The two points in your investment banking career when you’re most likely to crash and burn

There are two pivotal points in your investment banking career, neither of which is particularly beneficial to physical or mental health – making the step up from analyst to associate and promotion from director to managing director.

In theory, after years in the industry, securing a senior position is a sign that you’ve made it. But if you think your life is going to get any easier – forget it. Having made it to the upper echelons of the organisation, the pressure for most is too much, said Randall Dillard, chief investment officer and co-founder of hedge fund Liongate (and former head of investment banking at Nomura), speaking at the LSE Alternative Investment conference this week.

“It doesn’t ease off, it goes the other way,” he said. “Managing directors in investment banking last around 18 months. Most people simply cannot handle the amounts of revenue they are expected to generate year after year.”

Making it to managing director level is a more democratic process than most promotions, which tend to happen as a matter of course provided you’ve put the time in, believes Ziad Awad, a former managing director at Bank of America Merrill Lynch who now runs boutique firm Awad Advisory, but only a select few make it.

“Everyone in your team is relying on you for bonuses and the prosperity of the business. You’re expected to originate business, so product expertise and client relationships are expected, but you also need to understand your client's needs and get the bank to back you. The rewards are high, but it’s incredibly complex and high-pressured,” he says.

There are parallels between securing promotion to MD and surviving at analyst level, believes Awad. A lot of people put the work in, but few succeed: “Analyst to associate and director to MD are the two critical points in your career. You need to perform or get out, and a lot of people don’t make it.”

Analysts tend to be resilient to the punishing hours required of them, but after a few years your health can start to deteriorate, according to a well-publicised report from the University of California. Assuming they make it through the physical and mental pressures, it’s still difficult to prove yourself and as few as 20% make the cut.

Not surprisingly, new MDs are also on the edge of burning out, says Dr Michael Sinclair, managing director of the City Psychology Group: “People try and try to climb the career ladder, but when they make it to the senior ranks, it can be overwhelming,” he says. “It’s not just the day to day pressure of the job, but every new year – even if you perform in the prior period – you’re back to zero. It’s a constant source of anxiety.”

However, the real pressure begins when you make the step up to senior MD, believes Chris Roebuck, professor of transformational leadership at Cass Business School and former head of global talent at UBS.

“You’re suddenly a strategic leader for the organisation, who often has to report directly to the board. The buck ultimately stops with you and it’s the role with the maximum pressure within an investment bank,” he says. “Managing director is still mostly about bringing in the money, but more senior roles you have a lot of people watching what you do and need to be more collaborative and strategic.”

The financial rewards, rather obviously, are high. Managing directors in M&A bring in average compensation of up to $1.7m, according to figures from executive search firm Options Group, and many will be earning considerably more than that.

Putting in crazy hours throughout your career is a good way of securing money to enjoy later in life, provided you last that long. “If I don’t die, then investing a little bit of time up front and accumulating savings to buy it back in the back end of my life, it’s not a bad proposition,” said Gillard. “If you die unexpectedly, it’s a very bad proposition.”