Junior investment bankers may be overworked, but they’re also battle-hardened by internships, incredibly competitive and have one eye on the next career move.
Despite recent depictions of young investment bankers transforming from eager high-achievers into stressed out shells indulging in gallows humour during their rare breaks from work, the vast majority of new recruits enter the industry with their eyes wide open.
We spoke to ex-investment bankers, analysts in their third year in the industry, new analysts, and former interns due to enter the industry in September 2014 and a number of common themes emerged – most are under no illusions about the work required, money isn’t the main motivator and the majority have an exit strategy from the get-go.
“The vast majority of new joiners are middle class overachievers who made up their minds to land the most challenging, well-paid jobs they could find and then succeeded,” says one investment banker in their third year. “People come from incredibly diverse backgrounds but not particularly diverse mindsets, which is why affirmative action doesn’t work.”
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Now is a good time to be a junior investment banker. A number of bulge bracket firms – notably Bank of America Merrill Lynch and JPMorgan – are upping their 2014 intakes by 10-15%, while pay has increased to a maximum of £100k from £70k in the boom years before 2008. While managing directors are being edged out of the organisation, junior recruits are being paid more and offered more job opportunities.
Despite this, the industry’s reputation has been hit over the last 12 months – even more than since the 2008 global financial crisis. The death of Moritz Erhardt, who worked consecutive all-nighters while interning at Bank of America Merrill Lynch last summer, and the publication of the book Young Money by Kevin Roose – which catalogues the dispiriting existence of junior investment bankers – have not exactly enhanced the industry’s image.
However, a reputation for extreme hard work is actually more attractive to potential young bankers than the prospect of large salaries, says Mark Hatz, a former associate at Goldman Sachs who now offers interview coaching to prospective bankers: “I am convinced what pushes them is their sense of achievement. Those students come from very selective schools, the education system has taught them to be competitive, so when they see that investment banking is among the hardest industries to get in, they'll go after it.”
An understanding of the realities of the job
It’s essential to have completed a summer internship if you want to work in the front office, but increasingly new analysts have more than one under their belt before they start full-time. As the Erhardt case demonstrates, they’re not an easy ride.
“There are only a few people who get in and are unaware of what they're committing to, especially because a high proportion of graduate recruits are fed through internships, during which everybody has the chance to taste, or at least observe, what the full-time work is like,” says an analyst who started in debt capital markets at a large bank in London last September.
Internships, particularly rotational ones, give students a chance to explore the various facets of investment banking and decide where they really want to work, he says. By working out where he would best fit into the organisation, the job has so far lived up to his expectations, he enthuses.
However, while most realise that the job is more about spreadsheets than strategy meetings with CEOs of multinationals, the high starting salaries still help to maintain the ‘glamour’ tag of the industry. “People have this impression that your work is going to be that much more exciting than Harry Humdrum at your local FTSE 250 tax department. It is more interesting in a lot of ways, but we are talking relatives and not absolutes,” says the third-year analyst. “You get a lot more exposure than anyone else your age, but you’re not going to be marking up an RNS in your private jet on your way to chair a client’s board meeting twice a week.”
The long hours are gruelling, but this is not the main problem. Internships prepare you for the prospect of a few all-nighters, but not the unpredictability of the work, says the first-year analyst: “You can be given work at any time, often as you’re about to leave the office on a Friday night, and the timelines for completion are very stressful.”
Similarly, the exacting nature of the work, rather than the volume, is where most people fall down, says the third-year analyst: “It’s an incredibly tough and unforgiving environment – mistakes are not tolerated – and that’s what catches most new joiners off guard, more than the long hours. They think just because they’ve done one or two caffeine-fuelled all-nighters in the run-up to exams and went through ‘competitive’ classrooms in a protected environment they can handle anything. Not even close.”
The exit options
So, why bother with investment banking if you want to retain your physical and mental health? After all, the money’s good, but you’re not going to retire before you’re 30. Hatz believes that there are few other industries that provide such a fertile ground for training and development.
“Working twice as much also means learning twice as much, and this is extremely rewarding,” he says. “Even those choosing to leave the industry after a few years know they'll have many different opportunities from asset management to corporate development positions, passing by starting up their own company.”
Investment banks increasingly want to see a demonstration of passion for the industry and commitment from their new recruits, but this can be faked. One intern who was offered a full-time position starting in September, says that internships themselves are often viewed as a CV-booster for other vocations, but those going into the investment banking sector are not in it for the long term.
“It's very rare for those entering the industry to expect to stay in it and progress up the ranks within a single bank for more than five years,” he says. “Most look to stay until reaching associate level before then looking towards at least other banks, but more likely other industries – private equity and consulting being popular choices – although the exit options are many.”
Fundamentally, people entering the industry have to be prepared to make sacrifices, whether that’s giving up your dream of being the next Gordon Gekko, or just accepting that your work will dominate your life.
“I won’t attempt to justify this industry or sell it to anyone. It is what it is – a difficult job that still pays better than most,” says the third-year analyst. “What can I say other than be prepared to give up a lot, more than you ever thought you would give. And don’t complain in the end because it was always your choice to do it.”