answer).
Thanks
Hard to say. There is no standard savings rate for bankers! It depends on the person’s priorities and expenditures! This link should help: http://www.mergersandinquisitions.com/investment-banking-salary/
Realistically, can someone save $3000 a month (after bonuses)?
Thanks
Assuming you have relatively decent spending habits yes
Hi M & A,
I know there may not be a job in finance that’s a “perfect fit” for everyone. However, on the other hand, I do agree that there are better fits than others.
Can you recommend any way you have found that will get me a good fit? (I know trial and error is the only way; however, as with everyone else, I know my time, money, and others patience with me is limited). While this may sound naive and trite, I want to do whatever I can to save wasted time.
Thanks for the consideration
Sure, read everything on the site under these 2 categories: http://www.mergersandinquisitions.com/groups/ http://www.mergersandinquisitions.com/exit-opps/
Great post, really informative and realistic. If you could give me a little advice that would be great. Basically I’ve just finished my A-levels and got some good grades. I’m really interesting in banking and wanted to know which sector, if any, had the most maths involved? It’s just maths is one of my strong points and wanted to know if I could use this in certain areas more than others.
Thanks!
Perhaps you could look at derivatives, structured products, leverage finance …
Thank you for the post! I’ve been reading your website since I started job hunting half a month ago. A lot of the stuffs here gave much more insight than those “job descriptions” on company website. I was a little bit lured to the i-banking a while ago, and am considering consulting right now. But especially after reading this post, I figure it might also be ok if I just go to Chemical Engineering industry as a Chemical Engineering graduate student should do.
Hi M&I,
Informative article and entertaining read, thanks.
My question:
Im in South Africa, qualified civil engineer, as well as completed Chartered Accountant qualification, interested in investment banking. No misconceptions about being a millionaire or the mountains of grunt required, but, my biggest query, is where in IB would i find the most rewarding project based work? I have been accepted for internship with one of the local IB’s, rotating through M&A,structured lending, structured trade and commodity finance, as well listings on the JSE.
Any insight into which of these areas might provide the most job satisfaction from a project orientated work cycle, or perhaps there are other areas in finance where my expectation could be met?
Regards and thanks
I think most deals bankers do, while transaction-based, are project-oriented.
Firstly, thanks M&I for your site.
I have a question for you and just generally everyone who can help
I’m a first year medical student (here in the UK we have undergrad medical courses so I I’m still 18) and my whole life I’ve been in a dilemma over banking (or something finance related, as I come from a family of accountants and bankers) or medicine (cause at the same time, I love science and there isn’t much harm in helping people).
But right now I’m losing my motivation to do medicine and so am considering doing an internship in finance.
Where do you reckon I should intern to get a view of what a day of a person in finance is like? I know obviously there is no chance I will get an internship in somewhere like GS or ML, but do you reckon I would obtain a good insight if I shadowed my father who is currently a VP (Area Manager) at HSBC?
http://www.mergersandinquisitions.com/investment-banking-analyst-life-worst-day/
http://www.mergersandinquisitions.com/day-in-the-life-former-investment-banker/
http://www.mergersandinquisitions.com/best-day-in-life-investment-banking-analyst/
this is one of the most realistic articles I’ve ever read. Entrepreneurship and ibanking do not go hand for hand. Ever heard of the entrepreneurship mindset?? Entrepreneurship is about innovation, solving problems and capitalizing on it.
Hi Guys,
1. First off, I want to say how much I appreciate your well-written articles. While I’m certainly jealous I am not yet in finance and making the big money, I am glad that there’s a realistic picture involved. (i.e. that Wall Street people right now aren’t partying with beautiful women, nice cars, travel, etc. with lots of money; in reality, they’re doing boring tasks with stressful job situations).
Am I right on that?
2. Secondly, I do want to quote what an insightful I-banker (Tom Harris) told me about 8 years ago, “In I-banking, as in life, you CAN have it all, just not all at once; in any given moment, you must be completely focused on your task, over time, you can move to other goals”.
Do you guys agree with that?
1. Yes and no, depends on the individual
2. Sure but also depends on the context
Hey Brian,
Your posts are awesome (you know that already). I really got a clear picture of FINANCE industry and most importantly about CFA.
