How do you turn a young, enthusiastic, high-performing undergraduate into a jaded, stressed out cynic? Try one year in investment banking.
It’s rare that junior investment bankers go into the industry without at least one internship that should give them a taste of the career that awaits them. Even so, there’s an expectation gap about just how demanding the job will be.
Louis Markham, a Wharton student who has himself been through numerous investment banking and private equity internships, surveyed around 50 undergraduates seeking a job in banking and the same number of investment banking analysts in their first year on the job to find out why turnover in the junior ranks remains so high.
Despite the fact that a lot of those going into the banking industry already have a taster of the expectations that will be placed upon them, most of the ‘graduates’ who have been working in the industry for a year still didn’t expect it to be that bad.
They knew, for instance, that they’d have little in the way of free time, but did not expect what time off they did have to be so unpredictable. “Investment bankers are always stressed, even when they do have time off, since they do not know when they might be called in the office,” said the study.
Investment banking analysts recruiting on campus gave prospective graduates the impression that the social life and camaraderie between juniors was good because you are “in the trenches together”. This is not strictly true.
“The analysts I interviewed explained that obviously they were going to try and sell the position to candidates at recruiting events, even if that involves smearing the truth,” said the study.
We’ve been here before, of course. In his 2014 book, Young Money, journalist Kevin Roose followed eight new analysts around for the first three years of their career. Every day the analyst is “at the mercy of the associates, VPs and managing directors above”, he wrote, and their life is never their own. “An MD wants a bar graph instead of a line graph on page 6 of a pitchbook and it's 3am? A good analyst will wake up and spring into action.”
Investment bankers are portrayed as money-obsessed pendants, while analysts put on weight from working 16-hour days and living off takeaways. Other health issues built up: “His eyes were tired, his skin was sallow and pale,” wrote Roose.
Two years on and analysts now have ‘protected’ Saturdays and other efforts to cut working hours, greater power and are reportedly given more interesting work at an earlier stage. At Barclays, for example, associates have been handed ‘reverse mentoring’, where juniors are given one-to-one meetings with senior investment bankers in the firm.
Despite this, junior investment bankers are still regularly clocking 70 hours plus a week and all of this has done little to stem turnover among millennial employees.
The study suggests that most graduates go into the industry expecting, for all the long hours and hard work, to work with inspiring people in the senior ranks. Even this, however, is a disappointment.
“Many of them described the individuals in their workplace as ‘dry’, ‘humourless’, and ‘inflexible’,” said the study. “While the graduates did concede that those in investment banking were almost all incredibly driven, that came at the price of being single-minded and dull.”
And yet, investment banks are not short of applications for their graduate programmes. Goldman Sachs gets 250,000 applications a year, J.P. Morgan only hires 2% of those who apply to its investment bank and Citi took on 2.7% of analysts and associates applying last year.
Those who make the cut have invariably interned at the bank in question the previous summer – and before that completed insight weeks or other internships – and will have top grades from a leading university. But, in an effort to bolster their CVs and stand out from the crowd, juniors are also increasingly starting their own business.
“You’re always going to get a proportion of analysts who go into investment banking with a clear plan of how to get out again. It’s a badge of honour to stay for two years and helps opens doors later in your career,” says one former analyst who now runs his own VC fund. “Investment banks just need to accept that there will be churn at the junior end.”
Gail McManus, chief executive of Private Equity Recruitment, which tracked investment banking analysts and found that 44% had left within three years, says that the analysts classes are still regularly being "decimated" every year as juniors look for a move to the buy-side ever earlier or are simply leaving for other ventures.
Roose says that there are four types of people who do remain in investment banking – those who go into finance because their parents and siblings have and the lifestyle it affords is important to them; geeks who are genuinely fascinated by financial markets; ‘gunners’ who thrive on the pace and adrenaline of a finance career; and ‘locomotives’ who have an underdog's desire to succeed. Anyone in-between tends to fall through the cracks.
“I honestly believe that investment banking has offered more opportunities to me than any other career. I’ve moved banks, I’ve moved sectors and I’ve experienced more in three years than you would in ten years in other sectors,” says another third-year analyst who’s stuck with banking. “The hours are brutal, but you learn to live with it.”