Working in the investment banking industry involves providing capital raising, underwriting, restructuring and strategic transaction advisory services to a variety of clients, including businesses, governments, institutions and other entities. It goes with saying that being an investment banker is one of the highest-paying jobs available; yet, it is also one of the hardest jobs. That’s why, in this article, we will help you go through the pros and cons of this field so you can make a decision of whether to follow this path.
1.1. The myth of the 100-hour week: Is it true?
Rumour has it that investment bankers have to put in 100 hours of work every week. To answer this question, the a average working hours of an investment banker is somewhere between 70 to 85 hours per week although you will not be sitting in front of the screen, working all the time. Junior investment bankers often overestimate their hours by failing to account for idle time or breaks during the day.
In bulge bracket firms like Goldman Sachs, JPMorgan Chase & Co, or Bank of America, you might be expected to work for up to 95 hours per week, and have only 5 hours of sleep everyday. Investment banking analysts have to be on call 24 hours a day, seven days a week, and are required to reply to urgent requests and emails at all times. Therefore, it is difficult to manage your social/ relationship life with this lifestyle, especially when you might struggle to have a full-course meal, let alone going out to clubs and getting tables at restaurants.
A typical day in the life of an investment banker goes as follows:
- Morning (9 AM – 12 PM): Arrive at the bank, update on possible M&A buyers, email it out, attend a meeting with the client’s management team. You might be required by the associate to work on pitchbooks.
- Afternoon (12 PM – 5 PM): After having a leisure lunch, you will join in and monitor a few other calls with potential buyers. Associates may take this time to review updated models and presentations. In the afternoon, investment bankers also focus on the active deal (also called “live deal”).
- Evening (5 PM – 11 PM): Review the morning’s work and pitchbook and make necessary modifications based on the comments. During busy seasons, it is normal to stay in office until 2 AM when there are multiple live deals, upcoming pitches and last-minute emergencies.
Wanting to learn more about a day in the life of an investment banker, check out our article: What Do Investment Bankers Do?
1.2. Investment bankers deal with extremely heavy workload
The 70 – 85-hour week means that investment bankers have to face the crushing workload at work. Key responsibilities of an analyst working in investment banking include:
- Performing valuation and developing financial models
- Conducting preparation and review of materials used in the financing of clients, including investment memoranda, management presentations, and pitchbooks.
- Performing due diligence, research, analysis, and documentation of live transactions
A little-known fact about the work of the investment banker is that what they do is much more than just doing actual analysis. 40% of the time is spent on making PowerPoint slides and presentations for pitches and the rest on random administrative tasks and Excel-based financial modeling and valuation. Therefore, the bulk of the tasks requires the investment banker to be extremely meticulous and attentive.
Because of the nature of financial services, there are constantly atypical events happening that necessitate more time and attention, from handling many deals at once to pulling an all-nighter to finish the last-minute pitch deck. You should also keep in mind that those employed in the IB field must also deal with unexpected business trips and interrupted weekends.
1.3. Investment bankers face intense workplace competition
It is hard to get a job in investment banking; but it’s even harder to keep that job with the competition in the workplace. Due to the ups and downs of the financial market, competition is inescapable. Most banks adopt the “Up or Out” culture, where the worst-performing staff is regularly laid off. In order to survive in the harsh reality of investment banking, employees must fight for recognition, rewards, and promotions.
It’s no doubt that the heat can help fire up the staff’s body and mind; however, it can also lead to mood changes, fear and anxiety, since it focuses employees on the danger of being made redundant and losing income. Many IB employees move to other firms where they believe they can utilize their investment banking expertise.
Nevertheless, it’s all about perspective! If you look at it from a different viewpoint, competition is not a bad thing. When a team works together towards a shared goal, they encourage each other to be more motivated, creative and productive.
1.4. Investment banking can lead to some health issues
Another point to consider when deciding whether or not a career in investment banking is worthwhile is the fact that working as an investment banker might deteriorate your health conditions. In regards to this matter, we can only say that this is either true or false, just like everything else relating to health is.
A study by the University of Southern California points out that investment bankers will encounter at least one stress-related physical or emotional issue within four years on the job. And face it, you are not sleeping, barely having any time to exercise, and are working your socks off for 13 to 14 hours a day. At least one of these will affect your health, one way or another.
Everything appears to be absolutely excruciating and you might be questioning yourself, ‘Why would anyone choose to go down this road and do this to themselves?’.
