From Analyst Monkey to King of the Jungle MD: The Investment Banking Hierarchy
“This is not a fraternity house,” my staffer explained as he hauled me into a small conference room.
“Some of the MDs have complained about how messy your desk is, so clean it up.”
Genuinely curious, I replied, “Were you referring to the empty Red Bull cans or to all the papers too?”
Not a good start to your 3rd week on the job.
I told this story to a few co-workers afterward and they all laughed and responded the same way:
“He’s lying, a bank is exactly like a frat house.”
They were right – just like a fraternity, there’s hazing, a hierarchy, and certain rituals you must go through to advance.
While this site has been analyst-focused in the past, today you’re going to learn all about this hierarchy, how much you get paid at each level, how the work differs, the average age range, and the possible exit opportunities.
And if you’re curious about hours please stop reading this site right now.
Footnotes & Starting Assumptions
As with the analysis of where your paycheck goes, here I’m starting with the assumption that you’re in a developed country in a major financial hub like New York, London, or Hong Kong.
At the end you’ll learn how this hierarchy might differ outside banking, outside those cities, and in other countries.
These pay figures are not exact – I used recent salary and bonus figures, data from the Careers-in-Finance compensation listings, and other sources like that to get numbers.
So yes, there are exceptions and sometimes you see more pay or less pay – these are rough averages.
Let’s dive right in and start with the bottom of the hierarchy: the analyst monkey.
What You Do: You’re a monkey, and your chief responsibility is to collect bananas for the bigger monkeys higher up in the food chain.
You do most of the Excel and PowerPoint work, take notes, send emails and call people, and even take care of random tasks like fixing printers and picking up dry cleaning.
How You Get In: You’re recruited from a top undergraduate or Master’s program, or you network like a ninja and get in from a lesser-known school. Once you go beyond a few years of full-time work experience, you won’t get in as an analyst because you’re overqualified.
Yes, some people pull this off anyway but it gets exponentially harder the longer you’ve been working.
Age Range: Most analysts are just out of school, so 22-27; in countries with military service or with 5-year undergraduate programs (Europe) the upper end of the range is more common.
Pay: This varies by region and the state of the economy, but most 1st year analysts make at least $100K USD all-in (base salary + bonus) and that may go up to $150K or more if the economy is good.
2nd and 3rd year analysts see increased pay, usually closer to $200K in a good year for a 3rd year analyst, and maybe $150K or a bit less on the lower end in a bad year.
Time to Get Promoted: Usually it takes 3 years to become an associate.
Possible Exit Opps: See our comprehensive article on IB exit opportunities.
Analysts have the most exit opportunities out of all bankers because they’re young and haven’t had “too much” experience in a certain field yet.
What You Do: If the analyst is the monkey, you’re a bigger and better-groomed monkey who’s much smoother in social situations.
You may still do Excel work if the model is complex, but mostly you are checking the analyst’s work and making sure he doesn’t screw up. You spend most of your time managing the analysts and making sure the VP’s orders get executed.
Much of your time is spent talking to clients and seeing what they need when you’re working on deals; analysts are too busy cranking away to have much client interaction, at least at large banks.
You get to attend more meetings and pitches than the analyst, but you will always have a non-speaking role unless the MD needs a number from you.
How You Get In: You either work as an analyst for 3 years and get promoted, or you get recruited out of a top MBA program after working full-time for 3-5 years in another industry.
Theoretically you could get recruited for an associate position if you’ve already graduated from an MBA program and have been working in industry for a while, but this is rare – your chances are 100x better when you’re still in school.
Age Range: This one varies more than the analyst age range because associates come from more diverse backgrounds; 25-35 is the safest estimate because some associates are promoted directly from the analyst pool while others get recruited out of business school.
Getting in when you’re under 25 would be virtually impossible unless you graduated college early, and having 10+ years of experience pre-MBA makes you overqualified.
Pay: Again, there’s more variation here than with analyst pay because the bonus takes up the bulk of an associate’s compensation and that’s heavily dependent on the economy.
In a bad year, a 1st year associate might get between $150K and $200K USD all-in, while more senior associates (3rd and 4th years) might get closer to $400K or $500K all-in in a great year.
If your group is just OK and the economy is neither great nor terrible, your pay will be in the middle of that range.
Time to Get Promoted: Usually it takes 3-4 years to reach Vice President, and it’s harder to get that promotion than it is to go from analyst to associate – you need to show more leadership and client management skills.
Possible Exit Opps: It is more difficult at this level, but the same exit options that exist for Analysts also exist for Associates.
There’s less of a structured process, and you have to be far more proactive in reaching out to recruiters and networking.
What You Do: Moving up the pyramid once again, you are an even larger and more intimidating monkey, and you’ve got lots of barrels to throw down at the chimps below you climbing up the ladder.
