Money, Hours, Models, Bottles: Investment Banking in New York, California, and Everywhere In Between
“Are you guys even in the office past 8 PM? Whenever I call no one’s there.”
“New York is hella lame, people are so much better out here.”
“If you say ‘hella’ again I’m going to make you pay for the bottles next time – and maybe the models too.”
“Fine, I’ll do some research and see what I can send over. NY is still overhyped, though.”
No, it’s not another short story (don’t worry, the finale of Cold Call to Closed Deal is coming up soon) – it’s a banker from NYC and one from San Francisco talking to each other.
And you read that headline correctly: today you’ll learn how banking differs in different regions of the US rather than going off on adventures to distant lands.
As one reader pointed out a while back, “Hearing about all these different countries is great, but what about how banking is different on the east coast vs. west coast and everywhere in between?”
The Most Common – and Wrong – Arguments
Many people claim that the pay and hours differ significantly and that New York is more “hardcore” than other regions.
That makes sense intuitively: New York is the biggest financial center and the biggest deals tend to happen there.
But in practice, these differences are greatly exaggerated – pay is standardized at the junior levels in finance and bonuses depend more on your bank and group rather than the city you’re in.
At the senior levels, geographic differences become more important because certain offices have better deal flow and clients, and senior bankers’ bonuses depend 100% on performance.
New York bankers like to argue that they work way more than people in other regions, but last I checked there were no scientifically controlled surveys to support these claims.
Yes, maybe the hours are slightly worse since more deals happen there – but we’re talking a difference of 85 hours per week vs. 90 hours per week: you still won’t have a life.
So the more substantial differences have nothing to do with pay or hours, but rather the industries covered, the cost of living, and the exit opportunities. And yes, I’ll address the ever-popular models/bottles, networking, and a few other points as well.
This is the main difference – banks in the top 5 cities for finance in the US focus on a different industry:
- NYC: Diversified
- Chicago: Industrials
- Houston: Oil & Gas
- San Francisco: Technology / Healthcare
- Los Angeles: Gaming & Lodging / Media
There is no “best” because it depends on what you want to do in the future and how certain you are of your career.
Note that some of these fields are more specialized than others – something like oil & gas requires more specific knowledge than tech or healthcare since energy companies play by different rules and require different valuation methodologies.
So if you’re already interested in a specific industry, it may be a good idea to start out in the region that focuses on that industry – but if you have no idea yet, New York is the safest bet.
Just as actors get typecast, you will get more and more pigeonholed as you move up the ladder so you need to consider these options carefully.
One friend worked on a telecom deal at a small VC firm, then got placed into the telecom group at a boutique bank, and was then placed into the telecom group at a bulge bracket bank – he became “the telecom guy” all because of one small deal he worked on ages ago.
And it’s even worse on the buy-side – good luck interviewing for that hedge fund that wants people with European telecom merger arbitrage experience if you don’t have any.
But What About Deal Flow?
“But,” you rightly point out, “There’s a difference between deal flow, hours, and industries covered – even if you’re working a lot, you might just be building pitch books all day. And what if your industry isn’t ‘hot’ at the moment?”
I don’t disagree with you there, but it’s almost impossible to determine deal flow of specific offices online without talking to real people.
So if you’re such an overachiever that you’re going to pick your bank and group based on deal flow and exit opportunities, go talk to people at the different offices you’re considering and see what they say – but keep a critical eye open because they’re likely to oversell you on everything.
And no, in keeping with the “I would rather jump off a cliff and impale myself onto 10-meter tall spikes than rank the banks” tradition, I won’t rank cities and groups by deal flow here.
Cost of Living
As you might have guessed, New York is the most expensive – by far.
And no, you won’t go live in New Jersey to save money; it’s a bad deal for preserving your sanity, even if you become a reality TV star in the process.
The cost of living ranking looks something like this:
- NYC > LA ~= SF > Chicago > Houston
You will save the most money working in Houston because Texas has no state income tax, rents are ridiculously cheap, bottles are less pricey, and even the models (both male and female – yes, I realize that a diverse group reads this site) are less demanding and will give your wallet less of a workout.
Cost of living shouldn’t be your top concern, but you should be aware of it. Finance people are notorious for making millions of dollars and then blowing it all on luxury spending – so pay attention if you want to retire on more than $50K in that savings account you forgot about.
One other note: driving will be required in most of these places, especially somewhere like LA where there is no public transportation and where cars are more essential than food and water.
So if you hate driving and owning a car, your best bet is New York.
The main problem with exit opportunities is that it’s hard to interview when you’re far away.
You need to take time off work by using questionable excuses, hope people don’t notice your repeated absences, and then actually visit the firm enough times to seal the deal.
Since New York to SF or LA is a 5-6 hour trek, it’s not easy to hop from banking on one coast to the buy-side on the other coast. Pretty much all the analysts I knew in California stayed there, and pretty much all the ones in New York stayed on the east coast.
