Investment banking career path: all you need to know
Investment banking career path: millions before you turn 30?
Investment banking career path is pretty straightforward. You have a fixed number of years to get promoted. If you don’t move to the next level – you are out (or stuck indefinitely in a VP position). As simple as that.
The basic hierarchy works in the following way. At the lowest level there are interns. They are responsible for all the imaginable variety of tasks – from building Excel models to ordering dinner. Then there are analysts – pretty much the same story, except that they also have interns to boss around. Once the analysts get promoted, they move to associate level. They start managing the clients and deal execution process. In a few years they get a shot for promotion to VP (vice-president) and later – Director level. This is when the real fun starts. At senior positions bankers mostly focus on client relationships and management of their subordinates. Highest position is Managing Director (MD). He is the ultimate rainmaker – bringing in new business and overseing the entire division of the investment bank.
Investment banking career path is pretty much universal in the industry. Some banks distinguish between VP and Senior VP, or Director and Senior Director, but ultimately the way up the career ladder is standardised.
I drafted the outline in the infographics below. That should give you a basic idea on what to expect if you are planning to break into investment banking world. Keep in mind that this is only the basic snapshot – exact responsibilities, compensation and time to promotion differ by individual bank, division, team and – of course – luck.
What do you do: It all starts here. You get a real taste of investment banking. Long working hours, hard work, a lot of time understanding and mastering Excel and Powerpoint. Multiple projects at once. Essentially, your main task is to assist analysts or associates on whatever they ask for. This can vary from drafting slides to printing pitch books or building a mini-valuation model.
Expect around 55% of your time working on slides, 15% on Excel and 30% on general administrative crap. Exact work varies case by case of course. There will be some interns going insane with 6 projects at once and some joggling around two big deals and leaving early. Your intern workload will be a matter of luck.
Typical tasks: Look through the annual reports of 10-15 companies, find financial data and input it in the Excel model to calculate multiples. Research market information and draft a slide based on the layout suggested by your analyst. Contact 15 people to get biographies of specific team members and create a “Team” slide.
How much do you work: 9am to 2am is standard. Sometimes (rarely) you will be able to finish around 12am. Sometimes (often) you won’t leave the office until 4am. Expect at least a few all-nighters per month (see more coverage on investment banking hours here).
How much are you paid: In most countries you earn as much as the first year analyst (without the bonus). This should amount to at least $1.2k per week in global offices. Take a careful look at the local offices: those outside financial hubs like NY or London can often list a much smaller salary (for the same amount of work). In Netherlands I was paid an equivalent of $1.1K per month where for the same internship in London I was receiving $5k per month. On top of base salary you will also be eligible for a number of perks – paid dinners after 9pm, late cabs home, and sometimes even transport expenses or relocation reimbursements.
How long will it take to get promoted: 2-3 months in UK and US. Internships cycles there are fixed. By the end of the term you will notified if you are offered a full-time position. The tricky part starts with local offices. Those are pure evil. Be it Frankfurt, Moscow, Amsterdam or Milan – they love to do one thing. Extend your internship. And then again. It carries on to the point where you are expected to work as an intern for 3 months and end up there for a year. I knew people who managed to change three internship positions – slowly but surely being sucked into “indefinite internship”.
What do you do: You are in. Amazing. Don’t think your job will be much different from internship times. Actually, as a first year analyst it is pretty much the same. Most of your time will be devoted to preparing pitch books (gathering information and drafting long presentations). As you progress you will be given more responsibility. You might be asked to build you own Excel model or create a pitch book skeleton.
Analyst position is probably the hardest and most demanding position time wise. You still have to engage into multiple activities and take care of a huge pile of stupid administrative tasks. As the same time, you have more responsibility. You are expected to efficiently coordinate the work on the project (and the interns), quickly produce high-quality output and proactively come up with good ideas and project suggestions. Tough. Expect 30% Excel work, 50% Powerpoint, and 20% administrative tasks (scheduling conference calls, arranging meetings, printing pitch books or making travel arrangements).
Typical tasks: Building DCF valuation model from scratch for one of the clients. Calculating the value of the company. Preparing presentation deck and drafting slides.
How much do you work: Similar to interns times, first year analyst come in around 10am and leave after 12am. The more you progress in your investment banking career path, the better your hours will be. At the level of second-year analyst you are likely to get more help from interns too – so your job will begin to move away from boring administrative duties to more exciting pitching and deal work.
How much are you paid: Expect a starting salary of at least $85K per year and a bonus of $55k+ (keep in mind the exact numbers vary by the bank, your team and individual performance).
How long will it take to get promoted: In three years you should be promoted to associate position. After two years you will be critically evaluated and a decision will be made if you stay in the bank. If so, you will work for one more year before reaching associate level. A common statistic is that only 10% of the investment banking analysts are promoted to associates. It is about right – but keep in mind the number is so low because 80% of the analysts choose to move elsewhere.
