Investment Banking: Losing its Luster?

<p>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. </p>

<p>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.</p>

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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. </p>

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

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<p>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. </p>

<p>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.</p>

<p>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.</p>

<p>Goldman</a> Picks 70 Partners - WSJ.com</p>

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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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<p>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?</p>

<p>More firms are exiting the investment banking business. Thousands of jobs are being cut every year and the industry as a whole is shrinking.</p>

<p>Wall</a> Street?s Bulge Bracket May Shrink to 5 Firms, McKinsey Says - Bloomberg</p>

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Its true that investment banking loose their attraction . According the opinion of business week and financial times that investment baking are not much preferred mployers for MBA students. But at the same time many MBA students regard investment banking as Job which shows them a way to instant financial stability and helps them to quickly payoff student loans. So it would be wrong to to say that investment banking is loosing luster Investment banking mergers and acquisitions is still very much preferred by the MBAs.

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<p>Please explain how recent layoffs equates to financial stability and quick payoff.</p>

<p>Logic would tell you that if you work in a volatile sector, stability is not present.</p>

<p>I really wonder why anyone would want to pursue this line of work. What's the appeal of working 60+ hours a week in an extremely high cost of living area?</p>

<p>Basically, how is that better than a government employee making 100-150k/year in a low cost metro area (if in Philly, that's equal to 200-300k/year in NYC), stacking two government retirements, and being able to retire before age 50?</p>

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Basically, how is that better than a government employee making 100-150k/year in a low cost metro area (if in Philly, that's equal to 200-300k/year in NYC), stacking two government retirements, and being able to retire before age 50?

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<p>I know you are in the military. But please explain how many (or what level) gov't employees in Philly are paid $100-150K a year and can stack 2 retirements and be able to retire before age 50. Our best friend went to West Point, became a lawyer, retired as a colonel after 30 years at age 50 at 75% of base pay. He taught at NIH for 15 more years and is retiring this year at age 65. I don't think he makes anything near $150K/year.</p>

<p>The key is being a Reservist and not Active Duty.</p>

<p>Salary</a> Table 2012-PHL_LEO</p>

<p>A GS-14 or GS-15 in Philly will make approximately 100-150k/year depending on Step. FLEO careers allow to you retire at 25 years of service. In a larger FLEO agency, the only reason you don't make GS-14 or GS-15 is if you are completely incompetent and refuse to move when given an opportunity of a promotion.</p>

<p>As for your reserve commitment, if you were smart and enlisted (and then commissioned later on) when you were approximately 18, you could punch out at right before 50 with approximately 30 years of service. Although you would be eligible to retire at age 38. The 100-150k/year figure doesn't even include the > $15k/year you would receive as a drilling reservist. I receive approximately $15k/year as a 1LT; it starts to really shoot up once you make CPT and above.</p>

<p>Even if you were not ambitious and only achieved rank that any person with a heart beat would have made, then your combined retirement would still be > 120k/year at age 50.</p>

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A GS-14 or GS-15 in Philly will make approximately 100-150k/year depending on Step. FLEO careers

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<p>Are you saying these are law officers?</p>

<p>Not necessarily. That's just one example of how it is possible.</p>

<p>Many federal agencies are moving to a "Pay Band" system instead of the GS pay scale. It allows more flexibility and higher ceilings. However, promotions are less guaranteed under the system. It's the effect of a drive for "pay for performance".</p>

<p>For example, without the LEAP pay that FLEOs would get, a GS-9 at the NSA would be making peanuts compared to what the same person would make at a defense contractor that does the same work at the same site. The "Pay Band" system was designed to allow those agencies to better compete with the private sector.</p>

<p>The problem I see with most literature regarding "expected salaries for career field/position" is that they never take into account opportunity costs.</p>

<p>Investment banking with 60+ hours a week represents a huge opportunity cost. You are giving up a lot of diversification and putting all your eggs in one basket in hopes that you excel over the person standing next to you who is equally talented and motivated.</p>

<p>"Basically, how is that better than a government employee making 100-150k/year in a low cost metro area (if in Philly, that's equal to 200-300k..."</p>

<p>Well, although Philly is a great city, it is not NYC. And although some government jobs are better than others, maybe the IB and S&T jobs are just more exciting and risky and a whole lot less boring.</p>

<p>There is more to a job than the wages.</p>

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Well, although Philly is a great city, it is not NYC. And although some government jobs are better than others, maybe the IB and S&T jobs are just more exciting and risky and a whole lot less boring.</p>

<p>There is more to a job than the wages.