You make sure that deals and pitch books get done – you interpret what the MDs and Directors want, and ensure that whatever pops out of your analyst’s cubicle resembles it.
You get a lot more client interaction, and may call buyers and directly pitch a company that you’re selling.
And as you move up, you have to start shifting over to relationship development and winning clients – which is incredibly tough and one of the most difficult transitions to make.
How You Get In: You get promoted after working as an associate for 3-4 years.
It’s extremely rare to break in as a VP coming from outside banking, and I’ve never seen it happen. To have the skills required to run deals and win clients you need to have been in banking for a long time.
Age Range: Since you must have been an associate first, we could say the age range is 28-40, with the average somewhere in the middle.
Pay: There’s even more variability since the bonus takes up such a high percentage of your compensation; base salaries do not increase that much as you move up (even MDs might see only around $150K-$200K base).
Most VPs will earn between $300K and $1MM USD, with the upper-end of that range for more senior VPs in a good year and the lower end for more junior VPs in a bad year.
Time to Get Promoted: Probably another 3-4 years to reach Director / Principal / SVP, though it varies and you may do it more quickly depending on performance.
Possible Exit Opps: Even more limited than associates – either stay in banking or go to a normal company in corporate development.
Moving into PE from this level would be “challenging” to say the least, and even in other fields of finance you would have too much experience to have a good shot.
NOTE: Again, though, in practice people can and do move around – so exit opportunities do still exist even at this level
Director / Senior Vice President / Principal
What You Do: This one is a mix between what VPs and MDs do, and the role differs depending on the bank and group.
Sometimes you focus more on developing relationships and winning clients, and other times you do more execution work and project management like VPs.
But no matter what your role is, you will have to move closer to winning clients if you want to advance to the next level – Managing Director.
How You Get In: You’ve already been an associate and a VP, and you get promoted to this level after a few years of being a VP. I challenge you to find a single example of someone who was not already in investment banking and entered the industry at this level – it doesn’t happen.
Age Range: Sometimes you could get promoted more quickly (2 years rather than 3-4), so we’ll say 30-45. 45 is on the high end and you’d see that only if the person did something else for many years before getting into business school and then investment banking.
Pay: This one’s hard to pinpoint because it’s somewhere in between VP and MD in terms of pay; we’ll say $400K – $1.5MM USD to reflect that range.
As with the other pay numbers here, you should expect the lower end of the range in a bad economy if you haven’t performed well (your closed deal count is low or nonexistent) and the higher end of the range in a good year.
Time to Get Promoted: Similar to the others, a few years to go from here to the next level: Managing Director. We’ll say 2-3 years to get a specific number.
Possible Exit Opps: Imagine a blank screen with no visible life forms. Now imagine seeing this every day after you quit or get fired.
In all seriousness, you could always move over to the corporate side but it would be tough to move into other fields of finance from this position unless you happen to be a serious rainmaker and you have enough contacts to make yourself useful to a PE firm or other buy-side firm.
What You Do: You’re King of the Jungle. All the other chimps answer to you, and you move them around much like a chess grandmaster would move around pawns, bishops, and knights.
90% of your time as an MD is spent winning clients, meeting companies, and developing relationships – you fly around to conferences, meet with PE and VC firms, and position yourself to advise CEOs and win deals.
Occasionally if there’s a massive deal and it’s too big to fail, you get involved with the negotiations. Or if you have a special relationship with an investor or buyer, you may pitch a client to them.
But otherwise, you are sitting back and bringing in new business while everyone below you executes.
How You Get In: Most of the time, you’ve been a banker for life (or close to it) and you’ve worked at all levels in IB before – often across many different banks.
Sometimes you do see MDs who get into the industry from other fields (e.g. a Partner at a law firm that focuses on corporate and securities law, or a PE Partner who has lost his sanity and wants to move back to the sell-side).
But those scenarios are rare even at this level and you don’t see them much at large banks.
Age Range: This one is impossible to define precisely because some MDs really do stay in it for life, or at least until retirement age – for most bankers it is the highest they’ll ever go.
We’ll say early 30’s is the minimum age here, but on the upper end of the range there’s no limit – you rarely find MDs who are past their 50’s, though, so maybe that’s the limit.
By that time they are either burned out and retired on a beach somewhere in Thailand, or they’ve advanced further within the bank (see below).
Pay: This is where compensation has the highest “beta” (this is a finance site, so I am allowed to whip out finance jargon when convenient).
In a bad year with no closed deals, an MD might not make much more than his base salary – maybe the $200K – $300K USD range.
In a good year, they might make in the low millions USD ($1MM – $3MM) depending on how the group is set up, how many deals they’ve closed, and how well they’re playing the office politics game.
