Working as a junior Investment Banker opens up a world of opportunities for you. Unfortunately many of these opportunities only exist for a certain window of time and then they become much harder to break into. There is an optimal time to leave investment banking if you don’t want to be a banker for life.
Keeping this fact in mind will help you a) last until you have enough experience and b) hopefully force you to think about your career plans before it is too late and the window closes.
Your experience when you leave investment banking does affect your exit opportunities
Just as Investment Banks look for a certain type of person when they are hiring and it is best to position yourself as that type of person if you’re trying to get the job, many of the businesses that hire ex-junior bankers are also looking for a person with a certain amount of experience
Leaving too soon is detrimental to your exit opportunities because you simply do not have enough experience. I have talked about why you shouldn’t leave in your first year before but a lot of firms will simply not give you credit for any of the time you spent in banking if you leave within a year. From one to two years is also not optimal and your ability to get into competitive industries is limited.
Leaving too late can be as detrimental as leaving too early. Many firms are looking for young talent who they can mould to their way of thinking about finance and train up. They are looking for someone who has the skills and drive that banking imparts but not necessarily the processing / do anything and believe anything to get the deal attitude that is required in the higher levels of banking
The sweet spot to leave banking really depends on what you want to do next
The exact time that you should leave banking is largely dependent on
- What you want to do; and
- Where you want to do it
Taking a step back and working out these two questions will answer many of these questions for you. For example if you want to break into Private Equity in the US you want to be interviewing at the end of your first year and quitting investment banking at the end of your second. If you want to do Private Equity in Australia though you wouldn’t start interviewing until your 3rd year and you leave pretty much as soon as they make you the job offer.
Knowing about the industry you want to break into is the most important piece of advice I can give you so start thinking about this. A note for any current investment bankers – think about this actively and not when you have a bit of breathing space. Sometimes the perfect opportunity will be right in front of you (even when you’re jammed)
Stay in banking for 2 – 4 years to maximise your exit opportunities
If I was going to make a blanket statement about the optimal time to spend in banking I would say it was between 2 – 4 years.
You need to work in banking for at least 2 years
Any less than this and you really are limiting what you can do next and how much credit other firms will give you for your experience. I know investment banking sucks and you hate it but suck it up and stick out the 2 years…you will find a wealth of opportunities open up for you.
Why 2 years? I described this in my overview post on Analysts. First year investment bankers are really not that efficient and the work they do is fairly basic. They work incredibly hard but they don’t have the really great modelling skills yet. Second year is where a lot of the really good modelling and financial experience comes into play and by the end of second year you are typically a modelling machine.
Staying beyond 4 years starts to limit your options.
For the first 4 years you are effectively learning how to value, model and think about different companies in your sector. After this time though (by the time you are a second year associate) your focus is much more on deal processing. You are transitioning into a ‘process’ type role and the organisations which value this type of experience tend to get more and more narrow. For example, trying to leverage a mid-level Venture Capital role when you have 6 years’ experience and you are a VP at an investment bank is close to impossible…they don’t need the process skills that you’ve gained over the last 2 – 3 years.
The sweet spot is different for each industry
I hate making generalisations but I thought I would put a few sweet spots below to give you some sort of idea what other industries look for (note that this can vary between companies and it does vary quite a lot between countries and markets)
- Private Equity: Varies but as an example you exit after 2 years in the US and after 3 – 4 in Australia
- Funds Management (both equity and infrastructure)tend to like a little bit more experience and analytical (instead of pure grunt work) skills so you are really looking at 3 – 5 years’ experience
- Corporate roles will really take bankers with any level of experience but if you don’t want to take a massive pay cut (psychologically) then you probably want to be looking at them in the 3 – 4 year range
Obviously there are many more exit opportunities than the ones I’ve listed above and feel free to list them below if you know the answers but the fact is that you need to know your industry. Start talking to people early so you have a good idea how to position yourself.
Make sure that your experience gels with your ‘story’
When you were getting an investment banking job you knew that you had to start showing an interest in finance early so your story could be around how much you wanted the job and how interested you were in finance.
This approach doesn’t change when you leave banking. You still need to tell a story and your experience needs to gel with this story.
Talking about how you wanted to work in Private Equity from your university days and so got a job at a top tier investment bank and interviewed for private equity jobs after 2 – 3 years is a story that works really well and makes sense. It makes far less sense to say you really wanted to work in Funds Management coming out of an ECM role with 7 years experience. The obvious questions of ‘why didn’t you transfer divisions to a more relevant division?’ and ‘what did you gain by staying in ECM 7 years that will help you in infrastructure funds management?’ are bound to come up.
Optimising the time you leave banking is about understanding your new industry, how much experience you need and how your story gels together.
Are you thinking about leaving Investment Banking? Have you stayed for too long or struggling to stay long enough? Did you have any questions about what I wrote above?