- Private Equity
Investment banking is notorious for being a brutal industry to work in, particularly at the junior levels. However, it’s probably equally as notorious for how well it pays and the opportunities it provides. With that, you’re probably wondering if investment banking is worth it. Let’s discuss.
Let’s take a look at the positives, before later diving into the negatives, and then bringing it all together at the end. We’re going in this order because you’d probably be running in the opposite direction if I put the negatives first.
Investment banking pays very well immediately out of school. If you’re able to land an analyst job, you’re probably going to bring in somewhere between $175k – $225k in your first year and rapidly scale upward each year.
This is even better when you consider that you don’t need any actual skills to become an investment banker. Sure, it’s a very rigorous recruiting process and you need a top GPA, but you also do not need to have mastered any programming languages or whatever it is that engineers do.
Now, I said you don’t need to know any skills going into banking, but you will learn an incredible amount. You still won’t be as smart as your nerd friend software developer, but you will literally be one of the world’s top financial analysts.
We’ll touch on this in the negatives section, but the volume of work and the intensity with which you are required to do it give you almost no choice but to become incredibly good at your job.
Financial concepts, complex modeling, attention to detail, presentation skills, and ability to interface with senior management teams are all part of the package. If you decide to leave banking for a corporate role you will run circles around mid-career FP&A managers.
Most people don’t actually go into investment banking with the intention of staying in investment banking. They plan to use it as a springboard to new and better opportunities.
The most common example is a move to the buy-side (private equity, hedge funds, venture capital, private credit, etc.). People also make moves to corporate development roles or strategic finance roles, either at blue-chip companies or startups.
The investment banking skillset is highly sought-after and prospective employers love hiring bankers. Beyond the skillset, having an investment banking stint on your resume signals that you are a highly competitive applicant, otherwise you wouldn’t have gotten into banking in the first place.
And for the buy-side roles mentioned above, it’s really a pre-requisite. It’s next to impossible to land these positions without banking experience. While private equity and public markets roles have their own issues, there’s no question that they are incredibly attractive career paths, so it makes sense to keep that option open by pursuing banking in the first place.
If you do decide to stay in banking, life as an associate gets a bit better. VP is better still, and then before you know it you’re an MD.
Investment banking shares a lot of similarities to a team sport. You’re grinding with your squad, potentially doing things you don’t enjoy (like a conditioning session), but also making lifelong friends.
The Homies in your bullpen can help turn something very unpleasant into a pretty fun time. There were plenty of weeks where we were all pissed off at everyone and everything, but still had a blast shit-talking in the bullpen, golfing around the office, scheming as much food as possible out of our Seamless budget, and trying to avoid staffings with the MBA associates.
I still keep in touch with a lot of people from my banking days. There’s a lot I’d like to forget about banking, but some of the memories with the Homies will stick around for a while.
If you’re the networking type this can also be an added benefit. Everyone in the trenches with you is at the top of their game and probably will continue to be. Potentially helpful if later in life you’re looking for investors, selling your company, or trying to figure out which town in the south of France is best for a vacation home. Don’t forget about future second and third degree connections as well.
With this point, you’ll need to be honest with yourself as it may be a con rather than a pro. But if you’re the type of person who thrives in competitive, always-on environments, investment banking is a great place to be.
You’re surrounded by reasonably smart, reasonably successful, and very motivated individuals. The pace of the job is unlike anything you’ll find in a more typical corporate environment.
Personally, I have trouble staying engaged if I’m not moving at 100mph with six different emergencies to take care of. In lower stress, lower intensity environments I turn into a blob and question what I’m doing there.
If you have a similar personality, there is much less doubt about whether investment banking is worth it or not, as few other roles will have the same kind of energy straight out of school.
Now that you’re hyped after reading the good parts, let’s bring you back down to Earth with some unpleasant realities about investment banking.
It’s no secret that investment banking has potentially the worst work-life balance there is. But are investment banking hours really as bad as everyone says?
During busy periods, analysts will probably work anywhere from 70 – 110+ hours per week. Week to week hours will fluctuate based on staffings and market conditions, so chances are not every week will be brutal.
Each morning you’ll probably get into the office between 9 – 10:30am. On a good day with no heavy staffings you may leave at 8pm. More frequently you’ll probably get out closer to 11. On the worst days it’s a toss-up and could be anything between midnight to an all-nighter. Most weekends you’ll work at least one day, and likely two if you’re on a live deal or two.
My absolute worst couple of weeks were periods of 5 – 10 days in a row where I would get home at some point between 4 – 8am and get back on the desk at around 10am the next day. I only had a few nightmare weeks like this, but it absolutely does happen.
I remember one night where I left the office to go to the bathroom at around 5am. In a sleepless stupor I left my keycard and phone at my desk. That meant I was unable to swipe back into the empty office and had no way of contacting anyone.
I took the elevator down to the lobby and begged the security guards to let me in, but they refused because of their security protocols. I had to sit in the lobby for the next three hours until the first people arrived the next morning.
Probably the closest I came during my analyst years to having a complete meltdown. I feel bad for the security guys because they were just doing their job, but I was not a pleasant person to be around at that point. Point is, you’re probably smart enough to not lock yourself out like me, but these kinds of frustrating experiences are pretty frequent.
