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Investment Banking: Losing its Luster?

Roger_DooleyRoger_Dooley 6084 replies100309 threadsFounder Senior Member
edited February 2013 in Investment Banking
According to the WSJ:
Repeated cutbacks have dulled Wall Street's luster for some prospective Masters of the Universe, in the latest reflection of the gloom overhanging the finance industry.

Many of the nation's top M.B.A. programs, including Harvard Business School and Stanford Graduate School of Business, reported declines in the share of students who took jobs in finance this year. And even those that posted some gains, such as University of Pennsylvania's Wharton School, are still well below their prefinancial crisis levels.

Wall Street Loses Some of Its Allure For M.B.A.s - WSJ.com

What's your take - is this an opportunity for slightly easier entry into a field that will prosper in the future, or is investment banking too risky to target?
edited February 2013
43 replies
Post edited by Roger_Dooley on
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Replies to: Investment Banking: Losing its Luster?

  • Dad2Dad2 516 replies16 threads Member
    How about considering a career that innovates or creates actual goods and services, and one that you really like (or or "passionate" about, but the term is overused). I.e. teaching, research, engineering, architecture, medicine, government, etc. etc. It is inevitable that if one's sole motivation is making money by taking a huge cut of other people's money that the most secure jobs may be somewhat cyclic. We need good IB'ers, but it shouldn't be the default career choice for the majority of matriculants at selective colleges and universities.
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  • Roger_DooleyRoger_Dooley 6084 replies100309 threadsFounder Senior Member
    I agree, Dad2. Part of the problem, if it is a problem, is that historically the financial rewards were so high for this career path that many aspired to it solely for that reason. Of course, lots of people choose careers based more on money than what they enjoy doing - generally not a great idea. You end up with burned out lawyers and engineering school dropouts.
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  • mhmmmhmm 1183 replies9 threads Senior Member
    I would disagree with the sentiment that historically the financial rewards were so high for this career path, etc. Up to about thirty years ago give or take a few yrs, Wall St. paid fairly the same as an average salary of a lawyer, doctor in private practice, an architect in a high practice, an acct in a large firm. Its only recently where the street compensation left the other professions in the dust, creating a third world class system.
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  • SinkOrSwim123SinkOrSwim123 223 replies12 threads Junior Member
    and also don't i-banking people have to work for large amounts of hours per week? I heard it was like about 90 hours per week. If true, that'd be pretty hard work just for the money
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  • rokr32rokr32 387 replies11 threads Member
    That's correct, SinkOrSwim123. Most starting analysts at IB firms work 80+ hours a week, sometimes even higher.

    That's why usually IB is usually a 2-year gig for most.

    Someone correct me if I'm wrong.
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  • muckdogs07muckdogs07 1135 replies31 threads Senior Member
    IB is usually a 2 year gig for starting analyst because most go on to business school after gaining some work experience. Hard to make it big on Wall Street in IB without an MBA.
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  • OperaDadOperaDad 2404 replies72 threads Senior Member
    Analysts out of college work 80+ hours a week for Wall Street firms. They do that for 2-3 years, and then are out.

    Associates out of Grad School also work long hours. Then it is up or out.

    Once you make it to the VP level, the hours are much better.

    Regional firms are better.
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  • SinkOrSwim123SinkOrSwim123 223 replies12 threads Junior Member
    hmm 80+ hours a week right out of college, doesn't seem like I'd want to do it. Not that I'm unwilling to work that much but...just don't see that much of a point unless i-banking is your love/passion I guess
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  • TheBankerTheBanker 262 replies8 threads Junior Member
    As a prospective banker, I've talked to many bankers and even the global head at a BB. Banking is not losing its luster. It's just as strong as before -- and just as difficult to break in if you're not attending an Ivy/top private. Of course, the economy is going through a difficult time right now and Wall Street isn't immune, but it will rebound as it always has. In fact, finance-related occupations have actually grown since 2006.

    The New Geography of Finance - Jobs & Economy - The Atlantic Cities

    I'm not a subscriber to WSJ so I can't read the entire article, but...are fewer HBS/Stanford grads taking finance jobs because they don't want to, or because financial firms aren't hiring as many grads?
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  • LakeCloudsLakeClouds 530 replies54 threads Member
    What I read in the WSJ article is the percentage of students from top-MBA programs going into banking is declining. That could either be because of student interest or lack of offers.

