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Investment Banking Exits: When Should I Leave Investment Banking?

Short answer – if you hate investment banking, leave after your next bonus. Life is too short to spend an extended amount of time on something that you abhor. If you do not hate investment banking…

Most investment bankers do not hate their jobs that much on a relative level – the relative distinction is important because most people we know hate their jobs, including professions that are ostensibly more altruistic – nursing and teaching in particular.

“If you love what you do, you have never worked a day in your life”

This is an awful cliché and patently false. If it is an obligation, it no longer becomes as fun despite the extensive marketing that claims otherwise.

If an investment banker does not enjoy their job but can tolerate it for some time longer, they should do so.

Half of the literature on investment banking online is about exiting to some paradise, be it private equity, corporate development, the C-suite, a start-up, a non-profit or running a hotel in Portugal.

“Get the investment banking stamp on your resume and then you can do whatever you want.”

This is the second lie. Most people do not know what an investment banker does. Hollywood’s Wall Street: Money Never Sleeps has blended investment banking with hedge funds and private equity while financial service reps and mutual fund salesmen peddle themselves as investment bankers. Private equity firms do know – but is it a good exit. In our previous post, we argued that this is not necessarily the case.

So, knowing that most people do not really care and that the people who do are not necessarily the ones you want to jump into the arms of, when does the investment banker exit?

As we alluded to in our previous post, a top tier private equity firm or hedge fund is a good exit – if you are confident in yourself. A good candidate that is being underutilized in the process driven work of investment banking can flourish in the appropriate environment in a PE firm or hedge fund. However, if you have not been an astute investor in your personal portfolio, it is much more difficult to fake it in PE or a hedge fund because results are based on returns rather than sales.

In investment banking, it is less likely that someone who does not belong is “found out”. Bankers become very familiar with a process and can manage clients through a deal until they are given sales targets that they cannot meet. They can stay at this level or transfer out then given their connections and know-how.

The problem is that most megafunds and top tier hedge funds are very hard to get into – leaving investment bankers with middling funds, corporates, government and start-ups.

Leave Investment Banking Later Rather Than Earlier

Investment banking and strategy consulting are other corporate jobs on steroids (we are giving a lot of credit to consultants here). A year of investment banking is worth three at any other corporate job – investment bankers work twice the hours and are far more productive in their role. Anyone who has been at a corporate or a weaker investment bank can attest to this.

Leaving as an analyst is meaningless outside of megafund PE recruiting. If an analyst leaves to be an analyst in corporate development or private equity at a mid-tier shop, it is a waste of a year of investment banking unless the goal is to just outperform peers.

Similar to accounting or any other professional services role, it is far better to leave at a Vice President/Senior Manger/Engagement Manager role than as an analyst. We know plenty of VPs that left to go straight to treasurer or another senior role at a corporate with generous share-based compensation or other perquisites whereas analysts more or less get what other new grads get with their fair share of resentment from other staff – not a good situation to be in.

The higher up in a corporate a position is the more likely it is that they deal with an investment banker on a semi-regular basis. Treasurers deal with bankers for debt issuances and hedging. Investor relations deal with investment bankers for shareholder marketing. CEOs deal with investment bankers for corporate strategy. Senior management is far more likely to engage with bankers than junior staff are – so pick your spots wisely.

Stay in Investment Banking

Unless there is a very clearly delineated path or investment banking is not that bad, it makes sense to stay the course. As investment bankers climb the ladder – it is a pyramid and many bankers drop off, not all of them for good reasons – the workload lessens, and the intellectual stimulation grows.

Once bankers begin to understand the process, they are no longer responsible for the grunt work and are given more responsibility pertaining to client engagement. What people do not realize is that client engagement is not about schmoozing so much as it is communicating idea generation in an articulate manner. An investment banker does not have to be your friend (in an efficient market), and while it helps, corporates are here for the same reason as the banker – to make money. A good idea trumps a baseball game.

Investment banking at the senior level is about understanding and simplifying corporate finance in context – far more interesting than putting together pitch books.  Also the compensation grows exponentially – note that a VP makes 2x-5x an analyst working half of the hours.

Travel the World After Investment Banking

During my gap year, I backpacked around Europe, thinking that I was very refined when in fact it was saturated with similar people looking to “find themselves”.

“I used to work at Merrill, and then I realized that there had to be a higher calling.”

Myriad iterations of this line – not convinced that the higher calling was being irresponsibly inebriated in Portugal, but nonetheless if you are not well-travelled and have burned out in a corporate role, this can be an option for maturity and to broaden your world view. You will start to question what you have been institutionalized into and learn how to frame things differently – in a dynamic and changing globe, this is imperative to being a successful businessman going forward.

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ex investment banking associate

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