Category Archives: Investment Banking

Investment Banking: It was a different world (2)

In mid-2008, right after my first annual performance review, the cocooned world of investment banking suddenly changed.

The first blast came with the news of Bear Sterns’ financial difficulty. Since early 2008, we had been hearing negative news concerning the real estate market, but Bear’s news alerted us to the fact the crisis was close at hand to the investment banking industry. On May 30th, Bear Sterns, the fifth largest investment bank in the US, was acquired by J.P. Morgan – salvation. The next blasts occurred in quick succession that September. Following the nationalization of Freddie Mac and Fannie Mae; Lehman Brothers, the fourth largest investment bank in the US, filed for bankruptcy after many failed attempts to save the company.

I clearly remember the day of Lehman’s bankruptcy. It was September 15th. One of my colleagues watching the Bloomberg terminal suddenly screamed, “Lehman has folded up!” His voice echoed throughout our floor, and 160 investment bankers stopped dead in their tracks. After a moment of silence, some people started checking the news on their computer, and others scrambled to the Bloomberg terminal. Since my desk was next to the terminal, my desk was surrounded with my team members. The monitor was displaying market news and stock prices of the investment banks. Goldman Sachs, Morgan Stanley – all stock prices were falling by the second. $38, $36, $33, $29, $26…looking at the falling stock price of my company, I asked a managing director, “are we going to go bankrupt?” He said nothing, continuing to stare at the monitor.

Financial Crisis

Since then, the world has totally changed. All investment banks downsized, many people left the industry, and some divisions even vanished into thin air. Survivors also had a difficult time. Many deal opportunities evaporated, companies continued restructuring, and investment bankers lived with the specter of lay offs.

After several years, the financial industry now seems to have regained its footing. However, investment banks are not as “shiny” as they had been, and the lives of investment bankers are totally different from what they were in 2007. Recently I talked with an old colleague at Morgan Stanley, and he told me that the company doesn’t reimburse $40 for dinner anymore, and new hires’ expectation for their performance bonus is far smaller than their base salary. He didn’t say so, but I suspect that these days managing directors may be scrutinizing menus when they select wine.

Bull Down

That’s the financial industry. Economic upturns and downturns come on a ten-year cycle. It’s inevitable. Luck is a critical factor for success in the investment banking business.


Investment Banking: It was a different world (1)

In 2007, I jumped into the “real” world. I was 23. It was literally a financial bubble. Everything was crazy.

During my first month, I participated in a one-month new hire training program in NYC. When I left my office to go to the airport, my boss gave me a thick envelope, saying “go for a drink with your colleagues.” I went down to the carriage porch, and found a senior driver standing by a black fancy car. He politely introduced himself, and gave me a cold drink and that day’s Financial Times. On the way to the airport, I opened the envelope. It contained a thousand dollars in cash. I had no idea where to go for a drink with it.


After finishing training, armed with a thin veneer of knowledge in corporate finance, I returned to my home office. What awaited me was an incredible volume of work. I was thrown into various deals, and worked day and night at a dizzying pace. No joke – in the morning, I settled at my desk, broke some bread into small pieces, set them on the corner of my desk, and ate a piece whenever I had a moment during the day.

My only pleasure came at dinnertime. The company reimbursed our dinner up to $40 and I spent the full $40 every day, gaining 9 pounds in the first three months. My bosses also often took me out to dine. They always went to the most upscale restaurants, and spent money like water. Ordering wine, they didn’t even bother with the menu, but just said “the most expensive one.”

The first year passed quickly, and we had our yearend performance reviews. It was also the day we were informed of our annual performance bonus. At investment banks, the performance bonus fluctuates greatly year-by-year, dependent on the economy and the company’s performance. Since it was my first year, I had no idea how much to expect. During the performance feedback, my mind was somewhere else. When the division head gave me a piece of paper at the end of the meeting, I finally came to my senses. At the bottom of the sheet of paper, I found my performance bonus for the year. The number was greater than my annual base salary.

What in the world had I come to? Is this sustainable? I was feasting on the rewards of the financial bubble, and losing my sense of the value of money in the process.