    From the WSJ article:
    At Harvard Business School, for example, students heading into investment banking—7% of job seekers who accepted jobs, down from 10% in 2011—reported median salaries and signing bonuses were flat with last year, at $100,000 and $40,000, respectively, while other guaranteed compensation fell to $8,750 from $40,000

    The question is what are those not going into IB doing? Many are going into private equity or other finance areas that have increased their hiring in the past 5-10 years.

    I still see an issue with the longer-term IB career path as most last only a few years. How ex-IBankers can upstate ice-cream stands and farms absorb?
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  • lancaster29lancaster29 47 replies23 threads Junior Member
    I think if you're worried about something like this, you should definitely check this out.

    https://files.nyu.edu/jh2844/public/index.html
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  • AlmaPaterAlmaPater 107 replies4 threads Junior Member
    The WSJ had another article recently about bankers leaving Wall Street basically because they were unfulfilled and not making as much money as they had envisioned, even if it is a fortune for the rest of us. Some were leaving essentially "to find themselves", without a job. The financial sector has morphed into a casino built on skimming sums small (HFT's) and large (Enron, Madoff, Stanford) from investors of all sizes. To announce an interest in banking in this era should be socially reprehensible, something said under one's breathe, with fear of being labelled a pariah. Certainly our best and brightest should be attracted to other creative endeavors, as they were only a generation ago, rather than to skim, steal, and squander.
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  • Commodore15Commodore15 117 replies0 threads Junior Member
    IB now offers much less job security than it previously did, although it is still an extremely lucrative career path for those who choose to pursue it and succeed in doing so.

    Most of the BB's either have changed or are changing very fundamentally; Citi is considering going entirely commercial, UBS has considered downsizing its IBD, etc. Although Goldman has maintained dealflow, Morgan Stanley -- traditionally the second best bank after GS -- has not. On average, these firms are slightly smaller than they were before the recession (some exceptions are JP Morgan and the almost-BB Jefferies and Wells Fargo). However, changes such as these are largely due to the fact that IB is procyclical and the economy was recently very weak. Theoretically, when the level of economic activity is renewed, the demand for the services of investment banks should again increase (and, by the same reasoning, decrease during recessions), barring any significant regulation such as the Volcker rule (and this is a GIANT and, actually, very impractical assumption; regulation will definitely increase and interfere with the industry, so it likely is, admittedly, forever changed).

    Another source of change has actually come from within the banks themselves. College students have traditionally entered IB in analyst classes, which usually guaranteed 2 or 3 years of employment in IBD, depending on the firm. The firms create these analyst classes and, in so doing, spend significant time and money preparing their new hires for continued work with the firm at the conclusion of their analyst stints. Someone above mentioned that analysts typically leave their firms for business school after their analyst stints, which is partially correct. Business school is one option, with other popular options being promotion within the firm, or a transition to an even more lucrative private equity fund or hedge fund. PE/HF positions are very rare to land after undergrad, and a pedigree that includes work at a top group at a top bank (e.g. GS TMT, MS M&A) and/or a top-7 MBA is often required for entry into either at even the analyst level. PE offers better hours and is typically regarded as more interesting, whereas HF's have more "leverage" and offer a higher chance of really "making it big". These are the biggest threat to banks, and wipe out significant portions of banks' analyst classes that the banks have invested their time and money into. They are in many ways the impetus behind the massive downsizing of analyst classes that has occurred recently at BB's, which in turn has and will continue to result in both fewer options and less job security for the field of IB.

    Hours in IB are indeed long. Although there is variation between firms, with better banks requiring longer hours, hours are bad everywhere. Analysts at most BB's average between 70 and 85 hours per week, although they frequently top 100 in the weeks leading up to the conclusion of a deal. There are also a few top boutiques that are in some ways more desirable than top BB's (e.g., Lazard, Evercore, Greenhill, Perella are frequently chosen over GS, MS, JPM) in terms of exposure to deals and exit opportunities, but that can be even more rigorous (Lazard is infamous for a stiff work atmosphere and the occasional 120 hour week).
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  • zobrowardzobroward 3741 replies193 threads Senior Member
    I am not a fan of banking/wall street.and I do agree with another poster that we need people who create,invent, make things etc...
    but that said entire groups of students in basket weaving majors graduate and are no more productive , then future bankers. and, a college is doing a disservice to students when they allow them to go into debt, only to graduate with a basket weaving major and then working at a coffee bar post grad. you can skip college to do that!
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  • LakeCloudsLakeClouds 530 replies54 threads Member
    IB now offers much less job security than it previously did, although it is still an extremely lucrative career path for those who choose to pursue it and succeed in doing so

