Is Investment Banking Worth it – Finance Careers?

If you are still in school or early in your career, you are probably trying to figure out what is the best job to pursue to jumpstart your career. Most people have no idea what they want to do, and that is absolutely okay! You should not feel pressured to figure out what you want to do so early in life.

Given that most do not know what they want to do in life, almost everyone focuses on pursuing the career path that pays the most out of school depending on what they majored in. That is why everyone seems to focus on investment banking, consulting or tech jobs.

Before the big technology companies such as Google, Amazon, Facebook became prominent, everyone who wanted to make a lot of money right out of college choose the investment banking route. There were not any other options if your goal was to make over six figures right out of undergrad.

These days, there are a lot more alternatives, so people start to question whether investment banking is even worth it.

My experience working in investment banking for three years

I worked at what people call these days an “elite” investment bank (think Goldman/Morgan Stanley/JP Morgan/Lazard/Evercore). I was extremely lucky to land this opportunity. As a junior in college, I went through literally dozens of interviews and numerous superdays for a summer internship, and was denied at all of them. It was not until I was done to my very last option that I somehow got lucky and received an offer.

More about my background here. Once I started working full-time, the transition was harder than I thought it would be.

I was ready to quit after two months

Going from having all the time in the world in college to losing your freedom to do anything is a tough transition. Investment banking hours are tough, so better set your expectations straight before starting the job. In college, especially during your senior year, you are basically able to do what you want when you want, while in investment banking your free time is dictated by what deals and pitches you are staffed on.

To say it was not easy is an understatement. This is the first time in your life where you are told you need to stick to a set routine for the rest of your life. I am sure everyone regardless of what career path they choose goes through this transition, but being in banking made it especially tough.

A few months into banking I was ready to quit. I did not like not being able to make weekend plans and commit to anything. Dating, concerts, dinners, college reunions, etc. where off the table. I looked at the Associates and VPs and knew the lifestyle was not going to get any better as you get promoted.

My decision not to quit

There were a few startup opportunities that looked amazing with a ton of perks and a great lifestyle. I was interviewing again literally just a few months into my career because at the time I wanted more freedom and have more control over my lifestyle. At the time, I did not fully appreciate the value of what a few years of investment banking would do. I was focused on the moment and was very close to making a rash decision because I was not used to the change in lifestyle.

Yes, I could have been that analyst who has a lifestyle outside of work that goes on dates, concerts, vacations, etc. But that analyst will get no respect from their peers, and for some reason I hate not pleasing others. I was not built that way.

I worked so hard and was extremely lucky to land that investment banking job to begin with. Thankfully I did not quit to join a startup and ended up doing three years of banking instead of two. I was ranked top bucket of my class and almost chose to stay on as an associate as well.

How did I go from almost quitting investment banking to almost staying on as an Associate?

I changed my perspective to realizing that not everyone is given the same opportunity as I was. Here I was making $140K+ first year out of undergrad and on a trajectory where I could make significantly more the longer I stayed. Yes, life is not all about money, but I watched my parents work their entire lives just to break six figures.

I realized that even if I did not want to do banking longer term, the exit opportunities were amazing. I could do practically anything I wanted after a few years of banking. Private equity, hedge funds, corporate development, startup, you name it. Almost any career path was mine to choose.

Once I changed my perspective from looking at my lifestyle at the moment to looking five to ten years out, investment banking became extremely easy and I worked harder than almost anyone else in my class. I would show up on Sundays even if I had nothing to do just to catch up for the week and stay productive.

Yes, I am probably crazy, but I knew I was fortunate and could do much more with the position I was in.

I still had a good time even though I worked so much at times

The work flow ebbs and flows. Anyone who says they are working consistently 100+ hour weeks is lying to you. Usually you either don’t have that much to do or you are working a ton. It is one or the other and it really depends on whether you are on a live deal or not.

I ended up missing all of my college reunions during my three years in banking. Something always came up last minute where I had to cancel my trip. I was still able to go on week long vacations around July/August each year and usually always had a week off around Christmas/New Years.

May not sound like that much time off, but the good part is I was in New York City and had a ton of friends from college around me. There is not a better place than NYC for going out, having a good time and meeting new people. Anytime I had to come into the office on a Saturday or Sunday during the first few years I was likely a bit hungover.  My Associate wasn’t pleased of course, but the work of an analyst during the first few years is so mindless that it doesn’t matter if you can function at 100%.

Why has investment banking developed a bad reputation?

