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 friend?
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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Tags: changing careers, co-workers, consulting lifestyle, entrepreneurship, investment banking, Investment Banking Bonus, Layoffs, management consulting, private equity firms, prop trading, S&T, trader, understanding investment banking
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Great article! What about asset management?
Eh it’s kind of a mix between normal company and sales & trading… pay is more limited than in the other finance-related fields, prestige is lower, but hours are also better.
Great one.
Any quick thoughts on sovereign funds in Asia? Great place to learn and attractive to MBA AdComs?
Seems like many great minds are heading to these places rather than bulge brackets/consulting.
Thanks!
zboy
I’m not too familiar with them and I think they’re generally too new to say much of anything. They could be the next big thing, or it could be the next dot-com bubble… kind of depends on what direction the economy takes and if these governments continue to make massive investments. At least in the US and Europe, I don’t think they have the brand-name recognition of banks / PE firms.
One of my favorite entries for sure. Hope you enjoyed HK!
Losing all my money in Macau inspired me to write this one…
So what is the pay difference between PE and working at a normal company?
A lot. You don’t get bonuses or carry at a normal company.
Actually base salary is not that much different in many cases but the difference really comes when you’re talking about the bonuses, which don’t really exist at normal companies.
Another excellent, candid article. Can you go public with this site so I can buy shares? In any case I discussed “$60K-$70K base salary is barely enough to get by in New York” with a few friends, and I have to ask: what the hell do you spend your money on?
So $70,000 after tax, social security etc. is roughly;
$52,700.00
Less ~$18,000pa for a decent-ish, mid-town apartment
Less ~$6,000pa for food, including regularly eating out
Leaves you with $28,700 to spend on what you like… I mean you’re not going to drive in NYC, so you won’t have a car-associated costs…
Coming from my background, I’m pretty frugal and I don’t have ridiculous expectations of Crystal champagne on a bi-weekly basis… My biggest expenditure would probably be expensive clothes, travel and some good tech (like my Mac)… And this isn’t even including your bonus! I’m thinking I could save at least $10k-$15k a year.
(For us Brits (also applicable to other Europeans) our breakdown is much nastier:
Base salary: £44,000
After tax, national insurance: £29,320.60
Less ~£12,000pa for decent-ish, zone 1 flat
Less ~£7,300pa for food, including regularly eating out (note cost of living in London is much higher than in NY, particularly food/consumables!)
Leaves about ~£10,000 a year, and that won’t go far on clothes and travel, let alone a £2,500 MacBook…)
Definitely moving to America….
Your estimates of taxes are off – NYC state and city taxes together add up to more like 40-50%, so you only get around $35-$40K post-tax.
So let’s assume $40K – minus $18K for rent, that leaves you with $22K. So then $6K for food, but that’s actually a low estimate depending on how much you go out – a good meal in NYC can easily be $100+.
So on the surface, it seems like you can save at least $10K – but the problem with that is that you’re not factoring in other expenses.
Dry cleaning, the occasional trip/vacation, utilities, having to fix things that broken when you don’t have time to do it, etc. etc. and it adds up to a lot of miscellaneous expenses.
I agree that if you rarely go out and avoid spending much on those types of expenses you can certainly save more – but the reality is that once you start working, you almost need to spend money and have fun because you work A LOT and it will depress you if you never go out.
40-50%, really? Ouch.
I found this:
Your Pay Check Results
Monthly Gross Pay
$5,833.33
Federal Withholding
$1,062.17
Social Security
$361.67
Medicare
$84.58
New York
$326.68
NY SDI
$2.60
City Tax
$191.75
Net Pay
$3,803.88 x 12 = $45,646.56
Less the aforementioned: $21,646.
And I guess this is where we’re different: I do not need to spend $100 to have a good meal. So $6k a year on food is perfectly acceptable for me. But I definitely see what you’re saying with misc. expenses. Taxes are so damn high… For the British calculation I forgot to add to council tax (like city tax) which is super high in London… Sigh.
I like the article! Good job!
Great article thanks! How would you put going full time into trading with an M&A internship under your belt? Would that give better exit ops if you have a bad trading year for some reason.
Also
“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.”
But I am imagining it would be relatively easy to go to corp dev/corp finance which does not pay as much but hey you’ll have a job right?
