Investment Banking - What am I getting myself into?

College Majors Business Major
1

<p>Hello all,</p>

<p>I am an undergrad student that goes to a small business-focused college right outside of Boston. My concentration is in finance, and going into i-banking has been on my mind for quite some time. However, it really became a topic of interest when a couple of friends, who are about to graduate from one of the Ivies, accepted job offers with Merrill Lynch and Black Rock back in the fall semester. Each of their total compensation for the first year came to about $140,000 - this includes base salary + guaranteed bonuses. Simply put, the money looks really good in investment banking. </p>

<p>Because of this, I would like to get all of your input so I can make sure I know what I am getting myself into if I do decide on a career in i-banking. I hope this thread can be of use to others as well. So here it goes...</p>

<p>It seems there are 3 major divisions of an investment bank:
1. corporate finance (i think this includes M&A and such)
2. sales & trading
3. research</p>

<p>From all the research I have done about i-banking, there seem to be generalizations that</p>

<p>a. corporate finance entails extensive financial modeling and Excel-ing, working 80-120 hours a week, getting 4-5 hours of sleep a night, almost no social life for at least the first 2 years as an analyst
b. trading/sales people work on the weekdays because trading is closed for the weekends, much more drama and tension-filled e.g. testerone-infused men yelling and throwing phones, in other words very crazy
c. research is researching and recommending buys/sells</p>

<p>Given these generalizations, which I assume for the most part are facts, why is it that besides the really good money, so many college grads are inclined to go into the corporate finance division of i-banking? It seems that a lot of it is pure grunt work, and you would be stuck at the analyst position for a couple of years before most people either burn out or go back to get their MBAs.</p>

<p>I find the trading/sales division to be the most exciting, and I would love to get into that. How hard is it to break into being just a college grad? I understand that being an Ivy Leaguer is a major advantage, but unfortunately I did not study enough in high school to get into one! But I do plan on graduating with good grades (above 3.7), an internship, and a degree from a decent business college that has its own trading room.</p>

<p>Like I said, the real reason why I am posting this is to clear up my understanding of i-banking. I want to know what I am getting myself into before I take the plunge, and I hope all of you who have experience in this field can help me. Right now, I want to do it because a lot of my friends are going into it and will be living in NYC this fall, it seems fast-paced and exciting, i-bankers have this sort of prestige about them, they make a lot of money with potential for more in bonuses, I do like following the financial markets, I get to surround myself with very intelligent people, and once again, the prospect of living in NYC is exciting.</p>

<p>Sure, some of my reasons are obviosuly selfish, but I guess it can be somewhat justified. Along with answering some of my questions, I hope people who read this can perhaps elaborate more on the lifestyle of the investment banker, and what a student can expect. Thanks everyone!</p>

2

<p>What school do you go to? Investment banking is an extremely competitive field, and it is very important to be attending a target school. </p>

<p>So for the pros and cons...<br>
Pros of investment banking:
1. The money (six-figures your first year out and a sharp increase for your following years in bonuses).
2. A ticket to a prestigious MBA program given that you did well and showed some signs of leadership.
3. Stepping stone onto bigger and better things (hedge-funds, private equity)
4. Prestige, power</p>

<p>Cons:
1. Your pretty much selling your soul for money.
2. No life outside your job.
3. People will think you are greedy (but who cares? lol).
4. From what I hear, women/minorities have a tough time in the office.
5. No time for family or friends.
6. Bye bye sleep.</p>

<p>When making a decision on going into banking, dont base it on just the money and the prestige. Those factors are indeed important when making a decision on a job, but when you consider the fact that you will be working for 80+ hrs a week, you better LOVE finance and business.</p>

3

<p>I'm guessing you go to Babson. To get a job with a BB firm, it would help you a lot if you went to a target school (like leo187um said). Since you do not, try to aim for some of the smaller, lesser-known firms or boutique firms. I think leo is right about the life of an i-banker, but note that all his points vary depending on what firm you end up with.</p>

4

<p>Besides the hours, the firm's culture is pretty much white shoe.</p>

5

<p>is working 120 hours a week possible? =/</p>

6

<p>
[quote]
is working 120 hours a week possible? =/

[/quote]
</p>

<p>Reading the book, The Running of the Bulls. It talks about a girl clocking 140+ hrs one week at lazard during her summer internship.</p>

7

<p>If you work for a BB firm, you will most likely get paid a lot but also have to work a lot. I've known summer interns working at Morgan Stanley who have worked 110-130 hours a week. Working for a smaller firm means less hours, but also less pay. You need to decide which is more important to you.</p>