Time to Get Promoted: Yes, there are levels beyond MD at large banks (Group Head, C-level executives) but there’s no set path to reach them – you could get lucky and get there in a few years, or you might be there for a decade and never see the light at the end of the tunnel.
Unlike other levels of the banking hierarchy, it’s not “up or out” at the MD-level – it’s more like “make lots of money for us or out.”
So as long as you keep producing, your position will remain intact.
Possible Exit Opps: If you’ve been a lifelong banker, it will be very difficult to move into a completely different field – but you do sometimes see financiers at the top moving around to other high-level positions in the industry.
Some MDs may also just retire and do something completely different – business coaching, angel investing, writing, and so on – especially if they are worth tens of millions of dollars and don’t have a pressing need for cash.
Wait, What About Other Levels?
Note that in some regions and at some banks these levels have different names – VP might be labeled “Director” and SVP might be “Executive Director,” for example.
At firms with a partnership still in place (Goldman Sachs), there is also a difference between normal MDs and Partnership MDs – the Partnership ones make a lot more money.
And then beyond MD, there are Group Heads (e.g. Head of M&A Europe or Head of Capital Markets Asia) and the C-level executives at firms.
With those, the potential compensation is even more variable and could range into the tens of millions (or higher for C-level in a good year) – or the bank might slash its CEO’s pay to $0 in a symbolic gesture if they’ve had a bad year and caused economic Armageddon.
Differences at Boutiques?
Boutiques tend to have fewer levels than bulge bracket banks, so you might not see as many VPs and Directors/SVPs.
Advancement may be faster depending on the firm’s size, but pay will also be lower since the deal sizes are smaller – regional boutiques might pay 50% of the bonus that bulge brackets do (very rough estimate).
This does not apply to the “elite boutiques” (Evercore, Lazard, etc.) which pay more in-line with bulge brackets.
What About Trading?
On the trading side there is a flatter hierarchy and you may reach the MD level more quickly.
Pay is also extremely variable and the top traders might make tens of millions even if they never advance beyond the MD-level (ok, it’s questionable how true that will be post-crisis and financial regulation).
The Buy-Side: Private Equity and Hedge Funds
This one is impossible to cover fully here (maybe in a separate article if someone has good data), but let’s give it a shot:
The private equity side is similar to banking, but you will make more at each level; as a Partner in PE you could make significantly more than MDs in banking (hundreds of millions if you’re Henry Kravis), but at smaller firms you’ll see compensation closer to what banking MDs earn.
The main difference is that you get carry at the Partner-level as well, so that opens up the possibility of earning into the stratosphere if you’ve invested well over the years.
On the hedge fund side, there’s so little reliable information that it’s hard to say anything concrete.
You hear stories about people making hundreds of thousands or millions at young ages, but the average case is probably closer to the compensation levels above for banking.
And while hedge fund managers making billions of dollars a year get a lot of attention, that is far from the average case: the majority of funds out there are much smaller ($100M – $1B AUM) and it’s impossible to earn anywhere near that amount.
In short: hedge fund pay has the highest ceiling of anything here, but there is a massive difference between the founder or the portfolio manager and everyone else in the fund, and pay is almost 100% dependent on fund size and returns.
Developed countries (Western Europe, Hong Kong, Japan, Australia, etc.) see similar pay levels and have the same sort of promotion timelines.
In emerging markets, it’s more chaotic and you might advance far more quickly – but also make less in absolute dollars, even if you have your own palace and a harem or two.
The investment banking culture is not as well developed in the BRICS of the world, so you will see many deviations from the hierarchy above.
But in most of these places you have a 0.0% chance of breaking in as a foreigner with no connections: they are looking for locals who have studied or worked abroad and who are now returning to their home countries.
How Do You Move Up the Ladder?
Please see this article on investment banking promotion.
So, what does all of this mean?
Stop Assuming That Investment Banking / Finance in General are Guaranteed Paychecks
Especially as you move up, your pay is based almost entirely on your performance and the economy. A VP who has several closed deals may make more money than an MD who has nothing and gets a bonus of $0.
I’ve attempted to estimate pay ranges above, but to get there in the first place you’ll have to work 80-hour weeks for years and sacrifice your social life and maybe your first-born son or daughter.
Most MDs are Not Mega-Wealthy
Look at the Forbes list of richest people in the world, and you’ll see that there are very few (no?) banker-types on there, unless you count Warren Buffett as a banker (he’s not).
After you’ve taken into account taxes, recessions, the cost of living, and so on, a 10-15 year veteran MD might have $10 million or more saved up.
That is an enormous amount of money to most people, but you will not become a billionaire in finance unless you’re on the buy-side and you’re one of the best in the world like John Paulson.
Forget About Breaking Into Banking in the “Middle Years”
You either get in as an analyst or associate, and if not, you’ve missed your chance unless you have highly relevant experience, the market is frothy, and you trade down (i.e. go from a F500 to a boutique).