Yes, most laid off bankers go into corporate development / corporate finance. Pay is less of course but there’s always demand for you.
Full-time trading after M&A internship: yeah it might be easier to get back into M&A afterward, but I’m not sure how much just an internship would actually help.
A great one.
I just have one question about your comment on “Wanting to stay in finance for just a few years to have enough experience to do something else is a poor strategy.”
What about I want to stay in finance a couple of years and want to have experience found my own P/E or VC? I don’t think I can just do it without enough knowledge or the network in the industry.
The flaw there is that you need a lot more than “a few years” to actually start your own PE / VC firm.
People who do that are already at the Partner-level and have either started successful companies before (think, Vinod Khosla) and have a lifelong track record of success, or have done extremely well making significant investments and again have a very long track record of success.
Also how would you put working at a valuation firm like Duff & Phelps or the FAS practice of HLHZ?
Similar to what I said above about asset management… sort of a mix between normal company and banking. It gives you more options if you can network properly, but again, pay/upside/hours are all reduced.
How about venture capital in Silicon Valley? Is it a bad idea to still attempt breaking in?
This is a really broad question, and it depends on what you want to do… it’s honestly very hard to advance to Partner-level in VC if you’ve never started a company. It’s good for business school and may let you move to good portfolio companies, but I think advancement is more limited than with some of the other options here. You could argue that it’s more “fun” but you also spend a lot of time sourcing, i.e. finding companies and looking for the next Google.
I’m trying to network my way into an analyst position (hopefully) and leverage that for business school. Is the pay similar to banking?
Bonuses will be lower – at that level base salary will probably be about the same but you won’t get much of a bonus
This article reminds me of what Bud Fox wanted to do, “get a little bit pregnant.” It baffles me how so many people watch that movie and think Oliver Stone is on the Gordon Gekko side of things. He tries to show that Bud Fox wanted to do the impossible, “make money and get out.”
I’d like to add to the entrepreneur section if I may. Most people think an entrepreneur is like a mini PE firm. You just throw money at ideas and turn a profit. But it’s YOUR money, or worse, it’s borrowed money in YOUR name. And these are YOUR ideas, for better or for worse. You have to be a little bit naive to think you can just start a business from scratch, be your own boss, set your own hours, get what you put in. In actuality, every customer you have is your boss. They’ll set your hours and I promise you they won’t be nice. Unless you have serious capital you’re going to be wearing many hats of the company. You can’t get a personal assistant if you can’t train him/her because you don’t know what the job will entail. Anyone here who would like to start a business after IB, do yourself a favor, work in that industry first. Learn the ins and outs when it’s not your money on the line. Then, go apply for your small business loan and get used to the 100 hour work weeks again only with much, much less pay in the beginning.
Okay, I’m done. Sorry about the ramble.
Exactly. I’m going to send this one to anyone who asks me such questions…
So why did you do banking? Are you saying to only go into banking if you actually love/enjoy it, otherwise it’s pointless unless you do make it too the top?
I was interested in VC at the time and figured that tech banking was a good way to move in. But yes, partially I was actually interested in it too, coming from a non-business background.
The point of this article was to provide a “reality check”: no matter what you do, there’s no magic bullet.
I’m not saying you should or shouldn’t do anything: I’m merely pointing out the benefits and drawbacks of different options.
I have always heard that ex-bankers tend to party/travel BIG before they start their buy-side careers. Where does this money come from if costs of NY living and taxes eats the majority of it?
By the time they leave, they have 2 or 3 years of bonuses so they can save a bit by then… and it’s not like you need $100K to travel or have fun for a month or two.
Have you heard about this thing called credit card and america’s love for credit ?
I’ve never had credit card debt… though I might be the only person like that in the US
How many years will it be until you can start saving? I understand it will not be a top priority for most people in finance, but will it really take until VP or MD level until you can have a nice fat retirement account? I always figured once you start to near six figures after tax you’d be fine (second year associate, four years in the game). Is this completely false? Is saving just not something most bankers even care about?
Couldnt you also get a good job in private wealth management or corporate finance once you have a family and your kids start growing up, and move out to Jersey or LI? I mean, once your maybe in your late thirties, hopefully have something saved up by then. Is this practical at all?
I mean you can start saving at any point in the process if you are careful with expenses and don’t spend too much on models/bottles.
