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Boutique or big bank? It all depends on the size of your Rolodex

Rolodex

Well over a decade ago, before going to college, I spent a year as a golf club salesman in Connecticut. On my first day, I sold a $300 set of non-brand-name irons. My commission: $50. Not bad. A few days later, I sold an $800 set of Callaway irons. I got a check for ten bucks.

Baffled, I went in to talk to my boss about what I assumed was a mistake. There was none. “I don’t need you to sell Callaways,” he said. “They sell themselves.”

It was an early lesson in the power of brand identity. When you have it, sales will come, but oftentimes the checks are smaller as you’re not doing all the heavy lifting. On the other hand, when you sell with little or no brand recognition to rely on, commissions tend to be higher. The whole eating what you kill philosophy.

It’s the same thing in the world of M&A. Investment bankers can work for a big-name firm, like a Goldman Sachs or a J.P. Morgan, and earn hundreds of thousands of dollars a year. Or, they can toss aside the company shield and join a boutique, with the prospect of earning much more.

At bulge bracket banks, managing directors take home an average base salary of around $400,000, with the potential of a bonus that can nearly double their income, according to a new report from Financial News. Partners at boutiques, meanwhile, can earn several million dollars each year.

The average partner at boutique investment bank Ondra Partners took home $5 million last year, according to the report. The average team member earned over $1 million. The compensation-to-income ratio at boutiques can reach as high as 90%, says Financial News. At big banks, with shareholders and hundreds of millions of annual expenses, it’s around 40%. That’s not to mention that the majority of boutiques aren’t public, meaning they pay mostly in cash and often without deferrals.

So, why doesn’t every senior M&A banker head to a boutique? It’s the shield, or lack there of. M&A bankers need to rely more on their personal relationships as they fight and claw with big name, legacy institutions with sterling reputations. The work, you could argue, is more difficult.

But lately, boutiques bankers have won more than their share of battles. Six boutique advisory firms earned spots in the top 20 of the global M&A league table during the first half of the year. Four of them – Centerview Partners, PJT Capital, Evercore Partners and Perella Weinberg – own greater market share than UBS, for example.

Many, like Moelis and Greenhill, are hiring. But you’ll need one heck of a Rolodex to get the job.

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