You can read more here about life of an investment banker, but it is simple – the rise of millennials and social media. People these days are able to compare one job to another and share experiences more easily. Stories of bankers fresh out of college working 100+ hour weeks, getting staffed on a deal/pitch on a Friday, constantly having vacation plans canceled, the repetitive nature of the work, I mean the list can go on and on about bad experiences people have had in banking. Nobody likes to lose freedom over their lives and it is hard to give bankers control over their time when clients are always demanding for work to be done.

There is a reason why investment banking is arguably the worst when in comes to work life balance in finance careers. Here is a prime example of the classic impression around investment banking:

Facetime was and probably still is such a big part of investment banking (even if banks say it isn’t). If you want to stand out in any job, not just in banking, then you should be the first one into the office each day and stay late enough to show that you care. Yes, it may suck for the first few years of your career, but this is the easiest way to stand out from your peers.

I was definitely not the smartest in my class and did not go to an Ivy League school like many on Wall Street do. But I showed that I cared about the work that I did and it really stood out to everyone (at least for the first few years before landing a job at a multi-manager hedge fund). Showing that you care is really all that it takes for others to think highly of you.

Why should you pursue investment banking despite all the sacrifices?

1. Investment banking culture has and continues to change

Over the past few years, there has been a big shift away from people wanting to pursue investment banking opportunities. Big technology companies have created a lifestyle that is hard to turn down. With a ton of perks, free food, six figures starting salary, flexible hours and vacation, technology jobs have become an extremely attractive alternative to investment banking.

Banks have realized this and have made huge changes to the lifestyle of an investment banking analyst. Since I was an analyst, the lifestyle has changed substantially.

How have banks improved the lifestyle?

Every bank is different, but in general there are three big changes that banks have made:

• Protective weekends where analysts are guaranteed to have a weekend off every month. You may think wow one weekend is not a big deal, but you don’t realize how amazing this is. Every month you can choose to take the entire weekend and do whatever you want to do. Go on a weekend trip, see your parents, hang out with friends – all without the worry about getting blown up last minute and cancelling your plans. Just having the ability to commit to something is a gamechanger.
• No weekend pitch work. Before, you could get blown up on a Friday and told to work all weekend for a pitch the following week. Nowadays, MDs are told that you are not allowed to have analysts work on weekends for random meetings.
• No more 100-page slide decks. Most clients don’t even want to go through massive slide decks. 10-40 pages is all you need to get your point across and banks are making sure to minimize the amount of work created.
• General respect for an analyst and their well-being. People now are forced to care about your well-being and respect that you are actually a human being.

2. Exit opportunities are unmatchable with the skillset that you develop

Try to think about a job right out of college that gives you the same exit opportunities as investment banking. There isn’t. Maybe consulting, but even then, unless you are at one of the big three consulting firms (McKinsey, Bain, BCG), you are unlikely to have any opportunities to transition to the buyside.

Investment banking provides a transferrable toolkit that you will use throughout your career. You need this foundation early on to stay ahead of the crowd.

3. You will make more than any other career path

Aside from tech and consulting, it will be hard for you to find a job that pays you over six figures right out of undergrad. But the difference in compensation after a few years becomes substantial. If you stay on as a banker for life, you can go from making $150K per year as an Analyst, to $300K per year as an Associate, to $450K per year as a VP and then much more if you can continue to get promoted.

If you go to the buyside the upside can be even more substantial, especially at a hedge fund where salaries and bonuses can vary widely depending on the fund’s performance.

But money is not everything. You need to make sure you like what you are doing and are not burning out doing it. I quit a $500K per year job at a multi-manager hedge fund because I knew it was not what I wanted to do longer term. Many others on the buyside experience signs of burnout after just a few years. It takes many sacrifices to stay in the industry, but those that can push through can see their compensation reach in the seven figures by the time they are in their mid-30s.

Few simple words of wisdom

1. Don’t follow your passion
2. Focus on the longer-term five-to-ten year goal

Following your passion is completely the wrong advice to follow early in your career. Unless you are completely obsessed about a particular industry or have been successful at some entrepreneurial ventures, you should not follow your passion. Most people have no idea what they want to do.

Yes, I know that Steve Jobs and a lot of very rich people always say follow your passion. But that is because they realized what they love to do early on. 95% of people are not built this way. Most have no idea what they want to do in life.

Focus on choosing the path that gives you the most opportunities down the road. Passion doesn’t come out of thin air – you become passionate at what you are good at.  

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