Investment Banking: Facts and Advice

A good time to send your resume to an investment bank is in November and December.

Hires are usually made around January and February. But don't stop in February just because you haven't hit your target. According to one analyst we spoke to it's really crucial to be persistent. It's basically a numbers game. Contact lots of people. But at the same time, customize your approach to each person and bank. That means it's going to be pretty much a full-time job.

Don't forget to check back.

Traditional recruiting is done by April. Lots of people also change jobs in the March to July period. This is going on heavily in the post-financial crisis period because banks are doing well and are scrambling for people. This means that many banks are looking for personnel in July, long after the resumes have been thrown away. Somewhat surprisingly, the best time to find a full-time job is by screening your contacts in late Spring and Summer.

Investment banking is bounding back after the financial crisis.

Investment bankers lost jobs in record numbers due to the financial crisis from June 2008 to Sep 2009. While many firms have not yet fully bounced back, things have turned around substantially. Hiring is picking up substantially and while things won't be bubbly again for awhile, there is no doubt that banking is back. It's a great time to enter this profession.

Franchises Being Sorted Out

Certain franchises are suffering significantly. Morgan Stanley has seen its league table standings in M&A fall. This is a strong firm that went through substantial turmoil in 2006 with the result that quite a few of its top flight bankers left.

Similarly, Bank of America absorbed Merrill Lynch. Yet B of A is culturally very different and, as a result, many of Merrill’s best and brightest have moved on. Citigroup has laid off large numbers of people but is holding its own in 2010.

Bulge Bracket Changing

There is always movement in the “bulge group” and the emergence of new powers in the top 10 list of banks that are not at the top. The new bulge powerhouse is JP Morgan which is now a real rival to Goldman Sachs for the title of the world’s premiere investment bank. Firms like Credit Suisse, JP Morgan and RBS benefitted from the financial crisis but haven't been keeping their gains in 2010. In contrast, recovering franchises like Barclays and Morgan Stanley are picking up in league tables in 2010. Goldman Sachs has not benefitted from recent U.S. congressional scrutiny but still maintains strong client loyalty. In addition, Deutsche Bank has been steadily climbing the league tables as of late and has solidified a position as a major world player in investment banking.

Not Going Away

Despite apocalyptic media coverage in 2009, investment banks are here to stay. Their function is far too central in the economy. On the one hand, investment banks solve a matching problem between multiple buyers and sellers of assets in the M&A market. By facilitating asset transactions, investment banks play a valuable role not dissimilar in function that played by real estate agents, export brokers etc. Similarly, in financial markets, banks match users and providers of capital. This is an enormously important function that will only grow over time.

Investment banking is one of the mostglobalbusinesses on earth.

Investment bankers spend plenty of time tracking down corporations in Peoria and Seattle. But they are just as likely to be working with investors and issuers on the other side of the world--perhaps Hong Kong, Bulgaria or even Africa.

Investment banking is seeing massive consolidation.

Today,firms are combining at an unprecedented rate. Recently, Merrill Lynch has merged into Bank of America. Lehman has merged into Barclays and Nomura and there is talk that other major firms may combine as well.

The investment banking business is notoriously competitive.

There are probably too many investment banks in the industry and business is hard fought.

Investment banks are facing declining margins on bread and butter business.

Margins are falling in underwriting of investment grade debt, vanilla foreign exchange and many areas of OTC derivatives. Treasury bond trading is fast becoming one of Wall Street's least profitable areas. This is putting downward pressure on salaries in places. Expect more pressure on salaries in time for traders as electronic trading becomes more prevalent.

Sometimes you will find yourself working for an egotistical jerk.

What do you do? First, don't take the job in the first place. If someone mistreats you in an interview, get up and walk out (funny... you may actually get offered the job). Second, be sure to communicate your needs very clearly when it matters when dealing with an ego-creep. It might just be that someone is so busy and overwhelmed that they get abusive. Laying it out in a nice way may help. Finally, if you find yourself in a truly pathological environment working with dysfunctional people, bail out. Life is too short and the money isn't worth it.

Labor Arbitrage Increasing

Shift towards outsourcing at the analyst and associate roles. Increasingly, investment banks are substituting highly skilled but less expensive labor from locales such as India, China and even Vietnam for analytical work and “pitch book prep” work normally carried in London or New York. Suppose, an associate makes $300,000 a year and works 3,000 hours a year. That works out to $100 per hour. A number of outsourcing services will prepare materials for $20 to $25 an hour that are well done. Classic labor cost arbitrage that will grow in importance over time.

Less "Monkey Business"

Investment banks are notorious as hierarchical playgrounds, rife with acting up, bad behavior and too frequent sexual harassment and other forms of misogyny. Firms are cleaning up and leaders such as John Mack of Morgan Stanley and Bruce Wasserstein of Lazard deserve credit for setting “zero tolerance” cultures for bad behavior. This bodes well for the future of women, minorities or persons who are generally not out of “Brooks Brothers Central Casting” in the industry.

Pick the first firm you work for carefully.

People who jump from firm to firm too much are less likely to get hired into a great job because your loyalty will be in doubt. One leading global investment bank has a practice of minimizing hiring from outside to avoid "career jumpers."

Investment banking is generally transaction driven.

In this environment a single individual with good client contact can make an enormous difference for a firm. This is part of the reason that star investment bankers ("rainmakers") take home high bonuses.

- Previously published at careers-in-finance.com