Ever since I started this blog a little under two years ago I’ve been talking about writing a post on gaining lateral transfers into Investment Banking. Whilst writing this post I realised that there is so much information that it is incredibly hard to fit the topic into just one post so this will be the first in a series of posts about how to get a lateral transfer into an Investment Banking job. Broadly speaking I want to cover 3 main topics
- Are you sure you want to get a lateral transfer into Investment Banking?
- What is the process for getting a transfer into Investment Banking?
- What are some things you should think about when deciding on whether to accept a job offer from an Investment Bank?
Those are topics for later posts…let’s go back to the basics first.
What are lateral transfers and why do they exist in Investment Banking
A lateral transfer is when you enter Investment Banking at a level that is more senior than a graduate position (even if it is only as a second year analyst) due to your relevant work experience in a related or occasionally unrelated industry. You may be coming from another Investment Bank, from within a different division at the same Investment Bank or, more commonly, from outside the banking world altogether.
Given the competition for Investment Banking roles you may be wondering why these positions exist at all. If you get a chance read my posts on the optimal time to leave investment banking and you’ll realise that a lot of people (including myself) use investment banking as a stepping stone to another job or industry. Investment Banks assume a level of attrition however they tend to lose far more people than they actually require and so they have to hire people at those mid ranking roles to fill their skills gap.
If you think about it from an investment bank’s point of view they are most interested in hiring people in the following order:
- People with actual investment banking experience
- People with financial experience that have done M&A work
- People with financial experience that haven’t done M&A work
- People without financial experience that have done M&A work (mainly lawyers etc.)
Now before you get too discouraged about where you are in that hierarchy it is worth keeping a few things in mind:
- Investment bankers almost never jump ship to another bank. It takes an incredibly long period of time to build up your reputation to a level where you are trusted and where you have earned yourself some respect and some freedoms from the constraints of the hierarchy. You don’t give that up for anything so most banks don’t get any applications from existing bankers
- People with financial experience who have done M&A tend to be in the sweetest spot and tend to get offers from multiple banks that they apply to. This means that banks often miss out on these people
- People with financial experience and no M&A experience actually have a pretty good shot because there don’t tend to be enough people int eh second category to fill all the roles
- People without financial experience but with M&A experience are a rarer breed and typically lateral in higher up in the food chain where their strategic knowledge is valuable and they can delegate downwards for the financial roles. It is not impossible though and I worked with one ex lawyer who came in as a reasonably junior banker
Lateral hires tend to last longer in Investment Banking
This is a truth that is rarely spoken about at universities and colleges and amongst all those people who want to do investment banking. If you actually go into an investment bank and have a look at the people who have become the Directors and the Managing Directors…it is not those who started as Analysts who last and get the rewards at the end of the marathon. It is the people who lateral in (or in the case of the US…people who come in after business school) that tend to last and make it to the top echelons of the Investment Banking world.
Why is this? I think it is for 3 reasons:
- The years where you get worked the hardest in terms of hours are the junior analyst years. If you can avoid this time you are much less likely to suffer from burn out. You are also not required to do as much face time the further you go up which helps a whole lot!
- People who lateral in know what to expect when it comes to the workforce. Analysts tend to come straight out of college and don’t really know what it is to work full time. If you have worked in another full time job (even if the hours aren’t as long) the shock to your system isn’t there and it is far more easy to mentally adjust to working longer hours.
- Lateral hires tend to want to be investment bankers. This point is key. A lot of analysts are incredibly young and don’t know what they want to do with their lives yet. Typically lateral hires have spent time discerning that investment banking is for them…that this is what they want to do and so they are never second guessing their choice or wondering what else is out there.
If you have always wanted to do investment banking but you didn’t get in out of college don’t fret. Getting in as a lateral hire is far easier and you are far more likely to last longer than if you had gone in straight out of college. Sure you don’t have the same exit opportunities but who cares? That’s not what you were looking for is it?
In the next few posts I’ll write about what you should think about before applying for a lateral transfer and the process of getting a lateral transfer into Investment Banking.