Financial Modeling Self Study Program

If the banking lifestyle is so tough, what’s the upside?

First and foremost, the money.  There are very few careers that pay as well as investment banking, especially taking into account the level of risk (trading or hedge fund compensation, while potentially equal to or vastly exceeding that of banking is significantly more volatile).  Second, the exit opportunities.  Many people treat investment banking as a stepping stone to other finance careers, including private equity and hedge funds.  Third, for what you learn.  Being a junior investment banker teaches you two things.  It teaches you about finance and it teaches you how to work and survive in a difficult and detail obsessed environment.  Both skills are likely to prove valuable regardless of future career choice.  Fourth, for ego.  Many people get a kick out of telling others that they are in banking and for seeing their deals on the front page of the Wall Street Journal.

Is the number of hours the worst thing about investment banking?

Most junior bankers will tell you that the worst thing about the banking lifestyle is not the number of hours required per se, but the unpredictability to those hours.  Said differently, that you have NO control over your life, as you are expected to be reachable at all time, day and night. This lack of control makes it extremely difficult to schedule time to see friends and family.  Analysts and Associates find themselves routinely having to cancel dinner plans, weekend plans and even vacations at the last minute.  Many bankers, after a few months on the job cease scheduling events altogether, for fear of having to cancel.

How does the lifestyle in New York differ from investment banking jobs elsewhere?

Always a touchy subject, but generally, the life of an investment banker is tougher in New York than anywhere else.  The other big international banking centers, London and Hong Kong, come in next.  The West Coast of the U.S. is indeed more laid back, as per its stereotype.  Bankers in secondary cities (often satellite offices) also tend to have better lifestyles.  Having said all that, banking is still banking, and just because you may have a view of the beach from your cube, don’t expect to work 9 to 5.

Will the lifestyle be better/worse in some groups than others?

Just like with bulge bracket banks vs. boutiques, it’s tough to generalize here too.  Often the lifestyle of a particular group depends most on the dealflow in that sector or product and on the personality and culture portrayed by the group head(s) or senior bankers in that group.  Obviously if there are a lot of deals in say, Industrials but few in Healthcare, then the bankers in Industrials will likely be busier.  However, if the head of Healthcare is really aggressive about marketing, then the healthcare bankers may be working 24/7 on pitches.

Alas, some groups do have reputations for having better or worse lifestyles.  Bankers in product groups (M&A, Leveraged Finance) on average probably work more hours than bankers in industry groups, except during markets when there are few deals being executed.  Groups such as Debt Capital Markets (DCM) and Equity Capital Markets (ECM) are sometimes referred to as “banking-lite” and offer better lifestyles (and lower compensation) than other groups within investment banking.

How does the lifestyle differ at bulge bracket banks vs. boutiques?

It’s always tough to generalize about boutique banks because there is such a broad range of them.  There are boutiques that have cultures similar to those of bulge bracket banks and there are plenty of boutiques where the lifestyle is significantly better (and some that are worse).  Having said all that, there are some generalizations that can be made that will hold true much of the time.  Analysts and Associates at boutiques often have the opportunity to take more responsibility than their bulge bracket equivalents, as deal teams are often smaller.  Junior bankers at boutiques also tend to have more interaction with senior bankers and clients and may be invited to attend more pitches and meetings.  There also tends to be less “face time” at boutiques than at bulge bracket banks, meaning fewer hours spent in the office.

As a banker, how much will I have to travel?

Senior bankers tend to travel a lot, perhaps being out of the office on average 60% of the time.  Most of the travel for senior bankers is spent marketing and pitching.  Sometimes Analysts and Associates will be invited to go to pitches and sometimes not.  The majority of a junior banker’s time will be spent in the office.  However, junior bankers may have a significant opportunity to travel when they are working on live deals.  For example, when working on a sell-side M&A transaction, often the Analysts and Associates will spend a significant amount of time at the client site, especially at the beginning of the engagement.  As the process progresses, the junior bankers might continue to travel to the client’s headquarters to oversee (babysit) management presentations or to travel to oversee (babysit) due diligence site visits by the prospective buyers.  Working on an Initial Public Offering (IPO) will likely require significant travel during the roadshow process.

Is it true that as an investment banker, I get free dinner every night?

Yes, at most banks if you work past 8:00 or 9:00 at night (though you don’t necessarily have to wait until that time to eat), you can have dinner delivered to you on the bank’s tab (generally up to about $35).  Since Analysts generally have no lives, and expect to be working far past 8:00, they will often congregate together in a conference room to eat and relax for a little while.  Associates, more often eat at their desks as they may still have the hopes of getting home before their loved ones or friends are asleep.  VP’s and above are usually gone by then but it’s always funny when a late working and hungry Managing Director has to ask an Analyst to order them food because they don’t know how to use Seamless Web (the standard food ordering website subscribed to by most banks in New York).

Of course, the consequence of having $35 each night to order dinner is that many Analysts gain a lot of weight.  After all, if the company’s paying, let’s max out and add that Tiramisu to my order.  More enterprising Analysts, stealthily use some of their daily $35 to pay for groceries for their apartments.

If the hours are so long, why don’t banks hire more people?

This is a question that every banker at one point or another (typically while they are staring at Excel sometime around 3:00 am) has asked themselves.  There is no better answer than to say it’s just the culture of investment banking.  Bankers are expected to work a lot of hours and likewise, get paid a lot of money for working those hours.

Are the hours really as bad as I’ve heard they are?

For the most part, yes!  At bulge bracket banks and top boutiques, Analysts can routinely expect to work 90-100 hours per week or even more.  A typical work day during the week might be 10:00 am until 2:00 am.  Analysts will also typically work both days on the weekend.  During a particularly busy time (working on a big pitch or at the beginning stages of deal), it is not uncommon for Analysts to work all night (“pull an all-nighter”) or even multiple all-nighters in a row.  Hopefully (for the Analyst’s sake and for others), they have the time to at least go home to shower and change clothes.

Associates generally have a slightly better schedule (emphasis on “slightly”).  Associates might average 80-90 hours per week with a typical weekday schedule being 9:00 am until perhaps 11:00 pm and working either Saturday or Sunday.  Associates on occasion will also find themselves pulling all-nighters.  At the Vice President level, the hours start to improve significantly.  VP’s, if they have to work weekends or late nights, can often do so from home.  Managing Directors have a much more normal work schedule, when they are not traveling.  MD’s tend to come in early (between 7:00 am and 9:00 am) and leave relatively early (6:00 pm – 7:00 pm).  However, MD’s are often on the road, traveling perhaps 3 out of every 5 days on average.

It should be noted also, that the hours at boutique banks can vary significantly.  As mentioned above, some boutiques tend to have similar work requirements to bulge bracket banks.  However, the lifestyle at many other boutiques can be substantially better.