Even getting in at the top from other industries is uncommon – you see it more often in VC or PE where operational skill sets are valued.
If you’re in this position, you’re better off looking at other industries or starting your own business.
Expect Your Role to Change Gradually, Not Rapidly
Even though banking has a rigid hierarchy, what you do at each level is not as narrowly defined.
When you move from analyst to associate, you won’t instantly start dating super models or get your own reality TV show – sorry.
Your hours might improve slightly and you won’t have to do as much grunt work, but the pressure to perform will be greater than ever as well.
Oh yes, and please reduce your expectations of $10 million and that beach in Thailand.
By the time you get there as a banker, you’ll be old and wrinkly and probably can’t stay out in the sun for very long anyway.
A frat house, on the other hand, might be well within your reach long before that.
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Degrees and Certifications: Got CFA + JD + MBA + MD?
Despite my best efforts to bash certifications and give snarky responses to related questions, there’s still confusion on what banks care about, what you can do with different degrees, and the meaning of life.
While I can’t help with the meaning of life (42?), I can tell you which degrees and certifications mean something and help you break into finance – and which will not.
Why the Hate? You’re Already Biased!
I’ve seen lots of aspiring bankers use degrees and certifications as a distraction from more important goals, like getting solid internships, networking, and even getting leadership roles in groups.
You may also think that degrees and certifications are a magic bullet: sure, you have a 2.1 GPA from an unknown school and you’ve worked in telemarketing for 5 years, but if you get that Bloomberg certification, Goldman Sachs will give you an offer right away, right?
Maybe I should get into the business of selling certifications with logic like this…
Definitions: Investment Banking / Private Equity vs. Other Fields
The usefulness of degrees and certifications varies widely by the field of finance you’re interested in.
For example, if you want to be in risk management then the FRM exam is essential; if you’re doing portfolio management or equity research, the CFA is viewed as a requirement. And bankers, of course, don’t care about either of those.
I’m focusing on investment banking and private equity here because that’s what this site is about and what you’re interested in if you’re reading this right now.
For more on other fields and where certifications might be useful, check out these articles from Bionic Turtle:
5 Degrees Above Zero
Let’s start with degrees since they’re less painful to write about.
The only degrees that banks care about are Bachelor’s, Master’s, and MBA degrees, and only for very specific reasons.
But just for fun, let’s jump through the entire list and learn why – and what to do if you’ve taken the plunge into JD/PhD/MD land.
High School / Secondary School
Please, no more questions from 16-year olds who want to get an investment banking internship. Go outside and play in the sun, you’re probably Vitamin D-deficient anyway.
This one is just a check-the-box requirement at banks, and if you’ve only graduated high school you won’t be able to do anything real – you need at least an undergraduate degree (maybe you could work as an assistant but is that what you want to do?).
Your actual performance in secondary school matters more in countries like the UK where A-Levels are huge – in the US, listing high school grades or AP scores on your resume when applying to banking jobs is silly. And where you went to school only matters if it’s somewhere prestigious, like Exeter or Andover, where you might get some networking benefit.
This is the bare minimum you’ll need to actually work at an investment bank, and most other finance firms.
Every week I get comments asking, “I’m 38 and never graduated from college – do you think I can become an investment banking analyst?”
No, you can’t.
- Supply and Demand – Banks have so many university graduates who’d give up a kidney to work for them that they can afford to reject 99% of applicants and still have more people than they know what to do with.
- Work Ethic – If you can’t finish a university degree then banks will assume that you cannot finish any project, which is a problem when you have a 100-page pitch book due in 3 hours.
Yes, I know there are good reasons you didn’t get a degree – you dropped out to start your own multi-billion dollar company, you couldn’t afford college, or you became a pop star and you’re still on leave.
That’s lovely, but life is not fair and if you don’t have a degree you’re not getting into investment banking or private equity.
Maybe you could trade for a small prop trading firm if you’re a baller trader without a degree, but even there it’s tough – they care less about pedigree than banks, but everyone else there will have the degree.
It’s approximately 100x more difficult to get into banking coming from a “non-target” school (one where banks don’t recruit) compared to a “target” school (the Ivy League, LSE, Oxbridge, and so on), so go to the best school possible.
What you major in doesn’t matter too much as long as you get decent grades and internships, but you can review your options right here.
- You need the prestige because your undergraduate school was unknown.
- You had poor grades and need to press Ctrl + Z on your transcript.
- You didn’t get an offer and want to try again, with better access to recruiters.
- You’re in Europe and 5-year programs that include both the Bachelor’s and Master’s degree are common.
The most common question on Master’s degrees:
“So, if I go for a Master’s in Finance program I can start as an Associate, right?”