Before jumping to any conclusions, it is important to examine things critically, from both sides. So, what makes investment banking so good after all these sacrifices?
Despite the grueling workload and the stressful schedules, investment banking is still an attractive environment to work in because it allows exposure to various deal types, opens the door to wonderful exit opportunities, and offers generous compensation.
2.1. Investment banking allows exposure to various deal types
The Product Groups in the investment banking division perform various deal types like mergers & acquisitions, restructuring, divestitures, capital issuances and offerings across multiple industries, while the Industry Groups specialize in a certain industry on many deal types. Industries that make use of the services of an investment bank might include: retail, financial institutions group (FIG), healthcare, energy and utilities, natural resources, real estate, technology, industrials, etc.
Once you get to work in either group, you will have the chance to get yourself acquainted with different kinds of strategic transactions that involve the master of different skills and tasks, including making large and complex financial models and valuation.
What’s more, investment banking gives you a chance to experience the process of performing high-profile transactions, especially in bulge bracket and elite boutique firms. The majority of what investment bankers do is kept under wraps. Therefore, participating in such deals can prove to be a golden opportunity that you will find absolutely rewarding and valuable.
2.2. Investment banking opens door to unmatchable exit opportunities
A major reason why investment banking is so bewitching even with extremely demanding working conditions is that it provides amazing exit options for employees. Many candidates see investment banking as a stepping stone to various other high-profile positions with six or seven figure salaries.
Past client exposure and the accumulation of great technical skills in corporate finance, valuation, deal execution and company operations are things that are highly desired by private equity firms, hedge funds, asset management organizations, and large enterprises from an ex-investment banking analyst. These exit possibilities are also more lucrative in terms of working hours and remuneration.
Best exit opportunities for investment bankers can be grouped into three specific categories:
- Buy-side jobs: PE firms, venture capitals, hedge funds
- Corporate Development tracks: corporate development, corporate finance
- Others: startups, strategy consulting, advisory for large companies, FinTech and MBA programs.
2.3. Investment banking earns more than most career paths
One of the biggest motivations for investment bankers that helps them pull through all the tension and hardships is the pay check. On average, an entry-level investment banking analyst made an annual base salary of $100K. VIce presidents generally earn between $200K – $300K per year. The managing director, who lies on top of the ladder, earns anywhere from $600K to several million dollars a year. Sounds appealing, right?
The reason investment banks make so much money is because they are the gatekeepers to the market for businesses, providing a variety of financial services and earning commissions and fees on underwriting new issues of securities. The salary of investment bankers can be determined by several factors:
- The type of firm: Elite boutiques often pay the most for analysts and associates while regional middle market IBs tend to be on the lower end of the comp scale. However, all types of banks still offer great compensation to stay competitive in the recruiting process. Firms that cannot afford the high base generally make up for it with fewer office hours or smaller workloads.
- The success of the firm: The size of the end-of-year bonus for employees will be influenced by the firm’s performance in the past year. When revenue is low, investment banks must deal with some defections and lower staff bonuses to minimize costs.
- The success of the group/industry: Another thing to keep in mind is that investment banking compensation will fluctuate depending on the industry’s total transaction volume. When the economy is slow, there are fewer deals and consequently, less commissions.
- Individual performance: This is also a huge determinator of one’s bonus. Some banks will divide their bonus pool into “buckets” to make them more manageable. They will pay extra to better-performing analysts to incentivize performance. Top bucket analysts often earn 10 to 30% more than bottom bucket analysts.
3.1. Can you handle pressure well?
In instances where there are several conflicting deadlines, the ability to not only cope, but also flourish under pressure, is crucial. If you wilt and wither in such high-pressure situations, you might want to go into a sector that is not as stressful as investment banking.
3.2. Are you willing to sacrifice your work-life balance?
If you strive for work-life balance, you might not find the 80-hour work week too appealing. Investment banks are known for their long hours, and while a few larger firms have tried to reduce the number of office hours of junior bankers, investment banks are still competitive environments where extra hours is considered a badge of honor. Therefore, a nine-to-five working schedule is practically unheard of. Time management skill is not enough to get you a “normal lifestyle” with casual nights out, parties or vacations.
3.3. Is money a key driver for you?
While this is not to say that all investment banking analysts are only interested in the money, it is still one of the major driving factors for those who can persevere through the difficult working circumstances. If the pay cheque at the end of the month is not a priority for you, consider switching careers.