My point was that in PRACTICE, most people don’t save much because they spend a ton on other “lifestyle” expenses.
I managed to save quite a bit by not living in NYC and being careful with expenses, but most people at the time laughed at me for being frugal.
Yes, you could certainly do PWM or corporate finance and move elsewhere if you want the better lifestyle.
Again, this article was meant to be a “reality check,” pointing out how most people in finance actually act and what they really do.
Was the lifestyle different living outside of the city, or did you still reap all the benefits of NYC? Im sure you probably spent 80% of your time there but was it all just in the office?
What career paths might allow for a better lifestyle without taking away too much or all of the upside? I understand IB PE HF etc will all be extremely demanding no matter how high up you get. Im talking with years of experience, NOT after just an analyst stint…or are you just pigeonholed by then?
I was on the west coast so it was quite a bit different than NYC. Honestly if you work in NYC I would strongly recommend living in Manhattan – it gets really annoying to commute a long distance into work each day.
On other paths, this is exactly my point: everything has trade-offs. If you don’t want a demanding or risky job, then you need to accept lower up-side potential… like working at a large company.
There’s no way to make a lot of money without either working a lot, or taking some risks. Unless you want to sell drugs…
And yes, you do sort of get pigeonholed as you move up the ladder, though in some fields (e.g. HFs) more than others. Ex-bankers have more options in most cases.
Dealing drugs is EXTREMELY risky if you’re encroaching on someone else’s turf. But, if you win the drug wars, you get the increased market share.
“Cocaine Cowboys” explains a lot about how we…I mean, they…do business in Miami.
Just curious, what are the taxes like on the West coast?
California state tax is rather high if I remember correctly, but there’s no city tax like in NYC, or at least it’s very low if it exists. I think total taxes amounted to around 40-45% of gross salary, so maybe around 10% less than NYC. I actually kind of forget right now but it was somewhere in that range, less than NYC but still a lot more than “low-tax” countries like HK / Singapore / Dubai.
Just think about where most people are coming from before they get into banking. They’re probably fresh out of undergrad. They probably drove a crap-box car or had no car at all. They probably have no furniture, no pots or pans, no professional clothes, etc. Not to mention they’re probably up to their eyeballs in student loans.
I once thought I could save half of what I made. But then I wanted to buy a house, and before that pay rent. Then I had to furnish it, etc. I ended up being far less frugal than I wanted. Not to mention entertaining your clients / professional friends isn’t cheap. And you think you’re going to get the girls by telling them you work at Goldman Sachs or by owning you own business? They want you to throw money around and drive a nice two-seater sports car. Damn I miss that car.
Stop ruining peoples’ dreams
Oh wait, this article might have already done that…
haha not my intentions but those who are falsely motivated or have a weak drive toward banking probably wouldn’t have made it far anyway. I would love to see an article on good reasons for choosing IB and why certain people with certain attitudes succeed in banking. Maybe like a case study of someone who went into banking and stayed in banking, and why. Was it the money, the thrill of the deal, a life experience, or even something as strange to bankers as loyalty or camaraderie?
Thanks
I actually wrote something like this for FT awhile back, but I think it comes down to being thrilled by the process and always wanting to be busy. Money and prestige stop meaning as much once you’ve been doing it for a long time.
So I take it that you hate consultants
Curious did you do IT consulting or management consulting when you did it (and couldn’t stand making 60 k a year)?
I was never really in consulting, that was Kevin. I did advise a startup tech company in Japan a long time ago, it was sort of a mix between IT and management consulting because it required technical knowledge but it was mostly giving advice on business decisions.
Actually it wasn’t that bad, but I hated living/working in Japan because of the corporate culture there.
“Stop ruining peoples’ dreams
Oh wait, this article might have already done that…”
I would say that anyone reading this blog should have realized up to now that just working at IB/HF/VC/PE.. and hoping to become rich in 3-5 Years is not possible. There is no magical way to become rich in such a short period. If the goal is becoming rich, then hard work (and luck) is necessary, independet of what field your working in. The tradeoff is usually that your work-life balance suffers quite a lot.
Otherwise great job, as usual.
You left out the forbidden subject of going the Big Four accounting track…
M&I,
There’s another (potential) way to become rich – leverage.
