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Boutique or big bank? It all depends on the size of your Rolodex

Well over a decade ago, before going to college, I spent a year as a golf club salesman in Connecticut. On my first day, I sold a $300 set of non-brand-name irons. My commission: $50. Not bad. A few days later, I sold an $800 set of Callaway irons. I got a check for ten bucks.

Baffled, I went in to talk to my boss about what I assumed was a mistake. There was none. “I don’t need you to sell Callaways,” he said. “They sell themselves.”

It was an early lesson in the power of brand identity. When you have it, sales will come, but oftentimes the checks are smaller as you’re not doing all the heavy lifting. On the other hand, when you sell with little or no brand recognition to rely on, commissions tend to be higher. The whole eating what you kill philosophy.

It’s the same thing in the world of M&A. Investment bankers can work for a big-name firm, like a Goldman Sachs or a J.P. Morgan, and earn hundreds of thousands of dollars a year. Or, they can toss aside the company shield and join a boutique, with the prospect of earning much more.

At bulge bracket banks, managing directors take home an average base salary of around $400,000, with the potential of a bonus that can nearly double their income, according to a new report from Financial News. Partners at boutiques, meanwhile, can earn several million dollars each year.

The average partner at boutique investment bank Ondra Partners took home $5 million last year, according to the report. The average team member earned over $1 million. The compensation-to-income ratio at boutiques can reach as high as 90%, says Financial News. At big banks, with shareholders and hundreds of millions of annual expenses, it’s around 40%. That’s not to mention that the majority of boutiques aren’t public, meaning they pay mostly in cash and often without deferrals.

So, why doesn’t every senior M&A banker head to a boutique? It’s the shield, or lack there of. M&A bankers need to rely more on their personal relationships as they fight and claw with big name, legacy institutions with sterling reputations. The work, you could argue, is more difficult.

But lately, boutiques bankers have won more than their share of battles. Six boutique advisory firms earned spots in the top 20 of the global M&A league table during the first half of the year. Four of them – Centerview Partners, PJT Capital, Evercore Partners and Perella Weinberg – own greater market share than UBS, for example.

Many, like Moelis and Greenhill, are hiring. But you’ll need one heck of a Rolodex to get the job.

The New Face of Compliance (eFinancialCareers)

Compliance jobs today are unrecognizable compared to a decade ago. There are higher rewards, but the pressure can be crippling.

Getting a Job in ECM (eFinancialCareers)

Here’s a detailed look at how you can get an entry-level job in equity capital markets, along with some advice on how to deal with senior ECM bankers.

No Conviction, No Problem (WSJ)

Yet another trader who was fired amid a probe into the alleged manipulation of currency markets has found a new job. Former Citigroup trader Rohan Ramchandani was just hired by London Trading Group. He’s at least the third fired trader to find new work, which is rather impressive considering traders with clean backgrounds are struggling to do the same.

Insider Trading Investigation (WSJ)

At least four hedge funds are being investigated for potentially illegal communications with a Washington research firm that may have tipped them off about a change in government health-care policy. The firms in question include Viking Global Investors, Visium Asset Management, Citadel and, you guessed it, SAC Capital Advisors – now known as Point72 Asset Management.

Bullying Suit Tossed (Bloomberg)

A judge has ruled against a former broker at BGC Partners who sued the firm over being bullied. Interestingly, the judge agreed that Robert Bou-Simon was subject to ridicule and insults, but he was not the only one. He “indulged in it himself, and often gave worse than he got,” according to the ruling.

Dimon Done With Treatment (WSJ)

J.P. Morgan Chief Executive Jamie Dimon has finished his eight-week cancer treatment. "I won't do a lot of traveling but my schedule is growing,” he said. Dimon was “shockingly present” during his treatment anyway, according to Chief Financial Officer Marianne Lake.

Overpaid (Bloomberg)

Nearly 90% of hedge fund managers are overpaid, according to one institutional investor. The 2% management fee is on its way out, it appears. Large clients just won’t pay it.

Buzz Around the Office

Kamikaze Pilot (WashPo)

Here’s an amazing story. Thirteen years ago yesterday, fighter pilot Heather “Lucky” Penney was given her orders: slam her plane into United Airlines Flight 93.

Quote of the Day: “If you intelligently trade derivatives, it’s like a license to steal. You can understand why they all want to do it. I just don’t think it does the country any good to have this huge gambling market.” – Berkshire Hathaway’s Charles Munger

AUTHORBeecher Tuttle US Editor

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