So by starting out in a particular city, you’re more likely to stay in that region unless you can pull off in-person trips or interview entirely via video conference (unlikely for the traditional exit opportunities).
New York having “better” exit opportunities is as greatly exaggerated as the questions over pay and hours; plenty of analysts on the west coast and elsewhere get into mega-funds – it’s just that they go to the offices in their region rather than NY.
One legitimate difference is that there are more exit opportunities in New York just because it’s the biggest financial center – but then there’s also more competition.
And you also run into the pigeonholing problem if you start out in another region: go to Houston and you’ll more than likely recruit only for energy-focused PE firms and hedge funds.
But aside from that, the actual quality and prestige of exit opportunities doesn’t differ as much as you might expect.
Networking opportunities are another more significant difference and one that people overlook all the time in favor of debating tiny differences in pay and hours.
Since NYC is much bigger than the other regions, you’ll simply meet more people there and will be better equipped to network your way into other roles.
Just as with other financial centers like Hong Kong and London, sometimes half the people you meet in NYC will be in finance (the other half will be artists or models, which is great for you as a financier).
How much does the quality of networking really matter?
It depends how certain you are of your “career path” – if you’re interested in doing tech banking and then doing venture capital in California, you’re better off starting in SF and networking with tech and VC groups there.
But if you have no industry preference, you’ll have more options by starting out in New York.
How to Satisfy the Models
Ah, now to the fun part.
The main difference is that the New York models tend to be higher-maintenance, more expensive, and more demanding; LA comes close since everyone is required to get plastic surgery, but you’ll still spend more overall in NYC.
But flashing around wads of cash also doesn’t impress as much in New York because $200K is barely middle class – not enough to satisfy models who are expecting a new bag every day.
In all seriousness, you really will spend a lot more money going out in New York; LA and SF can also be expensive and Chicago and Houston are more reasonable. Some also argue that people in the South and Midwest are “friendlier” but I don’t want to get into a debate over that one.
If you’re female I’m not qualified to comment on the quality of guys in each place, other than to say that SF is probably the worst place to find hot guys unless you’re into nerdy or hippy types.
(Yes, a female friend recently asked if there were a lot of tall, muscular blonde guys in SF and I started laughing.)
“Aha,” you say, “But even if the pay and hours are not much different, surely they must ask completely different interview questions in each region, right?”
Sorry to disappoint, but no, not really. You’re overestimating how well banks are organized – no one sits down and says, “Well, in Chicago we should ask this specific set of questions but in Houston it will be completely different.”
Once again, the main difference comes down to the industry focus: you don’t need to be an expert on the industry of focus in each city, but you should know something about recent deals and any industry-specific valuation methodologies.
It’s not really “easier” or “harder” to get into finance in different cities – there are fewer spots outside of New York but there’s also less competition.
Yes, there are banks in places besides NYC, Chicago, Houston, SF, and LA – but the offices tend to be much smaller and they don’t always recruit on-campus.
Other cities with a presence in finance include Boston (similar to SF due to the industry focus), Washington, DC (aerospace/defense), Atlanta (lots of wealth management), Miami (healthcare, Latin America), Dallas (got equities?) and probably a few others you could arguably include.
I can’t recommend starting out in these places if you have the option to go to one of the 5 major centers listed above; if you’re interested in only aerospace and defense and nothing else, then maybe DC makes sense – but you may be at a disadvantage in terms of deal flow and the buy-side.
A lot of boutiques are based in other regions as well, and you should definitely jump at the opportunity if you have nothing else lined up in a bigger city – but otherwise, stick to the top 5 above.
Outside of IB: Sales & Trading, Hedge Funds, and More
You run into the same differences in other fields like private equity, sales & trading, hedge funds, and asset management: a different industry focus and more geographically limited exit opportunities.
Some cities also tend to be stronger in certain fields – for example, Chicago is great for prop trading and the SF Bay Area is the spot to be for venture capital (LA and NYC people will claim their cities are great for VC as well, but let’s be honest – they’re not even close yet).
One downside to any type of markets-based role such as trading or hedge funds is that you have to wake up insanely early if you’re on the west coast because you work New York market hours.
If you’re fine waking up at 4 AM, getting off work at 5 PM, and sleeping at 9 PM every night you might be OK but that type of schedule can restrict your social life.
So, Where Should You Work?
If you have absolutely no idea what you want to do and don’t mind spending more money, New York is your best option – there’s more networking, more opportunities, bigger deals, and you don’t even have to drive.
But if you have a more specific goal such as going into VC or working in the oil & gas industry long-term, you could make a good argument for starting out in a different city.
There may be slight differences in pay, hours, and how much you save in your first year (ok, bigger differences on that last one), but those don’t matter much in the long-term.
To figure out which office has the best deal flow, network with bankers and ask directly rather than relying on what people say online – that information changes quickly and you’re always better off going straight to the source.
And whatever happens, just make sure you don’t end up doing equities in Dallas.
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