Guest Post by Howie Bick
Investment banking is an industry known for high salaries, prestige, and big bonuses. It’s one of the industries that unlocks doors for people and presents opportunities for financial success that few have access to. But it has a cost as well. The time you'll have to invest, the energy you will be required to spend, and the sacrifices you’ll have to make are things very few industries ask you to do.
Ultimately you have to decide if you’re willing to make the investment in your future and willing to sacrifice in the short term. Some people find it worthwhile and stay the course, while others don’t and decide to bail out.
So you may be thinking at this point, why investment banking? Consider the following:
The industry is all about time, experience, and expertise. As you invest more time and energy into the industry, the more you start to reap its rewards. The people at the bottom receive the toughest deal, working long hours for low price-per-hour wages. But as you rise up, gain experience, and develop expertise, you can start to see why it’s become such a lucrative industry.
Banking comes with some really large pay incentives. People can see their salaries doubled in their year-end bonuses. A lot of this comes from the incredibly large and complex transactions you’ll be working on. The industry handles and orchestrates the largest transactions in the world and the financial intricacies that come with it.
Investment bankers deal with companies on incredibly large scales. Sometimes that might mean issuing new equity or shares to public or private investors. It could mean offering new debt in order for companies to raise capital for a specific investment. It could mean trying to turn around a struggling company, that has had a considerable decline in sales. It could also mean taking a deep dive into a company’s financials or trying to find companies to merge or acquire.
The projects and transactions you work on are incredibly large in financial terms, usually in tens of millions, often times even in billion-dollar figures. With those large figures, also come large fees for the investment bank you work for, which trickle down to you. The way they trickle down is through bonuses. The bonus structure is all about the deals you worked on, and the fees the team you worked on generated.
With that in mind, the larger the deal, the more complex it is. That means more work, more parties involved, and more of a time commitment to making it happen. The deals can run for 6–12 months at a time, and sometimes even longer if circumstances change, the structure switches, or the parties change their mind.
The banking world provides you with a lot of benefits that come outside of the dollar figures you receive. The reputation in banking extends way past the industry itself. After you decide to depart from banking, there are going to be a line of firms wanting to interview you and trying to recruit you to their team. A lot of this is due to the way you work in banking, and what you’re able to learn.
The skillset you learn in banking is one of the most translatable skillsets you can learn in an entry level position. The amount of time you spend working in Word, Excel, and PowerPoint, is incredibly valuable to companies in almost all industries. Almost every company and every industry are using these programs in the operation of their business, and the best place to learn them is banking.
Another great skill you learn in banking is finance at a high level. Investment banking is the major leagues of finance, and you get to learn from the best of the best when you work in the industry. The people in banking, especially at the top are some of the best people within the world of finance.
You’ll have the opportunity to build an incredibly powerful and meaningful network of people by working on these deals. Most of the people you meet will have a lot of value to bring to the table and will be able to make decisions at a high level. These people will often have a career's worth of experience, and the expertise to go with it. Networking with these people is never a bad thing.
All of these benefits do come with the expectation that you will produce at an incredibly high level. Workdays are usually filled with tight deadlines and high pressure. Your superiors can request for you to complete work that normally takes you a week’s time within a day or an even shorter time frame. This means you’ll be working late that night to complete it.
The industry environment is tough. If you aren’t able to produce at the level they need, odds are there won’t be much sympathy. There’s a time for you to train and onboard, but once you complete that, it’s time to hit the ground running. You’ll be placed onto a deal team, or in a subsector, and asked to produce work that will go up the ranks.
If any of your work is flawed or has mistakes, it’s going to be you and the associate above you who’s responsible for it. Ultimately the associate above you is required to check your work and help you along the way. You and the associate are a team, your interests are aligned, and both of you are there to put together a cohesive package to present to your superiors.
You and the associate have to create and provide the essential deal documents needed to move the deal along. This includes the presentations, memos, and financial models the higher ups want to see before moving forward with the deal. This could also mean any other research or market intel they request and would like to have as part of their decision-making process.
The banking industry has earned its reputation for being demanding with good reason. The work you're expected to produce is difficult and time consuming, and your managers may be tough to please. Because of the compensation you're given, you'll be expected to produce at a very high level. You’ll be making six figures plus when its all said and done with your bonus, and your bosses will demand that level of work production in return. This often means sacrificing your free time, social life, and other lifestyle comforts you used to enjoy outside the office. But if you believe in banking, the opportunities it can provide to you, and the path it offers, it might be worth your while to explore the industry.
Howie Bick is the founder of The Analyst Handbook. A collection of 16 guides created to help current aspiring analysts advance their careers. Prior to founding The Analyst Handbook, Howie was an analyst in Finance.
September 27th, 2022
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