What is it exactly that investment bankers do?
The financial services industry isn’t exactly well known for promoting a culture of openness and sharing. Alpha, commonly referred to as the excess returns over the market’s return, is always zero when aggregated across all market participants. In other words, markets are zero-sum — you can’t do better without making someone else worse off. This, combined with strict disclosure laws and a culture where reputation matters, makes the financial services blogosphere significantly less robust and active than other industries like technology.
As part of my research when I was applying for finance-related jobs, I decided to get a better understanding of all the various positions and roles that make up the finance industry. What role best suits my background and interests? After all, the finance industry is massive — bulge bracket investment banks, private equity, hedge funds, proprietary trading shops all hire individuals into a variety of different roles. What I found surprised me: there is a significant lack of candid, intelligent, and non-commercialized content on the day-to-day lives of regular practitioners.
After digging deeper, I realized the problem: the best financial bloggers are typically always at risk at being fired by their employers. This is also why many financial bloggers write under a pseudonym.
In a flash of insight, I decided to turn to Reddit’s IAMA subreddit. For the uninitiated, IAMA is a place where individuals of various professions and backgrounds can request the community to “ask me anything”. Think of it as a giant group interview of one individual. Although it’s been plagued by fake and unverified posters lately, it’s still one of the best and most interesting sources for learning new things in a very personalized and candid manner.
I probably read close to 150 IAMAs during that period of time and saved the ones that were worth saving (probably close to one-third). Here are ten IAMAs from investment bankers that I thought were particularly unique, insightful, and interesting. Here you can find information on how to get a job in investment banking, what kind of compensation you can receive, and most importantly, a truthful account of their experiences, day-to-day lives in investment banking.
If there is enough interest, I can post other curated IAMAs for quants, individuals involved with algorithmic and high-frequency trading, traders, venture capitalists, hedge fund analysts, and other roles you can typically find in the financial services industry.
Returning to the original question, what is it exactly that investment bankers do? Read these IAMAs for some enlightenment.
Hours are easily 100 hours/week. Younger guys often sleep in the office, and work 7 days a week. You will be expected to drop everything, even if your brother is getting married, for the job.
Like many in the business, I plan to earn big and retire early, leaving banking for good to focus on raising a family and living in the mountains. Banking, for me, is a means to an end. It is also incredibly exciting, cut-throat, and demanding. definitely not for everybody. I got in after getting my MBA. It’s a full fledged process. Top 5 MBA, become the best student at school, crush your interviews, and get an offer. Investment banks are meritocracies, the best people, regardless of age, religion, or creed, will rise to the top. Indians and Chinese are everywhere in banks right now. Connections can play a big part in helping you get to know the bank.
About 80% of what I do can be done by a monkey. That leaves about 3 hours a day doing something that a guy off the street would struggle with. Most investment bankers come from pretty impressive backgrounds (mine’s pretty average comparatively). The first way to learn about the business world is to major in something business related. Next – get a subscription to the Wall Street Journal, and scour the internet for information. I’m pretty fresh into my career, so I don’t think I’m the best person to give advice. But from what I do know, the real world involves three major things – work, compensation, and the people you work with. I think it’s important to be satisfied in all the areas. You don’t have to love all three, but if one’s off – you will not be successful.
Well, you know how companies need to borrow money to do shit? Like complete projects or buy things? Well, they can’t exactly go over to Bank of America and ask for $500 million. So, they come to us. A lot of people think that most companies issue stocks to get their money. In reality, the market for loaning money to companies is way bigger. Basically, I help set up this deal so the company can borrow its $500 million. In return, they give us a small percentage of that money.
- I am an Investment Banking Analyst (lowest level) on Wall Street AMA (as well as a Redditor and NOT a Republican)
As far as investment banking in particular goes, only MBAs are common, but my position across the bank is mostly staffed by others like myself who only completed a bachelor’s degree. Compensation is based on seniority and performance. Your salary (here in NY) starts at 70K for a 1st year analyst and jumps to 80K your 2nd year. You are ranked against your peers and are lumped into one of 5 buckets. 10% get 1st tier, 20% get 2nd, 40% get 3rd, 20% get 4th and 10% get 5th. These ranks determine your bonus, which is doled out at the end of a year of work. Last year I was ranked top bucket and received a $65K bonus, while the bottom tier received $20k. The range for second-years is going to be around ~30K – 100K. Keep in mind that I average, at minimum, 80 hours a week in the office. Save for emergencies or really important events (weddings, etc), I cannot get time off if something needs to be done. I spent all of the holidays both years in the office, Christmas day included. I’ve worked over 130 hours in a single week. We’re literally expected to hand over the reigns to our life to the bank. And we do.