8

<p>Well you have two choices either go into investment banking or don't.</p>

<p>If you go into investment banking prepare for the following:</p>

<ol>
<li><p>A LOT of MONEY. You will be pulling down close to and quite possibly six-figures your first year.</p></li>
<li><p>Your friends will be wondering why you make so much</p></li>
<li><p>You won't see your friends or family because you will be spending 100 hours per week in the office.</p></li>
<li><p>Your social life will be non-existant. Going out to clubs is out the window, dating is probably not happening, hell you will only be sleeping 4-5 hours per night</p></li>
<li><p>You will be all set for a top MBA program and MUCH better hours after your MBA and you can expect to be making over $250,000 per year after your MBA provided you did reasonably well at a good Bulge Bracket firm.</p></li>
</ol>

<p>So it breaks down to this:</p>

<p>If you are willing to put your social-life on hold for 2 years and struggle through a lack of sleep with basically no life outside of work, you will make a lot of money for your efforts and will have extremely good opportunities ahead of you. You will be increasing your odds exponentially of getting into a Top MBA program and thereby increasing your odds of going into Private Equity or Hedge Funds post MBA where pay is even higher and hours are significantly less. </p>

<p>Just remember if you think that Wall Street is all multi-millionaires walking around with G5 jets, Rolls-Royces, yachts and all of that........ it's not. Yes, there maybe a lot of them but don't expect to become a Managing Director pulling down $2-3 million a year. To reach millionaire status in any industry takes enormous drive and dedication. Out of all the most prestigious banks on the Street only the top 10% of everyone in the industry makes that kind of money. Don't go into it because of six figures waiting for you at 22. If you don't have a genuine passion for it kiss the multi-millions goodbye and be prepared to give up your 20's in the process for a mediocre position. </p>

<p>If you want to guarantee yourself of living a solid upper/upper-middle class lifestyle I recommend ibanking. Your friends maybe going out all the time, getting laid, and having fun but you will be making a lot more than them in terms of annual income and will have potential to make a very good living for yourself.</p>

<p>I assume your at Bentley College b/c they have a trading room as far as I know. It will be tough to get into investment banking unless you have contacts, because while a business-focused school, the school is not exactly filled with Harvard MBA/BCG/Goldman Sachs aspiring students which leads to poor banking recruitment.</p>

9

<p>"5. You will be all set for a top MBA program and MUCH better hours after your MBA and you can expect to be making over $250,000 per year after your MBA provided you did reasonably well at a good Bulge Bracket firm."</p>

<p>Hours do not get better after you get an MBA. Holding an MBA allows you to become an associate, but you will still work extremely long hours. In fact, it seems as if hours don't decline until you become a senior VP or managing director.</p>

10

<p>I guess so then FBI. So you'll have to struggle in terms of hours to make it. </p>

<p>You want to become CEO in another industry or high-ranking executive in any other industry prepared to sell your soul.</p>

<p>Ever hear the term: Anything worth working for doesn't come easy</p>

<p>It's True.</p>

11

<p>
[quote]
Working for a smaller firm means less hours, but also less pay. You need to decide which is more important to you.

[/quote]

Not necessarily. In fact at some boutique shops such as Lazard, you are actally working MORE and earning MORE, compared to the bulge bracket counterparts.</p>

<p>
[quote]
it seems as if hours don't decline until you become a senior VP or managing director.

[/quote]

The hours IN THE OFFICE decline when your a senior VP or a MD. When you get up to that level, the job becomes more sales-oriented, as you will be doing a lot of pitching, talking to clients, meeting with company execs, etc. The hours remain very long, its just that now its not necessarily all in the office.</p>

12

<p>Bottom Line is long hours. In any industry if you want to make in the $2-3 million range you MUST put in LONG hours.</p>

13

<p>leo, it's funny you mention the book "The Running of the Bulls". I just finished it tonight lol. Yea, I read about Jessica Kennedy and her 140 hour work weeks. Yikes. I remember reading about how she was on the verge of a breakdown, which just goes to show how hard i-banking is, even for an individual that has such drive that she doesn't even take a vacation after graduation!</p>

<p>I also read Liar's Poker, which gave me the motive to find out more about sales/trading.</p>

<p>Yes, I do indeed attend Bentley. The quality of students here I must admit are obviously not on the same level as the Ivies, or even target schools such as Carnegie Mellon, MIT, or Duke. There are a few outstanding kids here, but the vast majority are your run-of-the-mill B-students who will go onto work as an audit or analyst for a small firm near their hometown, pulling in a comfortable $50k a year while working 9-5 hours.</p>

<p>And indeed I have heard the saying, "Anything worth doing is not easy. Because if it was easy, it would not be worth doing in the first place." Something like that.</p>

14

<p>KrazyK, you better like the financial field and not just like it, but be exceptional at whatever your position is. </p>

<p>If your doing it for the money, I can't stress it enough....you will not succeed.</p>

