When leaving a Goldman or JPMorgan for a boutique makes sense - and when it doesn't

If you are currently working at a huge bank like Goldman Sachs or J.P. Morgan and feel like your career growth has stalled, how can you tell when the time is right to join a smaller firm?

For Mark Traudt – who quit Goldman Sachs for a fintech start-up in 2003, back when an investment bank was the most well-paid and prestigious place for a technologist to be – he preffered the excitement of making a big impact at a small firm to the prestige of making a small impact at a big firm.

One of the biggest factors most people consider, understandably, is compensation.

“Your bonus upside is a lot better at a boutique investment bank, but your work/life balance may be worse,” said Brianne Toole, principal consultant on the investment banking team, Americas, at Selby Jennings. “You may have to work harder at a smaller firm."

“It’s difficult if the team is small and the deal is big – but you’re likely to be rewarded on the other end come bonus time,” she says. While big banks are deferring more of their bonus payments, most boutiques are still paying in cash.

The appeal of a boutique

Boutique M&A houses like Centerview Partners, PJT Partners and Robey Warshaw have been involved in some big-ticket deals over the past couple of years. The knock-on effect has been to enhance the reputation of all boutiques including larger firms like Evercore, Moelis & Co and Houlihan Lokey. It also helps that ongoing job cuts at larger firms have eroded any sense of loyalty to a single organization.

Boutique investment banks are continuing to eat the lunch of large M&A advisory players in the U.S., but they’re also taking advantage of problems hitting bulge-bracket banks to bring in some top talent.  Evercore and Lazard cracked the U.S. M&A advisory revenue top 10 list for the first nine months of this year, according to Dealogic. Firms such as Moelis, Perella Weinberg, Evercore and Houlihan Lokey pay quite well.

“Before we couldn’t move someone from a bulge-bracket or convince people to go from Goldman or J.P. Morgan to a boutique, but now it’s not a problem at all,” says Jeanne Branthover, a partner at DHR International.

“They think, ‘If I go to a smaller boutique, I could get a bigger bonus, take on more responsibility and make a bigger impact,’ so convincing them to make a move is not a problem anymore,” she says. “Nobody feels job security anymore – people saw Harvard MBA friends getting fired and realized that anyone can get fired, so now everybody keeps their ears open for opportunities out there.”

“Boutiques have ability to bring in big deals, and if they’re able to close them, there’s a huge reward,” says Toole. “Many of the elite boutiques have been able to attract great people from bulge-brackets lately.”

The case for leaving a bulge-bracket

While some bankers always seem to like to complain about their bonus, in recent years those complaints have gotten louder at certain bulge-brackets.

“Bonus pool sharing has really affected a lot of people in a negative way, especially at banks that had to pay a lot of fines and it affected everyone’s bonuses – it’s not in your control,” Toole says. “At a boutique, the money you bring into your firm will be reflected in your bonus, so there’s more upside.”

Most boutiques are privately held and therefore not subject to the same level of regulatory pressure as the larger firms, notes Anne Crowley, managing director at recruiters Jay Gaines & Co.

While large investment banks are very hierarchical, with juniors being pigeon-holed into one area of the business, the depth of roles at boutiques often means that career progression an be swifter - albeit less structured.

“The opportunity can be greater at a smaller firm, particularly if it is growing, but you need to be comfortable taking the lead or defining the role or path,” Crowley said. “If you have the right people, smaller firms can have a family-like atmosphere.

The case for staying put at a big bank

Smaller or boutique firms can be “personality-driven,” meaning the persona of the CEO can have an outsized influence on the inner workings and tone of the firm. This can be good for business, but it can also be problematic for career progression, Crowley says. Added to that are the fact that senior bankers at boutiques are often hired in from larger banks at a later stage in their career. This means opportunities to move up the ranks for those who joined a boutique as a junior are not always available.

Smaller firms often focus on one business area, which means they can be more vulnerable to changes in the economy or business climate.

Boutiques also tend to be less structured and more opportunistic.

“If you like structure and a defined career path, a smaller firm may not be the best place for you,” Crowley says.

Smaller firms may not provide the same level of complexity or functional rigor as a larger firm, she noted and the average size of M&A deals is lower.

Plus, smaller firms are typically less well known, and they may not command the same level of credibility and immediate recognition on your resume as some of the larger firms.

And while initially you may get promoted more quickly at a boutique, a smaller firm may not provide the same level of career growth potential over time as a larger firm, Crowley said. There are plenty of examples of Goldman veterans, even lifers, who have risen to senior, well-paid positions in

There are plenty of examples of Goldman veterans, even lifers, who have risen to senior, well-paid positions in HR, technology, Financial and Strategic Investors Group (FSIG) investment banking and M&A advisory. Of course, there is a comparably wide range of opportunities at J.P. Morgan, including people who switch from one group to another.

“As far as cons at a boutique, at the junior banker level, if you don’t have strong senior bankers above you, then you’re pitching all the time and sending out memos,” Toole says. “At a bulge-bracket, the brand name brings in business, so there’s not as much pitching involved.

“At a boutique, the deal flow is a lot more variable, so if they have a bad year your bonus will be small, and base salary can be 50% less than at a bulge-bracket,” she says. “At a smaller firm you’re handicapped by what you bring in and actually close.”