    My sense is that the longer-term career path is less lucrative than in the past. It's an up-or-out world with a funnel of new analyst coming in each year to push out those ahead - only a few make it to partner - maybe 1 in 20? HT/PE will only absorb a few of the ex-IBers as they also hire ex-execs/consultants/etc.

    Unlike law or medicine, which have their own issues, IB seems like a much more short-term career choice.
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  • cbreezecbreeze 4690 replies88 threads Senior Member
  • shawbridgeshawbridge 5723 replies53 threads Senior Member
    There is a structural change that I don't think anybody has mentioned that will affect investment banking's lucrativeness as a career path. The Volcker rule (part of Dodd-Frank) forces i-banks to dial down their proprietary trading arms, which is where a lot of profit was made. They had extraordinary market information about the big trades of their clients and could, although they never would do such a thing, front-run the trades of their clients.

    If I'm right about the above, it his implications for profitability and wages. Without the prop trading, life won't be the bonanza that it sometimes was. When M&A transactions are down, income will go down. They can still lend money (especially JPM and BofA) and create derivatives etc., a big part of where they made their money is gone -- some of it to hedge funds. So, it is still a great place to learn about some aspects of business, but it is less likely to provide the huge payoffs of yesteryear.
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  • Commodore15Commodore15 117 replies0 threads Junior Member
    My sense is that the longer-term career path is less lucrative than in the past. It's an up-or-out world with a funnel of new analyst coming in each year to push out those ahead - only a few make it to partner - maybe 1 in 20? HT/PE will only absorb a few of the ex-IBers as they also hire ex-execs/consultants/etc.

    Unlike law or medicine, which have their own issues, IB seems like a much more short-term career choice.

    It's definitely less lucrative than it was before, when most in fact saw it as far too lucrative. Still, the compensation is very good given the current state of employment.

    Within a firm, it's true that only a very small percentage of analysts eventually make it to partner. However, it's quite common for analysts at bulge brackets to peel off after their two years to become partners at boutiques, which are numerous. HF/PE are also much larger industries than people think; PE seems exclusive because so many people have a "megafund or bust" philosophy so they only ever talk about 5 to 10 firms, and HF's are everywhere. For a lot of people, the path to PE/HF is the only reason for pursuing IB. PE firms have been known to hire from top management consulting firms, but IB still has far stronger placement into PE. By no means do I intend to suggest that there is any sort of pipeline from IB to PE, but these people really do still have fantastic options available to them after their analyst training. I personally think that one is better off by leaving IB after their analyst program for PE/HF/VC, however, because the upward trajectory within a single firm is very stunted. It's tough enough to become an associate, and the kind of compensation that most are looking for isn't really available until the junior managing director level.
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  • LakeCloudsLakeClouds 530 replies54 threads Member
    Interesting article on Goldman Sachs - smallest group of new partners since their IPO in 1999. Only 35 new partners on an annual basis - definitely up or out with the emphasis on out.


    Goldman Picks 70 Partners - WSJ.com
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  • CollectivSynergyCollectivSynergy 980 replies2 threads Member
    The financial sector has morphed into a casino built on skimming sums small (HFT's) and large (Enron, Madoff, Stanford) from investors of all sizes. To announce an interest in banking in this era should be socially reprehensible, something said under one's breathe, with fear of being labelled a pariah. Certainly our best and brightest should be attracted to other creative endeavors, as they were only a generation ago, rather than to skim, steal, and squander

    I'm not a banker, but I find this statement nauseating. You can make any industry or profession sound evil by citing the worst examples. The company that constructed my home, for example, built the foundation weak near an underground waterway (so it floods at even a slight amount of rain). There are millions of homes that are like this or built with other structural deficiencies. Should construction workers, architects, and foremen live in fear of being labeled pariahs?
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