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 a short story or a new TV show about bankers – 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 of the US 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 there are no scientifically controlled surveys to support these claims.
Yes, maybe the hours are somewhat 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.
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.
Effectively, he became “the telecom guy” all because of one small deal he worked on ages ago.
And it’s even worse once you move beyond banking: 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 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, I’m not going to rank cities and groups by deal flow here since that changes quite frequently and since you’re likely an obsessive-compulsive person already if you’re reading this.
Cost of Living
In ancient times, New York was the most expensive city in terms of real estate, taxes, food, and so on.
Now, however, San Francisco is actually more expensive, or at least as expensive, due to the tech boom and the number of high-paid startup employees there (as of 2015).
So you are not likely to save much money during the year in either place; it’s also a bad idea to live in New Jersey or another location outside the main city to save money, since you might go insane in what little free time you have.
The “cost of living” ranking looks something like this:
- NYC ~= SF > LA > Chicago > Houston
You will save the most money working in Houston because Texas has no state income tax, rent is ridiculously cheap, bottles are less pricey, and even the models 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 in a city like LA where there is no public viable transportation.
So if you hate driving and owning a car, your best bet is New York.
NOTE: Ride-sharing services such as Uber and Lyft are actually changing this dynamic.
If you live relatively close to the office, you might be able to take one of those to and from work every day and gain some peace of mind in the process.
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 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 you’re more likely to stay in your first region unless you can pull off in-person trips or interview entirely via video conference (unlikely for traditional exit opportunities).
Again, people like to argue that New York has “better” exit opportunities, but plenty of analysts on the west coast and elsewhere get into mega-funds as well; it’s just that they work at local offices rather than in NYC.
One legitimate difference is that there are more exit opportunities in New York just because it’s the biggest financial center.
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 those differences, the actual quality 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.
Since NYC is much bigger than the other regions, you’ll simply meet more people there and you’ll 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 “aspiring” 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 gain 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 if you actually enjoy it.
LA and SF can also be expensive, while 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.
I’m not qualified to comment on the quality of men in each place, other than to say that SF is probably the worst place to find hot guys unless you’re into tech guys with a ton of money from startups.
(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.
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 maybe a few others.
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.
Maybe if you’re interested in only a very specific industry, like aerospace and defense, then DC makes sense – but you’ll be at a disadvantage in terms of deal flow and exit opportunities.
A lot of boutiques are also based in other regions, so you should jump at the opportunity if you have nothing 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.
One downside to any type of markets-based role such as trading or hedge funds is that you have to wake up very 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; if you’re not a morning person, though, you may want to stay away.
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, joining a tech startup, or working in the oil & gas industry, 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 (with 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 – that information changes quickly and you’re always better off going straight to the source.
And whatever else happens, make sure you don’t end up doing equities in Dallas.
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From Non-Target School and Unpaid Wealth Management Internship to Full-Time Bulge Bracket Investment Banking Offer: How to Make the Leap
In this interview we’ll speak with a reader who landed a full-time bulge bracket investment banking offer with 0 banking internships and a non-target school on his resume.
There have been a few interviews with readers from similar backgrounds – but I thought this one was great because he shares unique insights and unusual networking strategies – including surprising conclusions on what worked and what failed miserably.
So let’s jump in and see how this reader went from no connections and no experience to a full-time investment banking offer – and how you can do the same.
Background & Last-Minute Networking
Q: Tell us about yourself.
A: Sure. I went to an unknown state school that was off the radar of major banks, and which had very few alumni in finance. My family was involved in the retail industry so they knew almost nothing about it, and I had no connections.
I started getting interested in finance my sophomore year, but I knew almost nothing about it so I had to look online to get started, using your site and others.
The summer after my sophomore year I did an internship selling life insurance. It was commission-based and absolutely brutal – they just throw you out there and say, “Find clients and sell insurance ASAP.”
After that, I did an unpaid private wealth management internship at a large bank, which I leveraged into a full-time investment banking offer at a bulge bracket bank.
Q: Impressive. So let’s go back to that internship selling life insurance – most people would discount this experience because it has nothing to do with investment banking or private equity. Was it helpful at all in securing your PWM internship or your full-time offer?
A: Yes – in fact, my internship selling life insurance was my #1 talking point during interviews.
It sounds crazy, but bankers spent more time asking me about that experience than anything else on my resume – including my PWM internship at a brand-name bank.