No, you can’t, because:
- You would need at least 3-5 years of previous work experience or 2 years as an IB analyst first.
- Master’s programs are less of a time and money commitment compared to MBA programs.
I must have heard this question 500 times at career fairs and the answer is always the same: “You’ll still be an Analyst.”
This is the only advanced degree that allows you to “level-up” when you start working.
IF you have had enough experience (usually 3-5 years in a normal industry, or 2 years as a former IB analyst), then you’ll start out one rung above the Analyst: you’ll be an Associate instead.
Which means you get paid a bit more, have more responsibility, and you get to sleep 6 hours per night instead of 4.
But do not assume that just because you get an MBA, banks will automatically interview you or think that you can be an Associate.
There are plenty of ways to screw it up, including going to a non-top-tier school, not having enough work experience, or not showing a clear progression toward being interested in banking.
While Damages the TV series is awesome, most law firms are not even close to that interesting in real life: the Partners at your firm might be sadistic, but they’re still far from Patty Hewes.
So many lawyers get the bright idea that they could go into finance instead and make bank while abusing their former co-workers.
Just one small problem: banks don’t give a crap about law school.
OK, that’s not 100% true and it’s viewed a little more favorably than the MD or PhD – but there’s no added bonus for going to law school and it’s a much more indirect path to banking.
You have to graduate from law school, work in corporate law for a few years without going insane, and then network your way into banking from there.
Having the law background may benefit you in areas like Restructuring and Distressed Investing where there’s legal overlap, but it’s a stretch to say that you should go to law school specifically to get into those fields.
If you’ve already taken the plunge, you can’t exactly abort midway through – so finish, do corporate or securities law, and then network into banking after working for a few years.
You may actually start as an Associate if you do law school and then corporate law before banking, so the JD can be another way to level-up.
If you thought bankers looked down on lawyers, you’ve never seen their reaction to PhDs – ouch.
You might be the next Stephen Hawking, but that doesn’t matter because you don’t need to understand wormholes to be a banker – you just need to understand how to change the font size in pitch books.
Most bankers think that PhDs are too well-educated to go back to fixing printers and scouring through SEC filings, so there’s a significant bias against hiring them.
Sometimes you can still get into finance if you have the degree, but usually you have to:
- Target a boutique that fits your background exactly – like an industrials-focused firm if you have a PhD in materials engineering, or a healthcare-focused firm if you completed an advanced degree in biochemistry.
- Go for equity research instead. They actually care about the degree because they want people who understand an industry in-depth – again, you would focus on groups that match your background.
- Go the quant route (works best with physics/math/related degrees). Sure, trading will never be what it once was, but firms always need quants and smart math people to build their models.
You face a similar problem here: you’re over-educated and banks will assume that you have no interest in spreading comps if you’ve qualified to perform open heart surgery.
They may also assume that you’re unable to commit to anything and stick with it: how could you have made it through years of med school without realizing you wanted to do business earlier?
In this situation you’d have to follow the PhD advice above and go after boutique banks in the healthcare/biotech/pharmaceutical space and/or look into equity research. You don’t have the ideal background to be a quant, so that’s not the best idea here.
You’ll also need a really good story about why you’re making this move – not just “I realized business was so much cooler!”
You need a specific incident or person that made you interested, and a perfect explanation of how you realized that medicine was not for you after years of doing it, but how you’re simultaneously certain that finance is for you with 0 years of experience.
Combo Degrees – JD + MBA?
Combo degrees get another “thumbs down” from me.
We already learned that adding a Master’s degree on top of a normal bachelor’s degree, for example, won’t let you start as an Associate.
But what about that famed JD + MBA combination – surely that must open up more exit opportunities, right?
No, not really. Most jobs are geared toward law or finance, but not both.
It would be most useful in areas like Restructuring, Distressed Investing, or arguably Real Estate / Project Finance where there’s overlap with the law and legal codes.
But even there, it’s a stretch to say that the JD would add much: even the MBA might not be terribly helpful if you’ve had previous, relevant experience.
You may also face a branding problem if you have a law degree and a business degree: business people will think you’re a lawyer, and lawyers will think you’re in business.
There’s always a temptation to think that more = better when it comes to degrees or certifications, but that’s just not true.
You want the minimum investment required for maximal gain – anything more than that reduces your ROI.
What about other combinations like JD + PhD + MBA, or JD + MD + MBA? Please, don’t even waste your time and money – it’s just silly.
Adding more advanced degrees like this will hurt you and make you look like more and more of an academic and less and less like someone who can actually make money in the real world.
This part will be shorter because certifications matter far less in banking and PE than degrees.
The main one that generates debate is the CFA and whether or not it’s helpful for breaking in – others are either completely useless or marginally helpful at best.