Importantly, there is a significant degree of variability from group to group. A lot of this depends on your senior bankers. If you have a team that really values facetime and loves to pitch for new deals, you may be in for a long couple of years.
However, if you have a team that is more reasonable, you can have significantly better hours. If possible, see if you can figure out which type of team you’re potentially joining through the interview process. It’s also always a good idea to get in touch with former analysts from the group and hear their perspective.
Generally, teams on the West Coast seem to have slightly more relaxed cultures. You’ll still work hard, but you may have less of the uptight, facetime culture that is common in New York.
One potentially silver lining is that you probably will not be actually actively working the entire time. A lot of your banking hours will actually be spent waiting for comments from your associate, VP, or MD. The work product has to go up the chain before final approval, which takes time at each step, but you can’t leave until it’s done.
During these down periods a lot of analysts will study for PE recruiting, scroll Instagram, toss a game on TV, or just walk around and chat with the team.
You may not believe it, but the hours are not the worst part about investment banking. Even more unpleasant is the unpredictability of it.
You never know when you’ll have downtime and when you’ll be needed, so you are effectively on call 24/7.
This makes it incredibly difficult to plan anything. You might need to leave a date in the middle of it, spend a weekend trip glued to the laptop, or have to cancel a vacation at the last minute.
There is nothing more demoralizing than thinking you’re in for a bit of downtime, only to be called back to the office at the very last second.
It’s also a horrible experience having to try and explain this lifestyle to friends and family. Those that haven’t spent time in investment banking don’t really understand the job requirements, so they think you’re either a lunatic or making things up.
Dovetailing on the prior point, this all culminates in a gradual loss of friends and family over your analyst years. There is so little time to plan get-togethers, and when you do you’ll probably have to cancel.
It can become a pretty isolating experience. Your friend group is still out doing fun things, you’re just not there. It’s also very grinding on relationships, and makes dating new people next to impossible.
It’s also quite difficult if you’re an analyst just starting after college. You immediately transition from an environment of constant personal interaction and engagement to a social life that only occurs in office, if that.
All of these factors combine to produce profoundly negative impacts on both your mental and physical health.
Prolonged lack of sleep, intense stress, and the most sedentary lifestyle possible do no favors for your body. If you’re not very careful with diet and sneak in exercise when you can, it becomes quite easy to put on a few pounds.
Mentally, it will be a challenge. The difficult work environment combined with a potential separation from your prior support systems (friends and family) is not a good combination. If you include an abrasive boss or unpleasant associates, your life can become downright miserable.
I’ve seen a number of analysts that look literally lifeless. There’s no spark behind their eyes and they’re going through the motions, counting down the time until they can leave.
In a lot of cases you can actually see a gradual transition when comparing the person before investment banking to the person you now know after. Happiness and health visibly leave both their body and personality.
On top of this, there is a genuine concern about the impact of various substances on your health. The hours required of you generally promote use of things like nicotine, Adderall, modafinil, or cocaine (not so much for work, but after you escape the office).
Probably not a big deal if restraint is exercised and proper precautions taken, but it’s easy to let things get out of hand. Particularly if you get in a situation where you start to require drugs to achieve a certain level of work product.
This is bank and group dependent, but pretty widespread in my experience. I’ve never seen an instance where someone was forced to partake in something they didn’t want to, but FOMO and implicit peer pressure is a real thing.
Not a surprise, but substance issues can exacerbate the mental health side of things. It’s also not unheard of for over-the-top drinking or other usage to become a coping mechanism.
If you do decide to pursue a banking career, make sure to prioritize your health as much as you can. Investment banking is most definitely not worth permanent health issues.
For the right person I believe investment banking is 100% worth it. But, if you’re not the right person, it can be a living nightmare.
You need to be honest with yourself about what you value in life and what kind of personality you have. As an example, if you have a very tight-knit friend group and couldn’t survive without them, you may not want to do banking. It’s totally fine if investment banking isn’t worth it for you, and better to come to that realization sooner rather than later.
But if you are driven, competitive, thrive in a faster-paced environment, it may be a good fit.
There are very few other roles straight out of school where a young person can learn this much, open up as many doors, and earn as much money. Investment banking is an incredible opportunity and I am very glad that I was lucky enough to experience it. I would personally do it all over again.
However, it is crucial that you actually have an interest in finance and the job itself. You don’t need to be the next Warren Buffet, but if you think finance is boring you will be unlikely to have a pleasant time. Desire for money alone is probably not enough. You may be able to ride that through the analyst years, but at a certain point you need to have some interest in the work that you do.
But, with all that said, it’s really not that deep. If you get into investment banking and figure out you hate it, you can just quit! This happens all the time and there is nothing wrong with deciding it’s not for you.
I would lean toward giving it a shot, seeing what it’s like for yourself, and taking some time for self-reflection to see if it’s where you want to be.
You can also probably figure this out over a summer internship. 10-weeks is not a lot to get through, even if it turns out to be horrible. Slog it out and you’ll have a great role on your resume to recruit for something else (just start practicing your paper LBOs so you don’t get stuck). Or you can figure out that you love banking and rush out to cop your first pair of deal sleds.