There is a strange disconnect between what aspiring bankers think the career path to Managing Director is and what is actually the case. In reality very few people join at the bottom rung of the ladder, climb the ladder and then make it to Managing Director…in fact it is pretty rare to see this happen.
Have you ever wondered why? These analysts are given a privileged spot that so many fought for and yet it tends to be the people that doing other things first and lateral in at a later point that seem to get the big rewards at the top of the Investment Banking hierarchy.
So why don’t Investment Banking analysts become Managing Directors? Effectively it comes down to a very few simple reasons:
- The analysts are burned out by the time they finish their analyst program
- The grass always looks greener on the other side
- The exit opportunities presented to Investment Banking analysts are tremendous
- Lateral transfers typically know that they are getting themselves in for
I will go into all of these in greater detail below but as you can see the odds really are stacked against a person who joins investment banking as an analyst. It’s the reason I tell all aspiring investment bankers who are frustrated with their lack of application and interviewing success that if they truly want to be bankers they are not doing themselves a disservice by waiting and joining at a later point.
If you’re an aspiring Investment Banker I can highly recommend the book Monkey Business…it describes in a hilarious way that I never could why people join and then leave without ever getting to that promised land at the end.
Without further ado let’s look at some of the reasons that Investment Banking analysts rarely make it to Managing Director
The analysts are burned out by the time they finish the analyst program
Most investment banks run a churn and burn program with their analyst pool. The focus is on training them up quickly and then maximizing their efficiency to get the most out of them. The analysts in return are paid a ridiculous amount for their age and experience and also learn skills faster than they could in any other job.
The problem with this model is that people are not designed to work like this. Eventually everyone burns out. If you have read my post on my worst day in Investment Banking and multiply that experience by 2 – 3 years then you would understand what I am talking about.
After 3 years even though the hours are getting better and you are getting more responsibility and people working under you the fact is that most analysts are burned out. They are burned out and have incredibly negative thoughts about their job and the industry.
This is something I can relate to as it is something I went through which I outlined in a prior post. By the time I got to my third year I just had to leave…I had to rest. There was no way I could push myself any further
The grass is always greener on the other side
When you’re as burned out as I described above anything looks better than Investment Banking. Being a hobo on the street looks better than Investment Banking. It’s not true of course. You lose sight of the fact that you’re life is improving dramatically and that you’re getting amazing work and you no longer have to work the crazy hours.
You lose sight of this because you have to get out. Anything looks better. This is the reason that so many analysts end up falling into their next jobs. They do not think about what it is actually what they want to do – they just want to do anything else. This is the reason I so strongly recommend working out what you want to do before you quit Investment Banking.
When you see your friends start to quit…the ones that have been suffering in the trenches and they seem to love their lives so much more outside banking it becomes really hard to remain in Investment Banking. Every job has its ups and downs but when you’re mentally so against investment banking it is hard to see the ups of that job and appreciate the downs of the job you are thinking about doing.
The exit opportunities afforded to Investment Banking analysts are amazing
Although a lot of it is mental….sometimes the grass is greener on the other side. Being an investment banking analyst opens doors for you that would never be available from any other industry.
Investment banking analysts are in incredibly high demand in almost every other industry. They are young and can be trained, they are adaptable but have some very real skills that they bring to the table. They have attention to detail and can work hours that most people can only dream of. In short they are the perfect young employee to mould which puts them in high demand.
In turn this makes it even harder to stay in Investment Banking. When you stay in Investment Banking beyond your analyst and early associate years your options start to diminish. Contrary to what you may hear there is a right time to leave banking if you are going to do it and many young bankers take this opportunity.
Lateral hires want to be bankers and know what they are getting themselves in for
The reason lateral hires and those that join as associate tend to last until they are managing directors is that they are the ones that typically want to work in M&A. They want to be bankers and they know what they are getting themselves in for.
A lot of analysts join banking for the wrong reason and sometimes they join for a right reason but it isn’t to become a Managing Director. By comparison those that join a bit later have experienced another job and have spent time in the work force working out what they actually want to do. They come to the conclusion that they want to become bankers and while this doesn’t mean that all of them will get to MD the numbers show that many more of them will then the analysts that join straight out of college.
Some of it is knowing what you want and some of it is mentality and maturity and a huge portion of it is that the lateral transfers rarely get burned and burned out in the way that analysts do because they join later and avoid many of the pain years of junior banking.
People join and quit banking for a variety of reasons. Are you thinking about joining Investment Banking? What are you worried about? I’d love to help you make a decision so place a comment below or email me.