The following piece applies very well if you are not a top 1% talent in your field but you are still very good (top 5%). Similarly, one could assume that you are not amongst the top 1% in terms of your risk-taking but definitely have a high (again top %) risk-appetite.
Say you worked in Silicon Valley as a techie (engineer/product mgr) for 3-4 years (say at Google post-IPO) and you probably didn’t make much in stocks (<500K). You are 25-26 years old.
Now you have a couple of options, rush to promising early-stage (perhaps Series A funded) startup as a rank and file employee (you'll get ~0.1-0.3 percent equity). Now, most startups are not youtube ($1.65B exit). So your best-case scenario is when your startup exits for say ~ $200-300M. So your best-case upside is 0.3% * 300M = 900K. Now this is not a fuck-you money by any standards. Plus the probability of this happening is very very low and will take 2-4 years.
Now, an alternate option is to take your skills and talent out of Silicon Valley and go do a startup in say India or any other emerging market, where the entrepreneurial ecosystem is still not as strong as the Valley. On one hand, there would be challenges which are specific to the local ecosystem, but you'll have a huge unfair advantage in terms of skills, experience, risk appetite etc. It's much easier to build a startup in India (and for India) and exit it at $30-50M. All this while you are a co-founder and have atleast 25% stake. The odds of success are fairly low but not any better than betting that your SV startup (where you have 0.3% equity exits for $300M).
Case in point:
- Bazee.com (acquired by ebay for $50M in 2004).
Founders:
1st founder: Indian IIT grad, who came to the US did his MS CS, worked for a few years at Apple, went to HBS, worked at Goldman Sachs for a year post-HBS.
2nd founder: American Indian (BS Maryland), HBS.
Today both of them are running their own VC firms.
- JobsAhead.com (acquired by Monster for $10M in 2004).
Founder: Indian IIT grad, MS CS UC berkeley. Went back to India and after 3 years, started jobsahead.
Today he's a partner at Canaan Ventures.
There are more that have been similarly made and even more in the making (Komli etc). You dont necessarily need to be an Indian guy for doing this but would need to partner with that Indian IIT guy in Silicon Valley who is looking to go back and do such a thing.
There are other examples of talent arbitrage (outside of entrepreneurship). For ex, it's relatively easier to become a partner in a top-tier PE/VC firm in their India office than in NY/SV where there's far stiffer competition.
Essentially, do you want to fight it out trying to become a big fish in a big pond or would you rather leverage the talent arbitrage to become a big fish in a different pond that's becoming increasingly bigger ?
Or you could just start a website selling niche information products about investment banking, get passive income, and not have to worry too much with far less effort.
Whoops, why am I revealing this…
There’s definitely truth to what you said, but it all goes back to a point I raised above: no matter how much money, fame or success you have, you need to be doing something constructive, learning something, etc. or you get really bored. This is the flaw with all the “retire on the beach” scenarios.
I agree it is easier to be successful in other markets, but you also have to take into account that many people wouldn’t want to relocate elsewhere and there are cultural issues at play as well… it’s hard to start a successful company in an emerging market if you’re not associate with the country/culture in some way to begin with.
See the “Large Company” entry… very similar.
hey brian,
is it appropriate to send an email to first round interviewers regarding tips or suggestions they might have for you to prepare for the final round of interviews?? thanks!
You could if you want but I don’t think this will help you much, if at all
Great article. One thing to note is not only social life but HEALTH. I have about 10 months left and I can tell you that my doctor already noticed a difference I have high blood pressure and he could tell i was taking sleeping pills. As of now I still don’t regret doing it but I do plan on working in finance after this job (not banking pe hf but probably a corp finance job).
On another note how long is it acceptable for me to take a vacation before interviewers start questioning what i was doign post IB? I hear 3 months is around the max given the time to get a corp job.
That’s true – it definitely hurts your health if you’re not careful.
Yeah 3 months sounds about right, though I was still getting emails and referrals 1 year+ out. Admittedly I wasn’t really “on vacation,” I was just not working at an established company.
Hi,
Thanks for the answers. I was wondering if you could give me your opinion on some things.
1. In terms of exit opportunities is Barclays the same as the Bulge Brackets?
2. If I get into a place like Jefferies, is it a good idea to go for a masters in finance at a prestegious school and then try to get into a bigger bank?
3. How does places like BNP Paribas/Barclays compare to Jefferies?
Thanks a lot.
