Masters of the Universe
Tom Wolfe called them "Masters of the Universe" in The Bonfire of the Vanities; Michael Lewis called them a few unprintable things in Liar's Poker. Who are they? Investment bankers, salespeople and traders. Investment banks aren't like your local branch office with ubiquitous ATMs (those are commercial banks, like Citibank or Bank of America); investment banks work with corporations, governments, institutional investors and extraordinarily wealthy individuals to raise capital and provide investment advice.
The new world financial order
However, the legal barrier between commercial and investment banks has been rapidly decaying since the 1980s. In the last months of 1999, that barrier broke down officially when President Clinton finally signed into law the reform of the Depression-era Glass-Seagall Act, which kept bankers and brokers separated. This past decade has already witnessed the arrival of huge commercial banks entering the investment banking market. Germany's Deutsche Bank has spent enormous amounts of money to establish its investment banking arms. Mergers like the acquisition of Schroder's by Salomon Smith Barney and Chase Manhatten Corporation's purchase of Robert Flemings Holdings (renamed Chase Flemings in April 2000) have been the trend as of late. Flemings Group Chief Executive William Garrett said the company gave up its independence because "the emergence of powerful global houses has changed the competitive landscape over the past few years." Such combinations mean big changes and big opportunities in the investment banking industry; indeed, positions in these temples of lucre are more highly sought after than ever.
The different parts of the investment bank
There are dozens of specialized functions at an investment bank, ranging from private client sales (essentially, brokers to the rich) to risk managers (those who make sure the bank isn't taking on too much risk). At most major investment banks, the corporate finance and sales and trading functions are among the largest and most important.
The corporate finance department works to raise money for companies and other large organizations (for example, cities). The stereotype of the corporate finance department evokes stuffy, starch-collared (white and male) MBAs with wardrobes full of Hermes ties and Armani suits. While dress codes have changed, corporate finance remains the most white shoe department in the typical investment bank.
Sales and trading is a different story. An investment banking trading floor is chaos. There's usually a lot of swearing, yelling and shouting going on--a pressure cooker of stress. Traders must rely on their market instincts, and salespeople yell for "bids" when the market tumbles. Deciding what to buy or sell, and at what price to buy and sell, is difficult when millions of dollars are at stake.
However, salespeople and traders work much more reasonable hours than research analysts or corporate finance bankers. Rarely does a salesperson or trader venture into the office on a Saturday or Sunday, leaving the trading floor completely void of life on weekends. Any corporate finance analyst who has crossed a trading floor on a Saturday will tell you that the only noises to be heard are the clocks clicking every minute and the whir of the air conditioner.
In corporate finance, undergraduates are generally hired into grueling two-year analyst programs that promise plenty of all-nighters and 90-hour weeks. Their long days entail reviewing financial statements of companies and making recommendations on potential profits from investments in specific companies. Analysts may also start to determine the fair market value for a company looking to trade its stock publicly. In larger firms, analysts may specialize in a certain industry, like transportation or utilities, or a certain market, such as government financing.
After completing the program, "graduating" analysts often leave to attend graduate school or to find another job. Some analysts able to stand the long hours and stress will stay on for a third year in order to gain more experience, more money, and a better shot at getting in a top MBA program. Firms have often promoted top analysts to associate positions after their third years. More recently, however, many firms have started to promote top analysts to associate after only two years.
Like analysts, associates in investment banking work virtually all the time, and their stress level can be higher as mistakes are not as easily tolerated. Associates gradually take on more and more client contact and move up to the vice president level in three to four years. After vice president comes director (or senior vice president) and then managing director.
In sales and trading, the career path is not quite as structured. For example, analysts move more easily to the associate level without an MBA than they do in corporate finance. And associates can climb quickly to the VP and director levels, depending on the firm's need and the talent of the salesperson or trader.
Through-the-roof salaries;Perks like free meals and car service;Power
Back-breaking hours;High stress level
Average Hours Worked Per Work: 80
Entry-level undergrads on Wall Street: $45-$55,000 + $35-$45,000 bonus;Entry-level MBAs on Wall Street: $120,000 + $30,000 signing bonus + $year-end bonus. Total comp for MBAs can top $200,000
Bachelor's degree;MBA or JD for certain positions
Don't make the mistake of thinking that all investment banks are the same. While it's true that I-banks tend to fulfill the same functions, their cultures can be very divergent. At one major investment bank, employees say it can be "quite a forgiving place in many ways." A trader there explains: "There have been some people, mostly at the middle level, who have lost $30 million in a day. Nobody's happy about it, but it's not the end of the world, they keep them. I've had my losing days myself, and they haven't fired me. Sometimes I've even come to the office hung over." However, other firms are not so easygoing, featuring a "horrendous" bureaucracy which "can sometimes combine with office politics to make life miserable and incomprehensible." "Sometimes, for no apparent reason, you get blamed for things you didn't do, and get assignments you're not supposed to have, and there's no one to complain to--life becomes like a page from a Kafka novel," says one young insider.
Trading is its own world, complete with its own culture. One trader says: "Trading is like warfare. It can get very frantic and then very quiet, and flare again without warning. It's long periods of silence punctuated by fear and terror. That's what makes it stressful." Life off the floor isn't much less stressful, according to I-bankers. One associate says, "You burn out by the time you're 30. Most people last only until they're about 35, then go off and do something else. Some people move into managerial roles within the firm or at another firm, and some will just leave the business entirely, because, frankly, they're tired."
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