Many of the people there seemed very happy in what they were doing. Heck, they made a lot of money, but that doesn’t buy happiness. They seemed to accept that this is the job I chose, these are the hours, that’s the way it is. Which is true. But I personally could not have a job requiring at least 6 days of work per week (Saturday) where you arrive, work your ass off all day, go home maybe 11-2am, eat dinner, go to bed, and report back the next day. These guys didn’t even have the time to spend all this money. I’m pretty sure large sums of salary went towards nice apartments near the office, especially younger guys. If you’re there all the time, you don’t want a big commute.
That being said, I’m not here to encourage people to work in the financial world. I think the industry is on the downturn in the long-run and being a good trader is a very specific skill. If I was you, I’d try to learn about business and about industries. Like if you’re into natural resources or something, instead of playing with numbers and learning about some dumbass metrics, learn everything there is to know about the industry -like to the point of knowing what company makes some specialized screw. It’s that type of stuff that gets you places. Unless you just wanna play with money – which unless you get a high from that, gets boring FAST.
There really is no typical day. You are always on call. Essentially, whenever you are working on a “live” deal, you are always busy. I am at the bottom of the ladder so I just do all the bitch work and whatever the client wants. Usually, it comes in the form of doing excel work and making powerpoint slides. Typical hours are 70-80/week when it is reaallly slow to 120/week when its super busy
Eh, most people where I work are pretty laid back. The hard part is is just the strict standards of work and the vast quantity of work. You get assigned a shitton of work, and it has to be perfect. That’s the hardest part. The people tend to be pretty okay, but you just get hounded very hard if you ever make mistakes, which are easy to make when you’re on 5 hours of sleep and only spend the time working when you’re not sleeping. It sucks.
The application process is a little funny. They allow individuals to submit their resumes online, but I’ve never heard of anyone getting a call back that way. Usually, there are two ways to get in: you either need to be attending a “target” school, or have a solid connection at the company. The online resume pool is basically a dumping ground for resumes (they literally get 10s of thousands of resumes). The only way your resume will stick out is if an employee spreads your resume. It really comes down to the people you know. I’ve found that you really need somebody going “at bat” for you – and your major/gpa/school usually isn’t the most important thing. Sure, going to Harvard helps… but networking is more important than your major. There are English majors who I’ve interned with in the past. In order to network, you need to be personable and be “different” than the rest of the finance drones out there. It could be a business you started, a high GPA, critical thinking ability, etc. IB is probably one of the jobs where 80% of getting the gig depends on your sociability and the other 20% is your ability to work 100 hour weeks and accept the fact that you’ll be earning less than a McDonald’s worker. The math involved is nothing an 8th grader couldn’t do.
- I am a Masters of Science in Finance international student in a top tier US school going into bulge bracket investment banking. AMA
It took about a month to finally line up the key phone call to put my application ‘in the right pile’. After that call I jumped over the formal behavioral interview, did a technical interview and was invited to the final round interview on site within two weeks. I applied online to about 20 firms, and had developed inside contacts with 3 of those firms. I didn’t hear back at all from the firms I just applied on line with, and I was invited to interview with all three firms I had contacts with. So for me, networking was everything.
- Health of Investment Bankers
- Curated Interviews From Quants: Algorithmic Trading and High Frequency Trading (From Reddit’s IAmA) Part 1
- Curated Interviews From Quants: Algorithmic Trading and High Frequency Trading (From Reddit’s IAmA) Part 2
- Curated Interviews From Quants: Algorithmic Trading and High Frequency Trading (From Reddit’s IAmA) Part 3
- Curated Interviews From Traders (From Reddit’s IAmA)