<p>What would really be unfortunate is if you did it for the money and made more than all of your friends starting out who worked in different and less grueling industries (time wise). However, your friends had a passion for whatever it was they were doing.</p>

<p>You gave up your entire 20s, while they enjoyed theirs and in the end because they had a passion for what they did, they made it farther than you monetary wise and enjoyed it every step of the way and while having a pretty good balance throughout. </p>

<p>If your at Bentley or Babson I suggest networking you tail-off and if you can't get into banking, focus on a good job in another industry and use that to get yourself into a Top MBA program. After the top MBA join investment banking as an associate.</p>

15

<p>Dunkaroo,</p>

<p>thanks for the input. i do really need to figure out if i truly enjoy finance for what it is, not for its glitz and glamor that you see in magazine and movies (like boiler room).</p>

<p>I think like, only 1 kid in the graduating class of 07 from Bentley got an i-banking internship through SEO at JP Morgan. But he is truly an i-banking freak from what I know about him. He has accepted a full-time offer with them already. That may be my best shot since I do not go to a Harvard.</p>

16

<p>so on average, how long (in years) can one expect to work till the hours become more managable?</p>

17

<p>
[quote]
not for its glitz and glamor that you see in magazine and movies (like boiler room).

[/quote]

I believe boiler room was a movie about stockbrokers, not investment bankers..</p>

<p>
[quote]
so on average, how long (in years) can one expect to work till the hours become more managable?

[/quote]

However long it takes until you decide to retire..;)</p>

18

<p>In my experience, the hours never become reasonable in IB. I worked in HR for a large IB and we all followed bankers hours (100 hour weeks were common). The lights are on in these buildings well past 3am.
Many burn out and go to different careers after building up savings. </p>

<p>Good luck.</p>

19

<p>SEems liek this is where this thread is active. i'll copy paste my reply from the other. Here’s some jambled information…</p>

<p>There is no guaranteed bonus of 75K, at least not for analysts, and probably not even for associates. Most analysts at a bulge bracket (top 6 firms or so) can make around 100-120k after bonuses. I’ve never heard of a first year making 140k, even at goldman which usually pays the highest. Also, last year was a phenomenal year, so last year’s figures are higher than average. If you look into per hour wages, analyst wages aren’t extremely high. Most people do go into ibanking for the money. I think a company did a survey and found that 90% of people in banking would find another job if not for the money. I also doubt blackrock (asset mangement) pays 140k, since generally asset management salaries are lower than ibanks.</p>

<p>Corpfin, s&t, research are the 3 major components of ibanking, although there are other divisions such as operations or IT. When most people say ibanking, they usually refer to corpfin (ibd division) as opposed to s&t or research, so when most people (who know what theyre talking about) say I’m going into banking, you can usually assume corpfin.</p>

<p>Corpfin is usually associated to be the most white shoe/white collar lifestyle. S&T on the other hand requires more of a personality (though you will need amazing communcation skills too if you are making deals in corpfin...). You definitely need sales experience and good communication skills, and you need to have extremely good instincts to do well. Corpfin is rather inefficient for analysts, since you get a majority of your work at night and are expected ot complete it in the morning. There is however overall pressure at an analyst position rather than s&t. There are a lot of reasons why people choose corpfin over s&t, less pressure is one of them. Another reason is that you get more experience overall in the corpfin department. An analogy would be corpfin is like the jack of all trades, whereas trading you are a specialist and know mostly about that. Also, sales and trading are different, so make sure you know what you want to do although they do work hand in hand (and with conflicting interests). There are more exit opportunities with corpfin. If you go into M&A for example, that prepares you especially well for private equity, which is a very very elite field in which few ibankers can even break into. Research is also important, but I just find that kinda boring hehe.</p>

<p>If you want to be a trader, you’re going to have to do really well as well to become a prop trader, someone who is able to tap into the resources of the bank and make trades on their own accounts. If you don’t do well, you may end up just as a normal trader who simply executes commands. Most traders don’t want to do that, but most of them end up doing it. Thus, in my opinion trading is a bit more risky than corpfin, with less promotions and less exit opportunities. However you do work much less with approximately the same compensation.</p>

<p>It’s not too difficult to break into ibanking from a non-ivy or target. Do you go to Bentley or Babson? Either of those schools are amazing at business, and I know some people personally (and some from these boards) who got into ibanking from there as well. Make sure you express an interest during the summer and try to get some internships, and try to contact some alum who will help you get a position.</p>

<p>I also recommend the vault and wetfeet guides, so check to see if your school has a subscription to the sites. I’m not sure buying them would be worth the money though, as there are tons of resources online.</p>

20

<p>how do you work 100 hours/week?
15 hours/day * 7 day/week = 105 hours/day
hmm is that even possible? how do you eat/sleep/bath and what if you have other things to do such as: laundry, doctor's appointment, haircut and etc.</p>