The dead-end banking job you can't afford to leave
Junior investment bankers who leave the industry often talk about feeling the need to get out before they become “stuck.” On the surface, it’s an odd word choice, particularly considering the number of exit opportunities investment banking is said to provide. But if you talk to people one rung above junior bankers – vice presidents – “stuck” is exactly what many of them feel.
VPs at investment banks tend to make very good salaries, but compensation totals fluctuate wildly. Average take home pay for VPs at bulge-bracket banks was $364k in 2017, according to Wall Street Oasis. But some vice presidents can earn as much as $1.2 million. These are not the people who are stuck; they’re likely to be named managing director during the next cycle based on how they’re valued. It’s the others – and there are many – who find themselves in limbo.
Take Goldman Sachs as an example. CEO Lloyd Blankfein noted in 2012 that the firm employed roughly 12,000 VPs, accounting for more than one-third of overall headcount at the time. Yet the bank only promoted 509 employees to managing director in 2017, the largest class in the firm’s history. And Goldman only names MDs every other year.
For the rest, it’s not just a waiting game. While experience is obviously critical, “time served isn’t really part of the criteria” of making MD, said one former managing director at Goldman Sachs. “It’s a meritocracy. Those who get passed over will continue to unless something drastic changes.” Once five-plus years go by, “the writing is on the wall,” he said.
Former and current VPs we talked to know this – there just isn’t much they can do about it. “I make over $400k a year,” said one VP with seven years holding the same title. “I have a mortgage. I can’t walk away from that.”
One of the problems is that the exit opportunities provided to juniors tend not to be there for experienced bankers who haven’t been promoted. One buy-side recruiter told us that his clients prefer to hire cheaper junior talent from the sell-side that banks are looking to promote themselves.
Shifting to a competing investment bank is a more likely possibility but the chances the job will accompany a promotion or a significant raise are slim unless you are at a tier 1 firm and are willing to move down. “Why would they promote you if the bank you’ve been with for a decade wouldn’t?” said the headhunter.
The feeling of being stuck isn’t all about compensation, however. One former Morgan Stanley VP said she found herself frustrated with the role itself. “You get to deal with clients but you still have one foot in the other camp" – managing junior bankers and dealing with all the analytical work. She left when her subordinates started becoming her colleagues.
Becoming unstuck at the VP level is mostly about client relationships, the former Goldman MD said. If you can bring in deals, great. But at the very least you need to have strong relationships with clients and be seen as the point-person on a day-to-day basis, he said. Managing your associates is secondary. “If your MD were to quit or get fired and you can do his job, you’re golden.”
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