Series 7 / 63 / 65 / 66 / 79 / 84563X2
If you have a ton of free time, you’ve already networked extensively, and you already have great internships and/or a full-time job lined up, then sure, knock yourself out.
Just be aware that if your bank requires them, you’ll complete the exams during training anyway.
If you really want to set yourself apart before you start working, you’d be better off moving to another country for a few months and doing something interesting there.
I’m not going to rehash all the arguments for and against the CFA here – go consult this article if you want to go down that path again.
The short version is that it’s not the best use of your time for investment banking or private equity in developed countries, but it may be more useful in emerging markets or in fields like equity research, portfolio management, or some types of hedge funds.
And do not think that it will cover up an unknown school, low grades, or no work experience – it won’t.
Think of it as an added bonus and something to look into if you already have top schools, high grades, and great work experience.
CPA / FRM / Other Certifications with C and F in the Names
Look, if you want to be an accountant or a risk manager or perhaps other things outside of IB/PE, then sure, go ahead and pursue these.
There’s an alphabet soup of other certifications out there, and David from Bionic Turtle does a great job of summarizing them here.
There’s nothing wrong with any of these – it’s just that they will not help you much with IB/PE, because getting in is based almost entirely on practical experience.
In the future, who knows, there may be an exam to get “certified” in investment banking – but for now no one takes anything like that seriously (yes, I’m talking to you, “Certified M&A Advisor”).
There’s another critical reason why such certifications don’t apply to IB and PE: at the top levels these fields are based on sales, relationships, and negotiation skills – skills that can’t be tested on a written exam.
Bloomberg / FactSet / Other
Don’t even bother – you’ll learn everything you need to know (which is not much) when you start working, and you don’t even use the complex features in banking.
These may actually hurt you because you do not want to be known as “The Bloomberg Guy” or “The VBA Guy” or anything else that results in annoying requests to fix other peoples’ broken-beyond-repair spreadsheets.
Standardized Tests: SAT, GMAT, GRE, A-Levels…
These aren’t quite “certifications” but why not throw them in here anyway?
None of these is as important as grades in university, but in the US most banks will still ask for your SAT scores, and GMAT scores can be helpful if you have low SAT scores (under 2100 in the new system). No, don’t bother going back and re-taking them if they’re low: not worth the effort.
As with grades, these tests are more about whether or not you meet the minimum score they’re looking for rather than “standing out” – so please do not re-take the GMAT if you got a 720.
Got Degrees or Certifications?
I hope not – unless you mean a university, Master’s, or MBA degree.
Otherwise, save your time and money and if you’re already too far down a path to turn back now, cut your losses and change direction as soon as you can.
Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews
Investment Banking: Pakistan Edition
But this is such a good interview and has such specific information that I wanted to publish it anyway.
Plus, the interviewee has been a long-time reader of M&I and captured the personality of the site very well. So let’s get started and learn all about banking, PE, recruiting, and the lifestyle in an emerging market that might be completely off your radar.
Q: Can you tell us about your background?
A: I play the drums. I love buffalo wings with sour cream and ginger ale. I love stargazing. I’m a huge Tolkien fan. I find jazz very relaxing. I just discovered a hidden passion for photography and hopefully I’ll be traveling to Iceland in a few months after I buy a Canon DSLR.
I was born in Abu Dhabi and raised in Dubai. My father retired from his marketing job and we moved to Islamabad (Pakistan’s capital), where I completed high school and undergrad. I was a very distracted student during my O/A Levels because I really didn’t know why I was studying and what I wanted to do, so I definitely lacked direction for a time.
But during the first year of my undergraduate, I got really interested in corporate finance and M&A – so I actually performed decently and did much better than in high school.
After graduating, I networked my way into an investment banking analyst position at a bulge bracket bank in Karachi (Pakistan’s finance capital), and then I moved into private equity in the same city.
Q: Most Westerners know very little about Pakistan aside from what’s reported (accurately or inaccurately) in the news. What is the country really like, and how is the finance industry there different? Are the rumors of economic collapse / bankruptcy true?
A: A recent Newsweek cover described Pakistan as “The World’s Bravest Nation” – after describing it 3 years earlier as “The World’s Most Dangerous Nation.” I know the general perception is that it’s a country filled with corruption, religious fundamentalism, and no roads or women.
There is an element of truth to those claims, but for the most part we’re just regular people and most of what you read about in the news corresponds to a very small part of the country.
So don’t believe everything you read about the claims above (especially the part on roads and women) or the frequent accusations of terrorism – there are isolated extremists here but they are not representative of Pakistan at large.
Economically, we were always an underdeveloped country due to corruption from previous governments – but during Musharraf’s 10-year rule we were elevated to “developing country”status. Since that time the rulers have been questionable, so the progress has been disappointing since then.