It is not possible for me to get into a TOP TIER BUSINESS SCHOOL cause i don’t have the money as well as can’t plan my future on scholarship or student credit. So i would like to stick to CFA instead. But i followed your advise to NETWORK LIKE A NINJA and i m pretty much happy with my network COVERAGE. :P
I am not interested in investment banking particularly or neither dream about earning 10$ Millions in 5-10 year. I just love finance practice as well as i am good with number. Working for an hedge fund, a stock broker or some credit rating agency is my goal.
Regards.
Cool, glad to hear it
Hey, listen, I’ve come across your site occasionly. And now i realize that i stumbled upon a diamond. Many thanks for such a valuable info u post on the site…But, look I live in Kazakhstan a third-world country, and while reading your articles, i started to think about whether the things u write here can be related to my financial area, i mean your financial system and markets are bigger much more developed tnan in my country…my country only tries to copy the way finacial system and markets work i your state(i mean US)…So, due to my lack of knowledge and experience, i’m a little bit anxious that the things i read here can not be applied in my country, because the financial system and markets are not so developed as in yours and the culture and other important factors are different. So, what can u advice?…thanks in advance…
I don’t really know about Kazakhstan but many of the strategies still apply, just on a different scale. I would strongly suggest moving to a country with a better-developed system if you want to work in finance.
U write:
“I would strongly suggest moving to a country with a better-developed system if you want to work in finance”
Can u, please, recommend any country I can move to first, and then, which one is the best for working and building a career in finance? Please, take into account, that i’m 24 (bday in January),and i have 1,5 years of working experience in commercial banks in my country, to be precise, i had worked half a year in financial risk-management, then half a year i was assitant to chairman of the managing board of a bank, and now for half a year i work in the department of developing products and optimizing processes for crediting small and medium business in the bank. I can speak russian and english and have bachelor degree in finace(majior) and accounting(minor) from the best university in my country where all the classes are taught in english? So, considering this, what can u suggest? Many thanks:_)))
London / New York City
Very insightful article yet again! I need to make a decision. I have two offers, one is from a Tier 3 bank which is paying 45k USD in HK to begin with, after a rotation of one year in ops, risk and FO roles, I finally get ED trading with around 55-60k. The second offer is for a Structuring role in DB but not exactly in FO, it’s called offshore FO. I’ve heard that the exit options are not as good as this ‘offshore’ FO is still considered as a middle office. The possibility of moving to a proper FO within DB is still there but like 10%. The pay is definitely better in DB to begin with, but its a tough choice to make for long-term. What would you suggest?
Which team do you like better?
I’d choose DB given the name and pay and exit opportunities
I don’t have more experience to compare to. However, DB is CIB centre in India (maybe what people refer to as KPO), so even though a structurer can work sitting here on the same stuff, the exit opportunities is something I am not very convinced about. The pay is better in DB to begin with.
Which one do you want to take? What does your gut tell you? That’s important
One of the common themes I see in corporate finance, as well as careers in general, are the often conflicting themes:
1. Work as hard as you can, and make as much money as you can. (This gives pride and financial independence).
2. Travel as much as you can and have as many diverse relationships as possible. (This makes people happy).
Do you see this often in finance? Did you feel it?
(Sorry to bounce thoughts off you guys, it just seems like a hard reality many of us have troble realizing).
Ha. They are “beliefs” people choose to adopt. Not uncommon in finance. Whether you want to adopt the beliefs or not is your choice. And not everyone in finance thinks this way.
I guess I’m just trying to see how finance fits into the “big picture” of life.
Honestly, it seems like a job that is harder, more boring, more inconvenient, more stressful than most. But, the pay is prestige is definitely better than many other careers.
However, in the long run that may or may not be worth it.
What do you think?
Depends on your priorities and values. Its your choice. Whether its worth it or not is also your perception.
All good points.
If you knew what you knew now, would you try investment banking again?
I wouldn’t have known what I know now if I haven’t been through my path. So I can’t answer your question!
Well, basically it sounds like even though the pay is good, most poeple get out of finance because they don’t like it or aren’t good enough.
Am I correct?