1. Too new to say but yes probably.
2. If you start working full-time it’s probably better to get an MBA instead.. a Master’s program after 2 years just to move to a bigger bank seems odd.
3. Generally, bigger banks = better exit opportunities though Barclay’s is relatively new as a major player in banking, so it remains to be seen.
Hi Brian,
Thanks for the response. Just to clarify, I was actually wondering if it is a good idea to work for a bank like Jefferies right out of college or go to a prestegious Masters of Finance program, try to get a banking internship the summer after graduation (undergraduate) and then look for a bulge bracket opportunity after getting the masters.
Thanks again.
Honestly if you have a job offer right now I would just take it even if it’s at a bank that’s not as well-known – I only recommend Masters programs if you really have no other options. There’s risk that the market may actually be WORSE a few years from now.
How hard is it to break into Asset Management? I went to school at UC Berkeley and I never saw any postings for asset management positions… only IBD and PWM. What are the main differences anyway?
Asset management and PWM are almost the same, but asset management is more about institutions and PWM more about individuals… asset management is usually viewed as more “prestigious.”
It’s definitely easier to get into than IBD / S&T, though again the upside is lower.
Great. Is Asset Management the same as an “Investment Management” position? I saw several of those posted on my school’s career center website.
Also, are there any websites/resources where I can learn more about this career field?
Sigh. Always thought that once I get an IB gig as a starting career, my financial/sex life would be set… How far from the truth..
M&I: Why didn’t you start this website much earlier??
I was too busy working 100 hours a week at the time…
Great. Is Asset Management the same as an “Investment Management” position? I saw several of those posted on my school’s career center website.
Also, are there any websites/resources where I can learn more about this career field?
Yeah it’s sort of the same thing, I don’t know the exact nuances because I never worked in or interviewed for the field. Websites/resources – maybe check out Careers in Finance, I believe they have some material on it.
I’m going into analyst recruiting, as a senior. I was able to get a meeting in NY with a (very) senior executive at a bulge bracket bank, but he can’t meet until Sept 30. Ideally, if he liked me, he could get me an interview and I’ll be in a good position for that, since they’re not coming on campus.
Is Sept. 30th too late in the process for him to help?
Not necessarily, I know people who got offers later than that. Obviously earlier is better, but meeting late is better than never at all.
You’ve said before that once you get the interview, GPA doesn’t matter. I have a 3.0. However, in my internship interviews last year I was still asked “why is your gpa so low?”. Clearly I have other things to make up for it, otherwise I wouldn’t have gotten the interview. How do you address a low gpa?
“I screwed up my freshman year because _________ however I learned a lot from the experience and have done much better ever since…”
I actually started with a 3.5 and gradually got worse. I can’t exactly tell them my grades were hurt because of fraternity pledgeship (since hazing is illegal). I also tended to prioritize extracurriculars and other activities over grades, while my classes only got harder.
If you can’t cite some kind of improvement trend and you don’t have other excuses then I don’t know what to say – maybe if you’ve done well in your major, or over the past semester, or in certain classes etc. you could say you focused on a particular area or had some kind of family problem that prevented you from doing well in certain periods.
Hey,
A couple of questions:
1. What is the pay like in asset management at a top firm like BlackRock? Could you give me a figure from an analyst position all the way to the partner level?
2. Is there a Bonus culture in asset management?
3. What is the pay difference compared to banking and PE?
Thanks!
1. I honestly have no idea because I never did asset management and don’t know anyone who did – maybe check the WallStreetOasis salary/bonus database and see if they have anything. I know it’s lower than banking at all levels.
2. There are bonuses, but less than other finance fields mentioned here.
3. Again, less than either one of those. More than a normal Fortune 500 job. Upside/pay is somewhere in between those two alternatives.
Since you’re talking about relationships. Is it even a good idea to start a romantic relationship if IB is in your plans for the future?
I would probably not do this unless your SO is extremely understanding. All my relationships failed in banking – only after I left could I actually start meeting people again.
It would be easy to believe a high school freshman would fantasize such things, but professionals and college graduates?…quite sad if you ask me.
