Why is it that so many students are still chasing those coveted M&A internships in the hopes of becoming an Investment Banker? Investment Banking is still one of the most sought after careers for business school students.
The sacrifices are great. The work hours are dreaded. 70h to 100h per work are real. Dinner will be served at the office with a late-night taxi home. No complaints. It’s all part of the deal. Being on constant call eats into your social life and you will see who your real friends are.
Why is it that albeit these high demands this profession is still one of the most sought after for business school students? Even looking back, we still think it is one of the best options amongst other viable career paths. Let’s shed some light and look at the perks of starting your career in Investment Banking:
Money and the good life
No doubt, it is one of the most lucrative careers straight out of college. Saving for grad school? Student debt repayments? One mighty bonus check will take care of all of that. That alone is good enough for most. Once you figure out that student debt is real and Investment Banking salaries will take care of it in one to two years, this career becomes more enticing whatever the costs. Few career options offer bonuses that range from 30%-100% of your base salary depending on the group’s performance. After all, you are working client-facing front-office, i.e. your work makes money for the bank.
For students, the allure of the “good life” with such a high salary can be intoxicating. “I will work as hard as I can and I’ll have access to all the finer things in life”. Nice restaurants, expensive French wine, drinks at luxury hotels, vacations to exotic islands and finally your own place in a nice part of town all sound very much enticing compared to your modest student life. Whether the high-flying Bankers truly appreciate a EUR 300 bottle of fine red wine or just the status the comes with dining at selected fancy restaurants with outrageously priced meals does not matter. It is the lifestyle that the job can afford. It is the upgrade in lifestyle that people are after. It is the hope for a better life vs. earning half the base salary of a first-year Investment Banking Analyst for life with no perspective of advancement.
Exit options and buying yourself some time
“Get through two years of Investment Banking and you can do anything you want afterward” is an often-cited phrase on campus as well as from Junior Bankers. You can still decide what you’re going to do after the two-year stint. Possible exit options are buy-side (private equity), work for an actual company (finance, strategy & operations or business development), start your own company (now that you have some money and the knowledge) or simply staying in Investment Banking. Not that these options will be flying to you. You will have to work incredibly hard to get them. But you will have the tools to tackle them vs. your old self – a young green graduate.
As opposed to highly specialized roles, such as software engineering or controlling, you are still keeping your options open with various exit options. For a lot of college students, it’s a good way to buy themselves some more time. There are many, many students who find themselves halfway through college without having a clear idea where their strengths are and what they plan on doing for the next 40 years of their lives. M&A Investment Banking is a good choice to test the waters, develop your skillset (deals, PowerPoint, Excel and talking to clients) and figure out what you are good at to pivot from there. Investment Banking also happens to be “prestigious” and well-paid.
On a side note: If your family is loaded, Investment Banking is a common career path to gain the respect of your patriarch (i.e. your dad). He has been pouring endless resources into your upbringing and education. Now is your turn to show and impress your dad that you are “above average” and good for something. What better place to do than in one of the most competitive careers with a high salary. You may even recommend yourself to manage your family’s assets or entrepreneurial ventures – like a single-family office.
Become an Excel Wizard and PowerPoint Rockstar
Excel and PowerPoint are the most basic tools when trying to do business. These are your basic tools. This is your bread-and-butter business. You have to master them. There are no shortcuts. You will be able to build the sleekest financial models that Controllers will admire in awe. You will be able to draft slides that synthesize piles of unstructured data into clear actionable recommendations for your clients. All of this with incredible stamina and endurance. Everything that comes after Investment Banking will be a walk in the park for you. These base skillsets will stick with you for your entire career.
To learn about finance and business
You will understand how a company works as an entity throughout its commercial, financial and legal dimensions. Management Consultants are only focused on commercial matters. Auditors will only see financials. Lawyers only see the legal documentation. You will have seen it all. Not just from one company, but multiples. After all, you will have learned to sell the most complex product on earth – a cash-generating company. You will learn proper client relationship management. Make no mistake, Investment Banking is sales, just a bit more complex than B2B enterprise sales. Quite the thrilling environment isn’t it? (Hint: these are all good reasons for your interviews!) If you happen to get lucky, the deals you worked on will get executed and you have the bragging rights for your career.
The people
In Investment Banking you are sure to work with smart, ambitious and driven people. After all, if you were not ambitious nor driven, you would have not made the full-time cut. The reason is simple: Investment Banking promises lots of money and an exciting career with lots of learning opportunities. This, in turn, attracts some of the sharpest and most driven people from academia. It’s the same as on a college campus. You want to gravitate and form a circle with the top-performing students for your group work. You don’t want to associate with some low performer, who you have to drag along in group work.
