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What if your exit options are narrowing?

"Stay in banking too long, you'll be incapable of anything else"

I began my career in the investment banking division of a major European bank. Three years later, I left. Getting out of banking was the best decision I ever made.

It wasn't just about the working hours, although they were just as back-breaking as everyone says. Nor was it just about working with senior people who see you as dispensable - although they absolutely do. It was because the longer I stayed in banking, the more I could feel the industry crystallizing my bad habits and limiting my future career choices. I had to go.

Investment banking isn't about advice, it's about process

Investment banking is an advisory function. Or it's supposed to be. However, a lot of it is nothing more than processing market information when you're trying to win business, or managing a process on behalf of a client when you're trying to execute deals.

Most people in an investment banking division are not advisors. Only the most senior bankers are viewed as trusted advisors in the eyes of their clients - and they are a minority even among the seasoned managing director (MD) cohort. In my experience, most senior investment bankers are fighting between themselves to justify their expensive salaries in an ultra-competitive market. They rarely have an ability to form a long term view or stick to their beliefs (which would be the only way to gain the long term trust of their clients). They live by a “next quarter mentality” and when you're a junior this locks you into an endless cycle of processing and irrelevant analysis.

Senior bankers are slaves to clients, junior bankers are slaves to seniors 

In investment banking, the client is king. The client can demand high speed turnaround of huge chunks of work. Senior bankers who want nothing more than to please clients will rarely push back on these unreasonable requests, so as a junior member of staff you are in for a lot of sleepless nights. You will learn very little - except to suppress all forms of initiative and free thought. Your main skill will become blind obedience to your clients and your seniors and if you're not careful you will perpetuate this by indoctrinating the juniors working below you when you become senior enough to do so.

Banking will make you a dreadful manager 

Success in banking is all about processing. No one really cares about staff development when thousands of talented juniors are queuing to join the industry each year. The real goal is to squeeze everybody (especially the mid-level and junior cohorts) as much as physically possible to get all the processing done. Accepting this way of working - and the associated management style - as normal will have a hugely detrimental effect on your ability manage anyone in a more balanced environment where the pay is lower and managers actually have to motivate people.

You will learn nothing about the detail of finance

Working in banking is all about high level analysis. You're not going to be doing any detailed work because you won't have the knowledge, the information or the time. When you're a junior banker, a leverage ratio becomes nothing more than “3.5x” - the whole rich world behind this number (debt covenants, structural subordination, the security package, the acceleration rights) is lost. Ignoring this world is in effect ignoring the inner workings of corporate finance itself. But ignore it you will.

There will be unknown unknowns that you'll only discover when you walk away

When I was a junior banker, I worked worked on large and small deals but I never saw a loan agreement or a term sheet. There are a lot of key work streams that investment bankers simply don’t deal with. These include negotiating legal work, supporting post-merger integration, or developing strategies for business restructuring. If you work in a finance job in the corporate sector or in private equity, you'll need these skills. In banking, you won't develop them at all.

Of course, not all banking jobs are this bad and some people in banking are extremely knowledgeable and well-rounded individuals. In my experience, however, they are in the minority. For me, banking started my career but it was threatening to become a blocker unless I left before I became enmeshed in the system. I left last year. I'm very glad I did.

Aron Woods is the pseudonym of a former analyst at a European bank

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Photo by Joe Stubbs on Unsplash

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  • ye
    yetis911
    1 January 2022

    This is such a absurd article. First, rhe Banking system is designed to spit out most of its participants, as you move up the chain. There is only one MD for each sector, etc. So don't worry about staying too long. The system will eventually give you the boot. Smaller banks will keep people around longer, but then you need to ask yourself if working at these smaller banks is worth it? What deal flow, where are you in the deal? Top left or the last name on the list? Some of this really isn't I Banking.

    Second, I can name dozens of people who left the Banking system and moved into industry, at all levels. Hedge funds, PE, VC, private companies in the role of CFO, M&A, Biz Dev etc.
    In many respects you have an advantage, as you know the system and the process. You might not have all the answers, but you know a lot more than someone without I Banking experience.

    But as noted, it really comes down to the bank, what team you work for, balance sheet (do you have one), etc.

  • an
    anonymous_trader
    31 December 2021

    I find the article very much resembles my time in a big bank (though in markets/trading, not in IB). I find that most staff in large banks are very siloed, and only understand their own silo, and rarely venture out into the "scary world" of all the other silos that necessarily contribute to the work.

    And particularly resonant is the part about senior MDs fighting for relevance and pay. Banks tend to be extremely "tribal" this way, and it's toxic.

  • nb
    nba
    30 December 2021

    From my experience working in both Leveraged Financed and then the CLO market, I can't claim this to be my experience. After the 1st year into the job, you are required to start becoming more knowledgeable about the intricacies of the product you are selling. There is no way you get away with just be a 3.5x leverage guy..

  • di
    disqus_dacain
    21 October 2019

    I have to say this was not my experience of 25 years in infrastructure and project finance - maybe I was just lucky with choice of specialisation. Even as a junior you are exposed to everything - that sector involves the whole team in deep analysis in financials, covenant testing, modelling, legal documentation as well as due diligence interrogation. Of course there can be good and bad managers but if you are unhappy in your career development you have to let people know about it - fundamentally nobody is in charge of your career except you and if you think training is not being made available, demand it. If bankers sit there quoting 3.5x without knowing what they are talking about then they are only letting themselves down. Buy a book and learn if necessary. 3 years of trying and quitting is not long enough to justify the headline of this article.

  • Xa
    Xaxxus
    23 July 2019

    I’d say this is more relevant to software developers.

    Many banks are trying to “modernize” but from my experience they just end up wrapping their legacy systems in pretty modern frameworks.

    Absolutely mind numbing work that will not give you any useful skills to take to other industries.

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