Unfortunately I do know a high school freshman who is very eager to enter the jungle of Wall Street…I try to tell him to shy from it eventhough he does get good grades, has a passion for finance, and has the attitude for IB. Great job by the way on this article and I personally enjoy reading your site…it provides me some amusement in my free time away from intense curriculum in my sophomore year of high school, along with Facebook.
Just curious…if NYC and London take a good chunk of cash with high taxes and Tokyo has an unfavorable business climate….what would be great places to do IB where the corporate and social climates are tolerable and you actually have considerably more money to save for retirement? Granted, I know there’s no magic bullet, but perhaps a far-shot quasi-magic bullet? =]
Dubai? Hong Kong?
Keep in mind that you CAN save money no matter where you are.
My point was that most people in finance DON’T in fact save that much – because they spend recklessly.
You don’t need to follow this, of course, but a lot of people do get sucked in.
Hey, that’s my quote at the top! I’m glad that you decided to push the “publish” button on this article as I enjoy reading about controversial subjects.
I remember that you once revealed that you have a “box” from which you pull out ideas to help you decide what to write on M&I. Does that box have anything in it related to how bankers view programs such as Inroads/SEO? Is there a stigma associated with these internships (read: are students given a serious work load and/or extended FT offers)?
I don’t really know much about Inroads/SEO but I don’t think there’s much stigma associated with these internships. I would certainly take an internship via one of those programs if you can get it.
“Prestige obsessed parents” That is me to a T; you’re absolutely correct no effect on your life what so ever.
I’m in my senior year at Wharton and have realized that I should have done computer science so I could work in silicon valley. I’m really interested in working for tech companies/startups, but the most exciting ones only hire engineers out of undergrad. I want to work in product management, avoiding their finance departments if possible.
What would be the best way to leverage what I have (finance degree from a good undergrad program) to get there?
Banking. I have an offer from a BB, but I’d only be learning finance which doesn’t translate well. I do see the banking -> VC -> transition and work full time in an operational role for a portfolio company -> move on to more exciting tech companies
Consulting. I know you hate on consultants but I think this should be a marketable skillset to get into management roles.
Masters Degree in Engineering. I know what I want so I should rework my career now, bite the bullet, and do two more years of school before entering the market.
Ideally, in 20 years, I would be in senior mgmt at a tech company, a partner at a VC firm, or one of those guys who serves as an adviser to many small tech companies.
You could do this in many different ways, but honestly if you want to work at a tech startup just get out there and start talking to ones you’re interested in.
Startups are always in desperate need of capable people – it’s not like banking where supply far outweighs demand.
Personally I would start approaching tech companies you’re interested in and try to do some kind of product development or business development / marketing role… you could also try for startups in NYC, as they actually need people far more than ones in Silicon Valley do.
Hi Brian,
I was wondering if it is a good idea to start of my ‘why I-banking’ answer with something like ‘I don’t know if I wanna do banking for the next 20 years of my life but I do want to do it now and here’s why’.
Is something to that effect a good idea?
Thanks.
I would not start that way because you’re starting in the negative. Just jump to the second part and say, “It’s what I want to do most now because…” and then when long-term plans come up just say you don’t know exactly yet, but something in business/finance.
Another excellent post from you.
The conclusion that can be drawn is that having 10million and an island is up to the individual and is not guaranteed by what job/industry the person is in.
Great article and site. My only complaint is that like WallStreetOasis it seems to be almost exclusively targeted at pre-MBA folks with nothing for MBAs/post-MBAs. I know that to a college kid or 23-year old analyst it seems preposterous that you could have your MBA and still not know what you want to do with your life, but such is life in the great Recession. I finished my MBA in May at a top-3 b-school, and with the economy where it is I am still looking for a job (as are a scary amount of my classmates). I did not pursue finance while on campus, but after some belated (mea culpa) soul-searching I realized that I really do like finance, especially the areas of finance that combine finance and strategy, like M&A, restructuring, and PE. The problem is that I don’t have any finance background. Can you say anything about post-MBA banking and/or point me to any good resources on it? Thank you much!
How can you complain about hundreds of FREE articles?
Anyway, it’s aimed at younger folks because the majority of the audience is pre-MBA – but there are articles and Q&As covering more experienced candidates as well. And not that much of the advice is different in many cases.
The problem in your case is that it’s very difficult to get into finance if you’ve already graduated from an MBA program – if I were you, I would cold-call some local boutique/restructuring firms and maybe contact places that are hybrid consulting/turnaround firms and assess how interested they are. It’s a waste of time to even bother with large banks at this stage.