However, it didn’t last long…


(To be continued)

Consulting vs. Investment Banking

Given my experience working in consulting and investment banking* (3 years in each field), the most-asked questions I receive are, “What are the differences? Which do you prefer?” Standing on the verge of Hell Week, I was recently asked the same questions from some of my section mates.

Here are my thoughts.


The biggest common factor is the existence of a “teamwork culture”. At both consulting firms and investment banks, everything is a team effort. Teams usually consist of four to six people. For instance, at a consulting firm, a team may consist of a managing director, a project leader, a consultant, and 2-3 associates. Since the team members share good and bad times during the project, it is quite important each team member has good interpersonal and teamwork skills. When I interviewed candidates, I was always asking myself “do I want to work with this person for 20 hours a day?”

“Up or out” is also an important common factor. Consultants and investment bankers are required to dash up their career steps and can’t stay at a step longer than a specified period of time. Usually they need to be promoted to the next step within 2 to 3 years (UP), and if they cannot do so, they have to leave the company (OUT).

Another common factor is “top management issue focus”. Both consulting firms and investment banks always deal with CEO agendas, and the team frequently interacts with the client company’s executives. In a meeting, even if you are a junior analyst, the executives ask you “what should we do?” with the expectation that you will answer. Inevitably, consultants and investment bankers have to hone their general management and decision-making skills. This is why these jobs attract many MBA students.


The biggest difference is the acquirable skills gained through the two jobs. If you spend your career as an investment banker, your core skill would be hard skills – financial modeling, due diligence, accounting and corporate law. On the other hand, if you work for a consulting firm, you would acquire soft skills – strategic planning, project management, and critical thinking. The important thing to note is that these skills are all essential for business management, and they complement each other.

From a business perspective, there are many differences. While investment banks usually work on a success-fee basis (plus a retainer fee); consulting firms work on a monthly fee. Junior investment bankers work on multiple projects (2-5) simultaneously, but junior consultants usually focus on 1 or 2 projects. Deal origination and execution are different careers at an investment bank, but consultants work on both types of projects. And so on.

Other frequently asked comparisons are as follows:

Consulting vs. IB

To get a clearer picture, you may want to view this classic video.

YouTube Preview Image


Personally I prefer consulting.

*: Here, investment banking refers to so called Investment Banking Divisions, which provide M&A advisory and financing services to corporate clients. Other divisions, such as Capital Markets, Equity Research, and Asset Management, are not included.

SG Cowen and Investment Banking

“Among four well qualified candidates, to whom do you give the offer?”

Today’s Leadership class started, as always, with a straight forward question. The protagonist of today’s case was a recruiting manager at SG Cowen, an investment bank.

Understanding the bank’s business model and Cowen’s corporate culture, and given the resumes of four MBA students, we were to make a decision as to which candidate should be given an offer of an associate position.

A student with a military background promptly raised his hand.

“I would hire Andy. Although he has little finance background, Andy has entrepreneurial experience and strong interpersonal skills. Considering the size of the company’s organization, these qualities are more important than hard skills in accounting and finance.”

“Does anyone disagree with this?”

When asked by the professor, a multitude of students raised their hands, most of them investment bankers.

“I can’t disagree more. You don’t understand what the investment banking business is. It’s a real hell. There is no work-life-balance. Work is life. What is required is physical toughness and mental tolerance. But Andy is an entrepreneur.  He may accept the job offer, but I promise he leaves in 6 months, and we can’t get the recruiting cost back.”

The professor followed up by inquiring, “How many of you are from investment banking?”

About 30 students, myself included, for the most part disagreeing with the military student, raised our hands.

The professor then asked “And, how many of you want to go back to the investment banking business?”

Surprisingly, but not totally unexpected, everyone lowered their hands, again, myself included.


The main takeaway from the case was intended to be the importance of aligning corporate culture and recruiting standards. However, it seemed that many of my section mates were impressed more with the graphic stories of the hellish lives led by investment bankers than they were by the case’s takeaway.

Five years after the financial crisis, investment banking still remains one of the top industries HBS MBA students aspire to. Only time will tell how many of these naive souls find happiness with investment banking as a career choice, and I can’t help but wonder how many will be saying “What was I thinking?”