The moment you walk onto an Investment Banking floor, you feel the energy, the hustle and bustle. It’s quite the exhilarating place, to start your career. Joining an Analyst class is almost like an extension of college campus and fraternities – just that everyone is top of their class. It is a sense of comradery. You are all the same age. You have all studied at the same universities. You all went through the same internships and interview processes. It’s like fighting together in the trenches with like-minded people. But yes, while there are some incredibly smart and hardworking people in Investment Banking, we can’t deny that there are also many imbeciles who take themselves way too seriously in the industry. Somehow, they manage to survive year after year.
Pure luck
Some just stumble into Investment Banking out of sheer luck, much like an accident. It just happened. They didn’t have a “grand plan” to break into Investment Banking at all costs. It just happened. They were at the right place, at the right time and somehow seized the opportunity.
They somehow ended up at a company presentation of an Investment Bank at University, they somehow stumbled upon the right interview prep material, thought it was kind of cool and landed an M&A internship. Oh, the bank needs a young Analyst? Guess who everybody likes to work with. The rest is history. But don’t be fooled, those are often single-minded people obsessed with non-social hobbies, like chess or engineering. Yes, engineering as a hobby. They all share the same traits: incredible work endurance with next to no mistakes. That’s what gets you hired. As poetic as these stories may sound, they are outliers. They are the highlights of a match. The majority of full-timers got hired because of the right credentials, hard work and proper skills going through the regular recruiting process as anybody else.
Prestige and peer pressure – HINT: Don’t do it for the prestige
For some, the “prestige” that comes with the job is quite intoxicating. Many Investment Bankers like to feel important and that they are working in “high finance”. All of a sudden, people around you think you are a “financial whiz”. Relatives and friends call you and want investment tips regarding mortgages, gold, stocks or even a hot tech start-up. Your opinion on financial matters suddenly matters very much. Funny enough, your day-to-day job in M&A (selling and buying private companies) has nothing to do with mortgages, stocks or gold. God forbid you run into a real Investment Banker on a Friday evening at a rooftop bar. Although deep down they may carry utter disdain for their work, you will hear them describe their job as if they were doing headline-grabbing big business.
Another reason why banking jobs are so coveted is scarcity. There are only so many spots left in the industry for entry-level Analysts per year. Few entry-level jobs offer that kind of money and career optionality – the emphasis is on “few”. Coveted jobs project prestige onto those who manage to emerge as winners throughout a rigorous and “highly selective” recruiting process (HINT: there just aren’t that many seats). Especially at top-tier schools, where banks recruit at, they can pick and choose who gets to intern with them. And then, campus gossip takes care of the rest. Who got drafted and who did not? XYZ is so smart but got rejected, but ABC managed to break in! Even students never really interested in Investment Banking find themselves sucked into applying and interviewing just to prove they can do it!
Now comes the big caveat for your mental health: If you manage to break into Investment Banking, do not for one second think that you are any better than any person. You are not your job. If you get drafted by Goldman or Morgan Stanley, congratulations! Go for it! But after your first job, nobody cares about your career besides you. It’s like the weight you lift at the gym. Besides your insecure alter ego, nobody cares about the weight you lift. “Prestige” is just sleek marketing dollars spent on campus recruiting to create your desire to apply for and be part of the team. It’s mentally unhealthy to go after prestige. Who do you want to impress? Your friends at school who will fade away after graduation? What if you don’t get accepted at Goldman and have to “settle” for a more unknown boutique? You will be disappointed although you have landed an actual Investment Banking gig. Do yourself a favor. Do it for yourself and not to impress other people. Self to self comparison; outward comparison is pure negativity and paralyzing.
Why did we do Investment Banking?
Thinking back to when we were students, we can’t deny we were intrigued by the money, prestige and working with smart people. Yes, we made all the mistakes. We studied finance and it was kind of a thing to break into Investment Banking. Some of us had massive student debt – we didn’t know any better. So, we were forced to work as hard as possible and Investment Banking offered the possibility to kill all the student debt in just one to two years out of college – freedom. We can’t deny that we were not dazzled by “prestige” and thought it was cool to be an Investment Banker. But the prestige fades away pretty quickly by the third month after entering the workforce. When you are consistently working until midnight, you just want to get some more sleep and peace of mind. Once you figure out that the shareholders of the companies you help sell get rich and not you nor your Managing Director, “prestige” gets put into place. Working with smart people is true. We did learn a lot. How to make proper slides with PowerPoint, build Excel models and how to confidently pick up the phone and talk to clients. Was it worth it? Looking back, we guess so. It’s a good training ground for where you want to pivot next. It’s better to put the learning pain upfront, when you are young than delaying it with compounding interests.
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