The rumors of economic collapse are untrue. We’re not in the best shape right now, but we’re far from bankruptcy – the US and its allies also have too much of a stake in the country to let a bankruptcy happen. And we’re part of an IMF program that has pledged billions to us over the next 3-4 years.
Overall finance is still very much in a growth phase here, and private equity is at a nascent stage; Islamic finance is developing rapidly and corporate finance is also thriving. Hedge funds don’t exist yet, but many banks do have investment banking divisions and a handful of research and brokerage houses here offer investment banking and related services.
Q: What’s different about recruiting there? Do they prefer certain backgrounds or certifications?
A: The recruiting process for both IB and PE is highly unstructured.
Unlike the US or Europe where certain “paths” are preferred, here you can transition from almost any finance-related field into IB or PE.
I know people who have gotten into investment banking from industry, management consulting, and research, and people who have gotten into PE from Transaction Advisory Services, research, middle office trading support roles, and corporate banking.
My VP (from the US) would always tell this analyst at my bank that the CFA was completely useless in banking, but in Pakistan people have been conditioned into believing that a CFA + an accounting degree is the key to achieving unprecedented glory.
Wheeling & Dealing
Q: You were at a bulge bracket bank there – do the other global bulge bracket banks have presences in Pakistan, or are local firms more common?
A: It’s a mix of both. JP Morgan has been here since the early 90’s, Citi even earlier than that, and Credit Suisse has been here since 2008. UBS and BoAML operate through local affiliates, but aren’t officially here.
Even though they’re bulge bracket banks, they usually work on deals worth around $100 million USD – sizable for here but small by US standards.
M&I Note: Middle market banks in the US would do deals of this size; most bulge brackets focus on $500M+ or $1B+ deals, though they do occasionally go lower depending on the market.
Since that’s “the bar” for bulge bracket banks, smaller, local firms – called “investment houses” – advise on deals worth less than $100 million USD.
They offer everything from research to mutual funds to M&A advisory and capital raising. Two of the largest investment houses also have consumer and corporate banking divisions that they use for syndications.
Pure-play boutique investment banks are still very rare here – off the top of my head I know of just one firm that offers only M&A advisory and restructuring services to clients.
Q: What types of deals and companies are most common in Pakistan?
A: The breakout for deal types is something like this:
- Debt Financing: 70%
- IPOs: 15%
- M&A: 10%
- Restructuring: 5%
M&A is most common in the banking and telecom sectors. Here’s a table of M&A activity from 2002 – 2010 that I’ve been updating from time to time:
M&A in Pakistan rarely takes place to create value – this consolidation in the banking sector is driven by regulatory requirements (specifically higher capital adequacy requirements).
The actual rationale for M&A activity would be more interesting to look at – in my opinion it’s something like the following:
- Regulatory: 65%
- Gain Market Share: 20%
- Divesting Operations or Exiting from Pakistan: 10%
- Private Equity Investment: 5%
- Value Creation: 0%
The government also has a massive privatization program in place (the numbers above exclude this, by the way) and so all the bulge brackets submit RFPs (Requests for Proposals) to the Privatization Commission for each deal.
Even some banks like Goldman Sachs, Morgan Stanley, and UBS that don’t have a direct presence in Pakistan will fly in, submit their RFPs, pitch, and fly out – they’re known as “parachute bankers.”
Some local firms also work on these privatization transactions, while the bulge bracket banks focus more on attracting institutional investors via road shows or finding international buyers for assets that the government is divesting.
Here are lists of completed and upcoming privatization transactions in Pakistan:
Q: You mentioned how you networked into investment banking and then into private equity – how is it different in Pakistan? Do informational interviews and cold calls still work?
A: Right, so just to give you a brief overview first of how I networked my way in:
I went to a non-target school, but I did have 5 internships and decent extracurricular activities, as well as the resume template on your site. And I knew a lot about investment banking and private equity and kept up with global M&A deals and private equity activity via the NY Times Dealbook site.
A year before my graduation, I cold-called the bulge bracket bank I worked at – they’re known for only hiring summer interns from top US and UK schools, so it was a bold move.
A man picked up and I asked to speak to someone regarding summer internship opportunities in investment banking – the guy replied with, “I’m the guy” and he turned out to be my future VP.
I asked about the recruiting process for summer internships and he said they had already gotten started with interviews – but to email my resume anyway so he could send it to the team.
I did that, and about an hour later he replied and said, “When will you be able to join us for an internship?”
Q: Wait a minute, so you actually got an internship just by cold-calling a bulge bracket and asking for one?
A: Far from it, though that’s what I actually thought at the time – I didn’t even get an interview. I think he was just asking that to see when I would be free for an internship rather than actually giving me one on the spot.
He said they really liked my resume but were looking for a winter intern, which didn’t work for me timing-wise due to classes.