In one bulge bracket interview, they spent 30 minutes having me pitch them an insurance policy.
I think they focused on it so much because it was extremely tough and I had almost no direction – it wasn’t much different from what you do at the top levels in banking, although obviously MDs work on much larger deals and with more sophisticated clients.
Q: I’m still surprised they focused so much on that internship. How did you make the transition from selling insurance to private wealth management?
A: It was pretty much a last-minute networking effort on my part – I knew I needed an internship for my junior year summer, but I assumed I had no chance at investment banking, so I didn’t even try.
I did contact a few friends and alumni from my school who were in the industry, but most of those leads didn’t go anywhere.
I got the internship itself by going through a friend who had recently graduated from my school and who was working in New York – he passed my name along to a recruiter at his bank.
Then I followed up and sent 20 emails over the next month before the recruiter agreed to discuss an internship.
Q: Let me stop you right there – why did you send so many emails? I usually say that calling and meeting in-person are more effective. Did you try cold-calling at all?
A: Yes – but it didn’t work at all for me. I could never get past the gatekeepers no matter what I did.
I know it works since I’ve had friends who pulled it off successfully – but overall I didn’t have much luck with it. You need to be really good at sweet-talking secretaries and finding the right people to begin with, and I wasn’t great at that.
M&I Note: In addition, location seems to matter a lot with cold-calling. A lot of readers have used it successfully in California, for example, but other regions are more hit-or-miss.
Q: Yeah, people do tend to have mixed results with cold-calling. Going back to that internship, though, I’m curious – most bulge bracket banks don’t do unpaid internships. How did you arrange that?
A: It worked because this was in the midst of the financial crisis / recession and everything was chaotic at the time. They actually gave me a choice of 2 internships: a paid, back-office position in New Jersey or an unpaid, front-office private wealth management position in New York – I wisely selected the second one.
A lot of students would have chosen the paid internship, but I knew it was a bad move because banks want to know that you can live and work in New York – and as you’ve pointed out before, the back office to front office transition is difficult.
Going back to your original question, the bank itself and the industry as a whole were in such trouble around this time that everyone was running around frantically trying to cut costs – so they decided to give large groups of us unpaid internships.
The “interview process” itself was really informal, and all it took was 1 interview to get the offer.
Q: Ok, so it was more of a firm-wide policy than a special exception for you – which makes sense. So how did you keep networking with bankers once you started? Were the people in your PWM group helpful?
A: From day 1 I walked in there thinking, “How can I turn this into investment banking?”
Most people in PWM were completely useless for investment banking recruiting – a lot of times they’d give me contact information for recruiters, but then the recruiters would ignore me or lie about the process.
People in PWM were fine if you wanted to do Sales & Trading, but they hated investment bankers – if you mentioned that you wanted to do that, they would instantly start looking down on you.
The only good contact I got through the PWM group was actually in private equity – my boss had the interns go around to visit key clients in-person one day, and I met the head of a PE firm like that.
I made a good impression on him, and then ran it by my boss before I contacted him for networking purposes – he was fine with it, so the PE guy referred me to a lot of people and forwarded my resume to all his contacts, which was huge.
Q: Nice – I guess we can call that one “door-to-door networking.” So aside from that one PE guy, did you do most of your networking outside the bank?
A: Yes. I did an extensive search and left no stone unturned – which was key, because my most random strategies ended up working really well.
I reached out to alumni via our database as well as LinkedIn – I often found names on LinkedIn, and then plugged them into the alumni database to get contact information. I didn’t limit myself to investment banking, either – as long as the person did something in finance, that was close enough for me.
I ended up getting my full-time offer via an alum that no one from my school had ever contacted before – he worked in a Restructuring group and had good friends at bulge bracket banks, so I got the referral through him.
No one had contacted him in the past because he went to a top business school and was detached from his undergrad institution – so others wrongly assumed he was “off limits.”
I also met alumni via my finance classes, and I directly asked a lot of professors for referrals – teachers are severely under-utilized for networking purposes.
It was really important to be the first person to contact an alumnus – the same alum is unlikely to help more than few people with referrals, so getting in early is crucial.
Q: Right, that makes a lot of sense. But those strategies don’t sound that much different from what you’d expect – you mentioned some “random strategies” before. Could you give a few examples?