What do you do: in associate role you are still occupied with execution, but devote much more time to project management. You act as a bridge between analysts and seniors (VPs and Directors).
The array of your tasks will get more diverse at this level: 10% Excel, 20% checking analyst work, 40% project management, 15% client management, 15% administrative tasks (analyst recruiting, prep for conference calls). This is the first time in your career you will have time and responsibility to start interacting with clients and attend meetings.
Typical tasks: Check a set of multiples prepared by the analyst – and come up with ideas on how to boost the valuation by adding a few other companies. Look for additional revenue opportunities for the client. Lead the conference call with client team on the findings.
How much do you work: Associates come in after 9am (I even knew one that never showed up before 11am). They also leave before 11pm, but often come in on either Saturdays or Sundays to finish some work. Despite long hours associates lifestyle is marginally better than that of analysts. They have time to have longer lunch breaks or even hit the gym in the evening. Occasional all-nighters happen but are incredibly rare. 70-80 hours work week is standard.
How much are you paid: your overall compensation (bonus included) will start at around $200k yearly and can go up to as much as $400k-$500k depending on the bonus.
How long will it take to get promoted: 3.5 years if you are eligible. Promotion to the VP level is not automated. You will be evaluated on a number of skills before being offered a Vice-President position. Generally the bank will be looking for great project management skills, good relationships with the clients, understanding of the industry and technical aspects of the job.
What do you do: This is where it starts getting interesting. You are responsible for deal execution and all the marketing work (pitches). You need to manage associates and analysts to ensure the work is being done properly and on time – at the same working on relationship building with the clients.
This why the role of a VP is probably the most challenging one in the bank. Besides execution and everyday management activities you need to start winning clients if you want to progress further in your career. Expect to spend 60% of your time on deal execution and project management, and 40% on client management.
Typical tasks: Lead a meeting with a client where you present bank’s proposal. Draft the outline of the upcoming pitch deck and explain to analysts / associates what needs to be done. Anticipate a market development that can present an opportunity for the bank and start proactively working in this direction.
How much do you work: Your hours keep getting better. You start around 9am but usually leave before 9pm. Often VPs have to work at weekends too, but they usually do it from home.
How much are you paid: compensation will start at $200k, and you should be able to get the same amount in bonus.
How long will it take to get promoted: can be two years – and can be never. Many VPs are stuck in the position indefinitely. For you to be able to move on to the next level you need to show your excellent deal execution skills and ability to bring in new clients. Transition to Director level is incredibly difficult. Goldman Sachs alone has more than 12,000 VPs – and only 300 or so Managing Directors.
Director / Managing Director
What do you do: at this level your job is only about clients. Directors are rarely involved in execution. They oversee and control the overall process but spend very little time on it. Their task is to bring in new business.
Typical tasks: Fly around the globe to meet companies. Proactively approach businesses to win deals. Position yourself to advise CEOs and spot developments in the market that can potentially turn into new business.
How much do you work: Directors have a lifestyle that more often resembles “normal”. They usually come in quite early, before 9am, and leave around 6-7pm. They never show up on weekends, although they do work from home (which as an analyst you can see from early emails Saturday morning). Despite shorter hours travelling is a huge part of MD’s usual activities. A typical schedule of an MD would be something like breakfast in Amsterdam with CEO of Shell and afternoon board meeting somewhere in Oslo. At least three out of five days will be spent on the road.
How much are you paid: salaries start from around $300k without a bonus. The upper potential is unlimited. There are MDs who get salaries close to their base compensation, and there are some that manage to make millions in a year.
How long will it take to get promoted: as a Director you are already at the highest ladder of your career. In some firms, you can also a become a Partner. Your responsibilities will not change – but your compensation might increase significantly. As a Director you can aim at even higher levels – like Group Head, but there is no straightforward way to reach those. All is dependent on individual merit.
Is it exactly like this? A fixed number of years to reach Managing Director level? As everywhere, investment banking career path is not always so straightforward. There are opportunities when the VP just above you left the firm – and the bank desperately needs someone to fill in the position. There can be cases where bank turnover is incredibly slow and hardly anyone moves up. Then, again, there are exceptional cases when people skyrocket their career in 6 or 7 years. Durham Piplani was interning at National Instruments in 2000. In 2007 he was promoted to Managing Director of Equity Trading at Goldman Sachs. Kunal Shah joined Goldman straight after university, at the age of 21. Six years later he was promoted to Managing Director at the age of 27.
Your investment banking career path will be unique in any case. A lot will depend on the bank, your team, deal flow, and of course luck. If you decided to give it a shot – keep in mind recruitment period will start soon. Sign up for our newsletter to get all the latest updates on 2015 application period. And don’t forget to download the perfect investment banking resume template – it will definitely increase your chances of getting the job.