The recent spike in M&A activity means that boutiques are hiring, both at the senior and junior level. Senior investment bankers likely know the deal with boutiques: there’s more risk; there’s more potential for reward; and you’ll need a hoard of close client relationships to be successful. For junior bankers, deciding between a bulge-bracket bank and a boutique can require more thought, particularly if you are coming straight from undergrad or post-grad studies.
The biggest difference between the two isn’t necessarily size. Evercore is one of the better-known boutiques and it employs more than 1,600 people, for example. In fact, some established firms like Evercore and Moelis & Co. are pushing back on the term boutique, preferring “M&A independent bank,” according to Andy Pringle, managing director of headhunter Circle Square. That’s unlikely to stick, if we’re being totally honest.
What makes boutiques unique is the limited number of services they offer, the most important being major financing. As such, boutiques rely on rainmakers – advisors with strong relationships with clients who prefer to hire bankers over banks. Working closely with rainmakers is a major advantage, says Logan Naidu, CEO of banking recruiter Dartmouth Partners. You’ll develop closer relationships, have more client contact and work in a more collegiate atmosphere.
That said, the niche nature of the business can limit growth opportunities in different areas (like ECM and DCM) that are available at large banks, including global rotations, Naidu said. The training may also not be as good at many boutiques and the firm may be shut out of larger deals due to a lack of lending capabilities – the most obvious con. Many deals require full-service investment banks. It’s that simple.
Others feel the niche focus of boutiques can open future career opportunities that may not be available to junior bankers at larger firms. “Niche sector teams line up very nicely for juniors to move into private equity and venture capital,” said Pringle.
He also noted that boutiques can shelter younger staffers from some of the more brutal day-to-day aspects of working at a traditional bulge-bracket bank. They tend to offer a better work-life balance; there’s less of a “hire and fire” culture; and, because boutiques often work with sell-side firms, juniors don’t spend near as much time putting together large pitch books that may never even be read.
The work at boutiques is “70% or 80% execution and the origination is more intelligent than the ‘volumes of data is king’ model” that bulge-brackets may employ, Pringle said. One of the chief complaints of junior bankers who quit – outside of the hours – is putting in weeks of work on deals that are never even considered.
Perhaps the biggest downside of boutiques, other than the issue surrounding financing, is the lack of brand awareness, though some firms are making strides here. “There is a feeling of working at a tier-1 bank that can’t be replicated,” said one current U.S.-based MD who asked to keep his firm anonymous. It’s easier to become a rainmaker at a boutique by first developing relationships with big-name clients while working at a large bank – and then switching firms – rather than trying to move up the ladder at a boutique, he suggested.
As an example, Evercore hired six senior managing directors from outside the company last quarter while promoting just seven and moving on from five, according to Buckingham Research. You’ll likely never see such a ratio at a large investment bank that will do more promoting from within. Many boutiques are known for their “hired gun” philosophy in filling out the top ranks of their hierarchy.
Ironically, it may be easier to become a senior MD at a top boutique by not starting your career there. It’s hard to bring in new business when you have the same rolodex as your boss.
Compensation is complicated
Pay can oftentimes be better at boutiques that have fewer restrictions over compensation, said James Mitchell, an analyst at Buckingham Research. Clawbacks are a rarity and many boutiques tend to pay bonuses in cash, he said. The numbers from Wall Street Oasis tell a similar story, with the top 10 largest bulge-bracket banks paying their first-year analysts, on average, a slightly larger salary than their counterparts at boutiques, yet boutiques make up the difference, and more, with larger bonuses. (It’s worth noting that the numbers only include the top handful of boutiques).
At the top, compensation is a bit more murky. Several boutiques have switched from a more traditional commission-based structure to a shared bonus pool where MDs are judged on factors like talent development and the inclusion of other lines of the business, making their pay more subjective. How much that has changed things is up for debate. We were told last year that one firm disappointed analysts by carving out a larger share of the bonus pool for MDs to make sure they were happy.
Like anything in banking, pay depends on the firm, the role and performance.
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