If you’re talking abt exit opportunity fr banking to being a corporate executive (CFO or finance director), I think it’s much easier for a corporate banker (who knows the financial health in more detail and the management of that particular company) to switch than for an i-banker (who’s more into deals/transactions)
The corporate bankers I meant here are the senior bankers who supported the company’s forex, trades, financial transactions opportunities, etc
There’s some truth for that – bankers are more likely to end up doing M&A at the company rather than the other tasks you described.
I see CFOs/senior finance executives coming from different backgrounds: corp bankers, ibankers, research analysts
M&A deals won’t be taking place everyday. hence bigger companies may have M&A or Strategic Investment dept which employ Ibankers/ consultants. Corp bankers seemed to be more familiar with the companies day in/out financial operations (forex hedging, cash management, etc).
That said, I think at the end of the day it’s much easier for bankers to be employed by large corporates if they are constantly in touch with the corporate management levels.
Good article as usual. I’ve actually been studying this topic for the last couple months (I recently started an IB analyst stint). All your points are valid. However I think you need to keep in mind that, yes banking can be tedious & has a lot of misconceptions, but I think its one of the most flexible post college careers. I want to work in prod dev after this job at a growth stage VC backed portfolio company, I’ll get to use my engineering from college and meet the position requirements for job experience. Will I be using all my modeling skills? Probably not. But My IB background conveys a good work ethic to clients and investors.
Also I think you have a misconception about start ups. I did a short shadow at a start up by my school (UC Berkeley), and I loved it. Everyone is really easy going & comfortable with each other. I’m enjoying banking, but I cant wait to get back into that environment and use what I can from IB to help grow a promising startup. I haven’t spent much time in or around PE or HF’s, but I personally think in terms of lifestyle a good start up plugged into the right community is by far the best culture.
And really, I know your articles are for a general audience, but your quality of life can vary so much from company to company group to group. A roommate from school is working for Bain consulting in M&A, and hardly ever has to travel & loves his coworkers.
Read the About page… experience starting multiple businesses. I’m glad I did banking, but it wasn’t for me – neither is a traditional startup, as I enjoy the online infopreneur model much more.
Great article! And I got one very important lesson from this: If you want to do something else after 2-3 years of S&T(or banking), just DO IT after you graduate.
I want to become a fixed income trader. But then I always wanted to pursue a higher degree in fields other than finance and economics. And I think there may be a handful of people in this website who thought getting a Ph.D is another good option. Now that I begin to realize that working as a trader and saving some 70-150K for my graduate school and life afterwards is very unrealistic and hardly possible within 2-3 years of time frame, perhaps I can just apply for graduate school upfront.
But here’s the tricky part: My career has already been half set up, since I did two internships over the last summers and am studying a major which is quite relevant for banking and trading. I’m a junior now, and it’s too late to give up the career plan that I’d been thinking about ever since I entered collge. Do you think it’s still better to start late than never, or should I just stick with my career plan and try my best to save some money before leaving the industry?
(of course I may want to stay, but I know that only a very few traders become successful and get the rights to remain in the industry, after all)
Yeah I mean if you’re really interested in BOTH trading and getting the Ph.D degree I don’t see the harm in doing both.
You may not save a ton of money if you work as a trader at a bank, but if you enjoy it, there’s no harm in doing it and getting some experience.
i’m an analyst in the corp dev dept of a large bank. couldn’t agree more with what you said above. as you correctly predicted, i do intend to move on to business school in due time.
that being said, any insight you can offer regarding exit opportunities and related fields that i can move onto? is m&a consulting a good option? thanks!
Most likely anything finance-related in the industry you’re working in now… maybe a bank or group focused on that specific industry as well. Don’t know too much about M&A consulting but that could be another option.
Do you think you could do an article comparing Big 4 accounting to BB investment banking and give the pros and cons for both?
Really the only pro for Big 4 accounting is that the hours/lifestyle are better (at least outside of tax season) – but otherwise banking is better in terms of pay, exit opportunities, learning, networking, etc.
is 60k/year (now 70k) really that bad in NYC?? I’m wondering if I should even look at jobs there.
You can live on it in NYC, but your lifestyle will not be that great.