I know it may sound like a “stupid” question; but, I’m just trying to ascertain whether finance is such a great field; with the high-turnover rate, it sounds like it’s not.
Not necessarily. Some people stay some people leave voluntarily or involuntarily. Whether it is a great field or not depends on your values and priorities! I can’t say!
Hey Brian,
Just wanted to send you a thank you note – from reading your posts you’ve convinced me that I DON’T want to do investment banking, for the following reason: It is not a scalable business.
In a scalable business, you get paid for the value you create, not the hours you put in. An IB analyst who is only on $15 an hour doesn’t seem to be creating much value, do they? Having said that, I’m still really interested in the area of finance itself, so I’m thinking that I’ll probably head in the direction of working in the finance/trading department of a Fortune 500 company, etc. I personally think IB is quite overrated.
Anyway, just to share my own thoughts and thank you for the informative information on this site and explaining the ins and outs of IB without sugarcoating the truth.
Thanks! Keep us posted!
So Out of all these, which pays the highest? Private equity, Hedge Funds>
Hard to say. Depends on various factors such as the structure of the firm, the performance of the fund and your performance
Thanks so much for publishing this article and also for all the other stuff on this website – I’m trying to decide what career to go for and I’ve found it useful for making an informed decision. (By the way, you’re all really good writers!)
Thanks Dominic. Brian is an awesome editor.
Excellent post Brian, my question is more specific though.
I have previous IB (1 year) experience, left the job for some economics consulting and kind of became more religious in the process. So as a jew I’m keeping Shabbos (not working from Friday sunset until Saturday night).
I’m planning some PE interviews because I simply got tired of this lifestyle and find PE extremely interesting but I’m afraid my religious restriction is going to be a problem. What do you think?
(Sorry if this comment is in the wrong place)
Interesting question. Lifestyle in PE may not necessarily be better than lifestyle in IB. http://www.mergersandinquisitions.com/private-equity-recruiting-in-2550-words/
Yes your religious restriction may be an issue for most PE firms. However, if the firm really like you and you address this before you sign the contract, I think you will be fine. You may also want to look at teams in firms which observe the same religious day as you do
Great article thanks. I see a lot of posts in the site about many fields in Banking (IB, S&T, PE, etc.) But none abot transacion banking (GTS at Citi, Treasury Services at JPM) Anybody can give me some insight about it? Pay/prestige/exit opps, etc. Thanks!
I think readers may be able to give you better insights on this front.
If you want to break into IB, going through transaction banking may not be the best route. And I believe this division does not pay as much as IB. Prestige vs IB – not comparable
Great article here. I have a more specific question — how does working at an elite boutique (Evercore/Greenhill/Lazard) as a fresh college grad stack up against working at a relatively mature, VC-funded start-up (Series D) in terms of building skills and experience for someone who is eventually interested in working/running a business in some capacity? Whether that would arrive in the form of starting my own company, or perhaps working at a PE firm, I’m not sure, but I do know that if I did banking, I would want to transition from financial engineering to operational stuff sooner rather than later.
It seems to me that you would learn more at a boutique (and do less monkey-ing) than at a bulge bracket, and also preserve exit opportunities into finance – but then again, there’s no better way to learn how to run a business than helping to run a business. In other words, does the heightened optionality provided by a start in banking make up for the fact that it’s not directly what I want to do in the long run?
If you want to be an entrepreneur, I think the VC-funded start-up maybe a better option for you
Well, not necessarily an entrepreneur — I’d just like to operate a business someday. That could be in the context of running my own business, but I’d like to leave open the possibility of working for a PE or a VC firm as well.
In a nutshell, do you think any PE firms would hire from a business development/corporate strategy background for an associate role? Assuming that the megafunds would be a no, but I’d love to hear any anecdotal evidence of a non-traditional business candidate making it into a MM firm.
Yes, in an operations role. If you want an investment role, do IBD
http://www.mergersandinquisitions.com/private-equity-recruiting/
Hi,
I am about to start working in a discretionary asset management desk (research and pick fixed income/equity securities) at a BB Private Bank. What exit opportunities can that provide? Research? Buy-side? Long-short HFs? Would managing UHNW money (vs. institutional) decrease chances in getting into (say, fidelity or blackrock) few years down the line?
what are main advantages/disadvantages of being in Private Banking (investment side)?