A: Sure – here are 2 specific examples of more unusual strategies:
Example #1: I found out that someone very high-up at an investment bank a few years ago (C-level executive) was an alumnus from my school from many years ago. I couldn’t find his contact information anywhere, so I went through my Dean to get it instead.
I met with my Dean, told him about myself, and then he sent the resume along to the C-level executive because he knew him personally. A few days later the executive called me personally and I would have gotten an interview at his bank had I not already accepted an offer elsewhere by that point.
Example #2: Many people didn’t respond to emails, so I tried a more creative strategy instead – I went through the Bloomberg terminals available at my school.
You can look people up there if you know their names – rather than calling or emailing, I instant messaged them via Bloomberg. It worked really well, especially for people in Sales & Trading and Equity Research that were on Bloomberg all day.
Q: That’s a great way to use Bloomberg, though you do have to be careful not to go overboard with IM. Once you contacted these people, what did you say to them? Was it just the typical informational interview?
A: For most of the interviews I just said, “I’m interested in your industry and want to learn more about how I can get there.”
I did this because I knew that industries like private equity and portfolio management require another job first – and I wanted my contacts to give me referrals to other industries.
So if I called up a PE contact I would say, “I’m interested in private equity – how can I get there after I graduate?” and he would say, “Well, you have to do investment banking first,” and I would say, “Oh, ok, do you happen to know anyone in the industry?” and then I would get contact information like that.
I found that feigning ignorance – to a certain point – was more effective than acting like I knew everything from the get-go.
Q: I think that one should answer all the “Which industry should I tell them I’m interested in?” questions I get. Did you do anything else to prepare for full-time recruiting?
A: Not really – I read the usual sites online, interview guides, message boards, etc. but I focused on my networking efforts through the summer and fall. I’d say I spent around 40 hours per week networking and interviewing until I had my offer lined up.
It’s important to be persistent even when it’s the last minute and interview slots are being announced.
Quick example: A couple people from one class of mine got interviews at this one bank, and I noticed that my friends all had interviews lined up but I didn’t.
So I contacted the recruiter directly and said, “I noticed some classmates of mine had interviews lined up with your firm. I’d really appreciate the opportunity to interview with you as well.”
And just like that, she set up the interview and I got through first rounds there.
This might seem obvious, but 90% of people are too afraid to ask for what they want so they sit there and get no results.
Q: Another bold but effective move there. So what were interviews like? Did you have to address a lot of “objections” because you had no banking experience and because you were coming in from a non-target school?
A: Not really. They didn’t care much about the lack of banking experience, and hardly anyone raised my school as an issue.
However, that may have been because I interviewed fairly late in the process – after most full-time recruiting was finished. A friend who interviewed at the same firms earlier than me got grilled on why he wasn’t from a big city and why he didn’t go to a better-known school.
I had a low GPA (3.2 / 4.0) so that came up in interviews a few times. I gave the usual defense and explained that I didn’t feel it was low given my work experience, and hardly anyone asked about it past the first round.
I know a lot of people complain about their GPA, but I think those concerns are overblown – especially if you’re from a lesser-known school, networking is far more important than boosting your GPA by a small amount.
Interviews were actually easier and less technical than I expected – even though I was a finance major and had the PWM internship, I received only a few technical questions throughout the entire process.
Thinking on your feet and being good at making up stuff on the spot was critical, because I got some curve-ball “fit” questions that I hadn’t thought about before.
Q: Any interview tips that we haven’t heard before?
A: A few points:
- Interviewers often drifted if I went beyond a minute or two when telling my “story” – I know some people say that 3-5 minutes is ok, but I’d aim for 60 seconds instead.
- I tried to keep all my “fit” answers to a max of 3 sentences, or people would start to lose interest – be concise and let them ask for more detail if they want.
- Be confident but not cocky – cocky gets you obscure technical questions, while confidence makes them like you.
On the last point: a friend and I were interviewing for the same bank on the same day, and I got 0 technical questions while the interviewers asked him to build a 3-statement model on a piece of paper (!).
It was all because he walked in and acted like he was a finance guru, which was a huge mistake.
Q: Yeah, definitely. People try way too hard to impress and it always backfires. So now that you got this offer, what are you planning to do in the future?
A: I want to do PE and get an MBA in the future, but those are both quite a ways away. In the short-term I’m definitely looking forward to joining my group, but I’m also interested in the distressed debt side and possibly doing something there.
Q: Awesome, thanks for your time.
A: No problem. Later!
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