The career paths of investment bankers have become decidedly wonkier. The move to managing director was once an annual formality for top performers, but now that the glory days are over and ‘reputational issues’ abound, making it to the top is now a more nuanced affair.
There are queues of VPs and directors/executive directors who never make it to MD. For a start, there are fewer opportunities – at its peak in 2010, Goldman Sachs promoted 321 managing directors. Now, it’s switched to a bi-annual promotion cycle and last time around in 2015 around 425 people (or 212.5 a year) made the cut. Jefferies has just unveiled its its MDs for 2016 and just 28 made the cut - almost half that of last year. Credit Suisse promoted 180 people across all business lines late last year.
“The number of MD promotions has fallen dramatically,” says Graham Ward, the former head of equities at Goldman Sachs and now adjunct professor of leadership at INSEAD. “MD is once again something to aspire to and has become special.”
Special or not, managing director is a tough grade to make, and a tough role to remain in. “It doesn’t ease off, it goes the other way,” Randall Dillard, the former head of investment banking at Nomura said previously. “Managing directors in investment banking last around 18 months. Most people simply cannot handle the amounts of revenue they are expected to generate year after year.”
The selection process at most banks remains a mystery. “It’s an arcane affair,” says a former vice president at Goldman Sachs. “MDs are chosen behind closed doors; no one really knows how the process works.”
Nonetheless, based on conversations with bankers who have gone through the process, this is what it takes to be make it to MD now.
Getting earmarked as a potential MD happens relatively early in your career. VPs who excel in their annual assessments are nominated as managing director material by the MD in charge of their team.
David Charters, a former managing director in equity capital markets at Deutsche Bank says the luckiest VPs are nominated within just two years: “Everything needs to go according to plan: deals come in, you get to work with big producers and they are big enough to credit you with your contribution.”
More commonly, candidates are deemed MD-material after three or four years.
Depending on your perspective, the notion of an individual investment banks’ culture is either corporate guff or a mantra to live by. These days, if you want to make it to MD, you really need to toe the corporate line and embody the values of the company, says Ziad Awad, a former Goldman Sachs and Bank of America Merrill Lynch MD who now runs boutique bank Awad Capital.
“You need to espouse the strategic vision of the senior management,” he says.
“If you are a cultural misfit, you will not make it,” agrees Ward.
Assuming you gain a nomination, the next stage is a lengthy debate about your suitability for the role. Team leaders present nominations to a group of MDs, which then assembles a short-list of the most exceptional candidates. They’ll then consider the individuals on this list on a case-by-case basis.
Then there’s the ‘cross-ruffing’ - as it’s called at Goldman Sachs – where the firm will “canvass the opinions of managing directors and partners across the department”, according to the Goldman insider.
Once names have been thoroughly debated, or cross-ruffed, and the cream of the crop selected, a shortlist is typically presented to dignitaries higher up the rungs at the bank. At UBS, members of the investment banking board review candidates’ suitability. "The chairman is briefed on who is who and approves their promotion or not," says one banker. This is largely a formality – candidates are rarely rejected at this stage.
Awad says that any viable candidate for managing director will be “already performing at MD level”. This means that your numbers will match top performing senior staff, but also that you’re able to show that you can lead a team. Good MDs are good managers, able to demonstrate that they’re “a great team leader and motivator”, says Ward, and that they’re not the sort of sadistic individual that takes delight in torturing juniors, particularly now that analysts have more power.
“You leadership skills should be admired by both peers and juniors,” says Awad.
Viewing the MD promotions as an annual cycle whereby you must impress as the time draws near will get you nowhere. Awad describes it as a “marketing job”, presenting yourself well both internally and externally over the course of your career. Internally, in that you will have cultivated friendships and professional relationships across the organisation over a number of years. Externally in that your client relationships are deep enough to ensure that your revenues are generally consistent, rather than a flash in the pan.
“You need years of a consistently strong track record, both in terms of performance and in adhering to common values,” says one former J.P. Morgan MD.
If revenues are not the be all and end all for investment bankers trying to make MD, they’re still incredibly important if you’re working on the trading floor. At Goldman Sachs in 2015, an increasing proportion of new managing directors had yet to hit their 30th birthday. They all worked in trading.
If you're a trader bringing in the money for your employer, they will want to keep you and competitors will be making efforts to poach you. It just so happens that trading is a business area where young men tend to thrive and so banks tend to speed up the promotion process. As one J.P. Morgan banker puts it: “We’re always worried that mid-level traders will be targeted. Promotion is a retention tool.”
Ultimately, it’s about ticking all the boxes above and hoping that the stars align, says Ward. “In the end there is an element of subjectivity to the processes which are largely arcane. Make sure you are well connected, politically savvy, transparent and a great producer. After that it’s in the lap of the Gods,” he says.
What if you don’t make MD? There’s always next year. Candidates typically get two shots at promotion after graduating to the short list. But if you don’t make it twice in a row, your chances are severely depleted.
The alternative is to move across to another firm entirely on the promise of a more senior role. This is difficult – given the need for internal cheerleaders – but not impossible.
Last year, Alok Modi, the head of government bond and CDS trading at Morgan Stanley, was promoted to MD after just one year at the firm. He joined in 2014 from Barclays, where he was a director.
Additional reporting by Sarah Butcher.