So you decided to join an investment bank. Now the most important question needs to be asked… which part? Rather than set up an entire matrix regarding only “pay and hours” which is typically the two biggest drivers of deciding which part of an investment bank to work for. Instead lets outline what you will be good at. This is not because we believe everyone will only be good at one piece of the business, but given the market volatility, higher competition and general stress in finance it is likely best to align your personality with your career. Here’s a big secret no one tells you… If you’re good… you work less. That’s right, even if you’re the #1 sales guy, #1 research analyst, #1 banker, it is much more likely you work less not because you’re lazy but because you’re efficient, productive and hopefully somewhat enjoy what you do. Before we jump in, we preface this with the disclaimer that this is generally geared to younger audiences (College graduation, MBA level) and certainly at ALL levels on all 3 parts of the bank selling takes a priority over all other skill sets because revenues = job security. With that lets take a “deep dive”…
The Banker – The Party Animal With a 4.0 GPA: Ah yes the world of 80% base as bonus for a strong employee with possible up and downside dependent on firm performance. Of course top-tier candidates are still doing 75-85ish hours a week but hey that’s why they are getting paid the equivalent of two jobs (people love to know compensation at least generally!). But here’s the rub below are the biggest personal qualities needed:
- Attention to Detail: A must, because no one wants to send out a presentation labeled “all numbers in millions” when it’s really billions. If you can’t copy paste data and label properly you’ll unlikely last long on the Street.
- Maturity: Do you really want to stay in this career, then prove that you’re someone to rely on and trust putting in front of CEO’s, CFO’s, CTO’s and other high-ranking professionals… Alone. We do preface this with one caveat, maturity is also perceivedso while you may be a perfect candidate if you appear to be extremely young, emotionally, physically, or otherwise its tougher to place you in front of an executive. The last thing you want your client to think is that they sent an intern to pitch them a deal or update them on the deal.
- Selling: This is a running theme that you’ll see throughout each position… it’s called the sell-side for a reason. The difference in this case is you’re convincing people that you’re the best possible connection to have for the company. CEO’s don’t joke around. Essentially ask yourself, can I convince this person to trust me with his entire life’s work? You’re essentially the point person for the company, a very simple example that is unrelated to banking, imagine you are selling your house who would you like to sell it? The guy who gets above market value every day or the guy who sometimes does better than average… Yes we’re looking at you Frank Quattrone. To be honest this is the #1 skill for a senior person, but we assume readers are unlikely Managing Directors already
The Sales Trader – The Extrovert Who Loves Talking on the Phone: The popular kid in school, this guy could be Cassidy himself and “sell salt to a slug”. He’ll work the least hours out of everyone in the group because once the market closes there is no one to sell to. This position has been a dying breed as of late as many good traders are taking up more of the revenue since the good sales guys are naturally extremely convincing and take the great accounts (Fidelity, BlackRock etc.). Similar to research the pay is approximately the same but varies much more, more likely to get a bad bonus here than in research and banking because there’s more emphasis on selling stock:
- Selling: The absolute necessity, you’re a SALES TRADER! Essentially you’re covering specific buy side accounts and are leveraging the good research from the good analysts to give them great trade ideas to profit from. The more good ideas you send them the better they like you because you’re making them wealthier. Needless to say, when we say sell we don’t just mean give them great ideas but this also entails dealing with TERRIBLE calls where the buy side may lose money because you convinced him to get into Lehman Brothers in September of 2008!
- Traveling: The better you get the more you travel, so you better get used to meeting this happy or unhappy clients regularly over dinner lunch or breakfast. Don’t be surprised however if you set foot into a meeting where the client lost money and he wants to understand the story, you better have a good one too otherwise they’ll be chasing you down the street like rabid dogs on a pork chop!
- Inside Selling: Once you have done a great job perfecting selling to the buy-side, it means you know who’s a good analyst and whose not. It’s time in this case to… play politics or “inside sell”. Now you’re one and only goal is to make the good analysts like you so you can get them in front of your best clients who then buy more shares. More money for you, more money for the analyst and more money from the big envelope that has the bonus pool!
Research Analyst – The “Watson” of a Small Sector: This candidate likely enjoys learning a deep amount about a specific subject, like retail? Too broad try only restaurants. Like Technology? Also too broad try software. Essentially you should enjoy the companies you’re learning about because you’ll be asked to know the craziest details about them, some analysts go as far as knowing decimal point customer data over the past few years. Essentially, you enjoy learning, you want to work hard and you love the stocks you cover:
- Speed: Remember how the Sales trader is going to get every piece of info from you because he’s been driving people to buy your ideas? Well you better be ready and accessible anytime something big comes up. Let’s say Google buys Motorola (which happened) and you are the Analyst covering Google. You better have a solid opinion formulated, know the general transaction terms, have a solid grasp of the deal rationale… and oh yeah be right in which way the stock moves. Needless to say being caught off guard is a sure fire way to spot a bad analyst since all that Google stock your clients bought from your Buy rating, should be of value.
- Attention to Detail/Selling: We mix both of these as second since younger folks will likely lean more to detail oriented work due to earnings calls and medium level folks will be more interested in selling their thesis on a stock. But the idea is simple, when numbers change and deals are announced have both immediate back of the envelope calculations (sold at X times revenue, X times earnings multiples and for X dollars) and an idea as to how it affects your investment thesis.
- Traveling: Conferences, Investor meetings, Investor presentations, Research Analyst Presentations for IPO candidates, Conferences for third party macroeconomic projectors and the list goes on… This is probably the best and worst part for someone in the lower/middle level because it is taxing and can create the worst day in research possible.
Conclusion: While this was a little less straight to the point than we like, it’s quite difficult to understand what you’re going to be good at and even harder to understand the business without being inside of it already. So to summarize for the laziest of all people below is a qualitative comparison
- Banker: Can operate on low sleep and not get cranky, extremely good at catching the smallest of errors, can portray a sense of security
- Sales Trader: Can sell anything, likely a very fun/funny person outside of the office, doesn’t like having work on the weekends
- Research: Checks the stock market religiously, loves a certain type of company/sector, willing to work weekends when scheduled