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<p>Philly and other less populated metro areas aren't NYC; that's why they are more attractive. I grew up 35 mins away from NYC. </p>

<p>Many government jobs are boring and mundane, but those aren't the ones I would ever settle for. IB and S&T is less exciting, less risky, and a whole lot more boring that what I do (and want to continue to do or pursue in the future).</p>

<p>Being an Asian male and serving in a capacity/branch such as an Infantry platoon leader is risky. Serving in a region (South Jersey) where Asians are under-represented in a branch (Infantry) where, again, Asians are under-represented and excelling is unusual. Competing and succeeding in being selected over your peers for coveted specialty assignments such as Scout Sniper Platoon Leader is uncommon. Being recognized by your elected officials such as your Congressman to the point where they call your cell phone once in a while to see how your civilian career and military career are progressing as if they are eyeing (and betting on) you for a political future is rare.</p>

<p>I can assure you that my appetite for risk is far greater than the typical IB and S&T candidate. I'm willing to bet my life on the quality of the people around me, my own competence, experience, and skill. Can they?</p>

<p>The last thing I ever want to be in life is a conformist. I see so many of my Asian peers follow in the foot-steps of some type of generic life template. Many go to med school and others end up working on Wall Street (for a few years), and while they may have achieved great personal and economic success in their endeavors, that's all they've done. They simply didn't have a greater purpose - their lives are passively boring.</p>

<p>I want to be a trailblazer. I want to go where no others have gone before. Maybe I'm that @sshole with a chip on my shoulder and I'm out to prove something. So be it.</p>

<p>Now to bring the discussion back after being slightly off tangent, yes, a career is more than simply wages. But if you're being paid better to do something you ACTUALLY love and don't view as some type of grind, then you found what most people never will.</p>

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<li>As a side note, I'm currently a software engineer at a defense contractor. I went to a public school and majored in Computer Science. I joined the ARNG during that time and that allowed me to graduate with zero debt without even using my federal educational benefits. I'm doing better financially than all my peers from high school that ended up going to big-name schools and working on Wall Street. Debt and cost of living just destroys them even if they can find a well paying job in the financial sector.</li>
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<p>Wall</a> Street executives fret about talent drain - Yahoo! News</p>

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"There is a massive talent drain in our business," said a senior Wall Street executive, who declined to be identified.</p>

<p>"Banks are not getting top-level talent out of universities anymore, so in 10 to 15 years, there could be a big problem when it comes to leadership at the senior level of these firms," Boehmner said. "They're seeing big gaps in talent."

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<p>Well that is not what is going on at my D1's firm. But it is anecdotal info.</p>

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Well that is not what is going on at my D1's firm. But it is anecdotal info.

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<p>We would all like to believe we are invincible. It's really not that much different than when you are rotating out of a forward operating base and you're mentoring the incoming unit during this transitional period. Then a few days after you leave, you hear that they took casualties on a patrol. There will always be a few d<em>p</em>***s that try to come up with the "whys" and "hows"; they will believe that they were somehow more better than the other unit because they did so-and-so better or they came from wherever. No. You were lucky, they weren't. Sometimes, it's as simple as that.</p>

<p>Polo, I wrote a rebuttal to that article but I deleted it. People are going to believe what they believe, but I find the article ludicrous; is it gospel truth what these two people from one headhunting firm say?
My son and morrismom's D who work in the industry say no.
Working in high finance is very stressful, time consuming and highly competitive. Many people get out after a few years because the industry is "up or out" unlike government employees where it is virtually impossible to fire anyone.Many of my son's friends who work in banking want to get out because cash bonuses are capped and stock bonuses are deferred.Many want to go into buy-side finance where my son is because bonuses are not capped.
I can see my son getting out of hedge fund in 15 years and into asset management or own a taco stand on a southern CA beach because he wants more leisure time.</p>

<p>In the "many applicants" for a low paying job.....this must be a joke. For example, San Diego state received 70K applicants and Harvard had 34K. It must mean that SD state is such a better school.</p>

<p>You sound like you took that article personally.</p>

<p>No, I don't take it personally but I find it very surprising that such a badly written article is posted.</p>

<p>Layoffs</a> Watch ’12: RBS Dealbreaker: Wall Street Insider ? Financial News, Headlines, Commentary and Analysis – Hedge Funds, Private Equity, Banks</p>

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Like Bank of America, RBS has some big goals for the coming year, chief among them being the firing of several thousand investment bankers. (For those skeptical they can do it, according to a PowerPoint presentation presented yesterday, re: the “exits,” quite a bit of progress has already been made.)</p>

<p>Royal Bank of Scotland, Britain’s biggest government-owned lender, said it will cut 300 more jobs at its investment banking unit and is “on track” with its plan to exit businesses. RBS will eliminate 3,800 jobs at the division by the fourth quarter of next year, compared with an earlier target of 3,500, according to slides based on a presentation delivered by John Hourican, chief of markets and international banking, to analysts Monday. About 3,000 of the cuts will have completed this year, RBS said…The bank’s control of costs is “ongoing,” said Chris Kyle, chief financial officer of markets and international banking, at the presentation. “We will almost certainly hit this year’s number” in terms of the guidance, he said.

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<p>An entire generation of ibankers.... gone.
Their support staff.... gone.
Their researchers.... gone.</p>

<p>Barclays</a> vows fresh course, axes 3,700 jobs | Reuters</p>

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Barclays vows fresh course, axes 3,700 jobs</p>

<p>(Reuters) - Barclays' new chief executive pledged a fresh course for the British lender on Tuesday, axing at least 3,700 jobs and pruning its investment bank as he seeks to rebuild its reputation and boost profitability after a series of scandals.</p>

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