Over the next 5-6 months, I stayed in touch, emailed him on his birthday a la Bud Fox, added him on LinkedIn, and even sent the occasional random link.
Q: So you actually pinged him consistently – that’s interesting because I usually tell readers NOT to worry about constantly staying in touch and to focus more on making a good first impression and then asking for what they want when the time comes.
A: Right – you do have to be subtle if you want to take this approach. I didn’t want to give the impression that I was stalking him or wanted to be his best friend.
I did this more because I had an uphill battle given my school and background, and because there just aren’t as many banks in Pakistan – so it’s not like the US where you could easily go through hundreds or thousands of contacts to find the most helpful bankers.
Q: So what was the final outcome here?
A: In May I called him again, sent him my updated resume and “reiterated my interest” for an investment banking analyst position.
Despite being up against 100+ candidates from target schools, I was interviewed and offered the position.
What worked in my favor?
- I was myself and had the ability to laugh at myself – I didn’t act like some super-genius with perfect grades who claimed to know everything about finance.
- I had a burning desire to get into investment banking – I read everything and anything related to banking that I could find and this came across with how much I knew about the industry vs. the other candidates.
Q: What about your move into private equity? Did you go through a headhunter there or was that also networking?
A: Networking, once again. I cold-called my current PE firm’s Dubai office and spoke to a Partner there – we chatted about how Dubai has changed over the years and about the Middle East PE market in general.
I sent my resume, he forwarded it to the Partner in Karachi, and I interviewed a couple times and was offered the position.
M&I Note: This may seem ridiculous, but keep in mind that in certain parts of the world they are looking for very specific people and recruiting is less structured. It would be tough to pull off the scenario above in the US, but the same is not true in emerging markets.
Q: So it sounds like overall, the standard networking strategies still work and may even work better since recruiting is so unstructured in Pakistan.
You mentioned before how knowing so much about investment banking gave you a big advantage – but doesn’t everyone coming out of target schools there know the industry quite well?
A: No! A lot of students from top schools have absolutely no idea what investment banking or private equity are.
I’ve interviewed candidates from top schools here and this is how interviews often go:
- Me: What do you think investment bankers do?
- Interviewee: They make investments so that you get higher returns.
- Me: Higher returns… um, ok, and why do you want to get into investment banking?
- Interviewee: I’ve heard really good things about investment banking and [Interviewee inserts objective from his/her resume and “pitches” it] and how much I can learn there and bring my skills to the organization.
- Me: Right, we’ll let you know.
One time I had a PE candidate try to convince me that he was a “private equity investor” because he invested in the stock market.
I’ve come across only one candidate who made a convincing argument for why he/she should work in investment banking or private equity. And I’ve met hardly anyone else who has networked his/her way into IB or PE here like I did.
But as you can see from my story, it’s definitely possible – if you’re hungry and motivated, you can do pretty much anything.
Private Iniquity, Pay, and Exit Opps
Q: Not to sound like those annoying kids in Harold & Kumar, but what’s it like working for a PE firm there? What types of companies do you invest in, and is your job more about sourcing or execution?
A: Work is very unpredictable, which makes the hours unpredictable as well. I’ve pulled all-nighters, and I’ve found that there is a massive cultural difference / work ethic difference between local firms and international firms.
PE firms here do not focus on specific sectors – they’ll invest in anything from green/brownfield projects to mature companies and even distressed assets.
LBOs are highly uncommon here and so most of these investments are minority stake acquisitions instead.
Work is a function of sourcing and execution – I’d say I spend 20% of my time on sourcing (looking for new investments) and 80% on execution (doing due diligence, modeling for investments, and coordinating our team).
Q: As with other emerging markets, I’m assuming that salaries and bonuses are lower on an absolute scale but higher on a relative basis if you take into account the cost of living – is that accurate?
A: Yes, definitely true. In a good year, an analyst at a local firm can make 10 to 15 times his monthly pay with his bonus (around 80% to 125% of his annual pay).
In average years an analyst’s bonus might be around 50% of his annual pay – which is quite a lot of money in Pakistan.
Q: And are your co-workers all from Pakistan or are you starting to see immigrants there as well?
A: Right now there are hardly any immigrants – it’s 99.9% Pakistani co-workers.
Q: What are your future plans?
A: I’m planning to attend business school in 2 years, ideally at Wharton. I do want to stay in PE, and post-MBA I’d want to go to a larger firm in the US and work there for a few years before returning to the Middle East or Pakistan. If all goes well, I might start my own buyout fund here one day.
I also want to take up stellar and extragalactic astronomy – it has always fascinated me. And if I have enough capital, I want to start a theme-based restaurant at some point.
Or I could just take the CFA…
Q: Please, don’t.
A: Yeah, I think my own restaurant would be more fun anyway.
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