Private banking? More private banking, or possibly some asset management (do a search for both terms on this site). HFs would be more of a long-shot. Yes, institutional is better than UHNW for getting into hedge funds and/or large asset management shops. See: http://mergersandinquisitions.com/private-banking/
What are your thoughts on a career in corporate law?
I’m currently study a combined commerce and law degree and still weighing up the options.
It depends on what you’re looking for… pay ceiling and progression are lower than in finance, but if you don’t like quantitative work as much it might be good. If you do a search we’ve covered law a few times across different interviews and articles.
“Sure, your life may suck for awhile but once you hit 35 and have $10 million you can just deposit it all in bonds, make $800,000 per year in tax-free income, and then retire to the Caribbean right?
Except I know of no bankers or other financiers who have actually done this.
To quote a friend who finished the Analyst program at Goldman Sachs a few years ago: ‘Even Partners take calls in between their kids’ soccer games on weekends.’
If you’ve been working that much for that long a period of time, you’re going to be bored out of your mind if you actually ‘retire early.’”
However, would it be possible to retire early?
Yes, it is possible. Some bankers quit the industry early, invest in other businesses/start their own thing in other industries, or just pursue their hobbies. It depends on the individual.
I really enjoyed reading this. An awesome article to get a reality check and i think everyone should read this before trying to get into IB. Tyvm
Thank you for your comment!
“no one in the real world gives a crap where you work or where you went to school” – after so many years of working in finance I realize this is so true…not to mention that majority of people in society don’t even know what investment banking is. (Despite the fact that they just assume investment bankers “naturally” make a lot of money)
I don’t mind working long hours during the week, but would hate to have to give up my weekends, so my question is which would give you the most free weekends?
Private Wealth Management, Sales & Trading, Prime Brokerage, Asset Management roles
How does the buy side e.g. PE look upon an ivy graduate with both JD/MBA with two years at a top 5 law firm doing M&A?
Good credentials. However, you’ll be competing against people who have had IB experience. This article should shed some light on your situation: http://www.mergersandinquisitions.com/private-equity-recruiting/
What if your only goal is the attainment of wealth? What if you truly like finance & accounting more than all your other courses? I am not going to be a doctor or a lawyer I know I wouldn’t like med or law school. I see no other field to fulfill my desires. I am not going to be Lebron James, Cristiano Ronaldo, Jay Z, or Brad Pitt, I also do not play the lottery. I have an aptitude and interest for accounting, finance and economics courses why not pursue Wall Street? I am only posting this because I read posts on your site quite often and you seem to steer people away from IBD, PE, HF if your objective is attainment of wealth. Are you saying that analysts & associates in IB actually ENJOY making powerpoints and financial modeling 90 hours per week and are not just there for the large salary? I mean if they wanted quality of life/ free time & other B.S why not pursue accounting or wealth management with their degree/skills? Are you saying that many HFM/PE partners out there do NOT have the primary objective of the attainment of wealth? I think they realize that they do desire wealth on a large scale in life and they have to get this through a legitimate profession and they have somewhat of an interest and aptitude for finance. I am truly not trying to be an asshole here this is just my perspective. What I am saying here is that my main desire in life IS the attainment of wealth, I also have an interest and aptitude for it. I am not asking for one of these psychological things about money not buying happiness because I do not see how anybody has mind reading power to see what makes others happy, also I believe it is all relative to individual, some like apples, some oranges. I know I am not going to be a star athlete, celebrity, or invent anything. I see no other venue of making multimillion dollar income?
Also about how many years does it usually take to reach MD level at bulge bracket?
Thank you for your feedback and comment. You’ve made some good points. If you truly enjoy finance and doing deals, then please do apply for roles in IB. And no, we are not here to steer people away from attaining wealth for acquiring wealth’s reasons. However, its best if you know what brings you true joy and how you can be of service to others in exchange for the wealth. Some people do enjoy making powerpoints and models; some love trading and can’t imagine doing anything else. It usually takes 10+ years to reach MD level, or perhaps less. There’s no set career path – http://www.mergersandinquisitions.com/myth-career-path/