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I was hoping to get your opinion on the state of the investment banking industry and IB recruiting for the class of 2011. I still want to enter investment banking post MBA because I plan to have a career in the finance industry long term and I see investment banking as a great starting point for building the necessary skills and background for a successful finance career. I'm willing to put in enormous effort during recruiting, go to all the events, network, schmooze, etc I just don't know if the jobs will be there. Looking back at 2001-2003 job offers from the bulge brackets was WAY down and that doesn't even compare to the pressure that banks are under right now. Is getting a job at one of these firms still viable? I'm going to Tuck next year and I work at a boutique financial consulting firm where I value private companies and securities in private companies. I hope to have the CFA charter by the time I start school (taking LIII in June) though I realize that's really only helpful for buyside jobs, not IB. Is it a pipe dream for me to think I can still land a bulge bracket out of Tuck as a class of 2011 grad? My optimistic scenario is that the demand for IB jobs has dropped almost as much as the supply and that the economy will recover slightly by 2011. I know this is all speculation but I really value your opinion (like everyone else here I have followed your BW posts for a while) and I know that you have experience in IB as well as familiarity with top MBAs. Thanks for your input!
Anyhow, it's not impossible, but it's going to be extremely difficult.
In the past, the bulge bracket firms scooped up the majority of incoming associates:
Goldman Morgan Stanley Merrill Citi Lehman JP Morgan Credit Suisse UBS Bear
Three of them no longer exist (Merrill, Lehman, Bear). Rumors that BofA bought Merrill purely for its brokerage and asset mgmt units, and may simply disband Merrill IB altogether. Citi is approaching zero equity (it was trading at $3/share yesterday?).
Investment banking as a job function will likely continue to exist, but how the industry is organized/structured is in flux right now -- especially when certain banks still have concerns about solvency (Citi in particular).
You may have to be realistic and look at the regionals (who hire in smaller numbers anyhow so the competition will be very stiff) - at places like CIBC, RBC, Wachovia (if they don't go under), and so forth. Boutiques like Lazard, Greenhill, Blackstone, etc. won't hire newbies as they will fill their incoming associate class with ex-IB analysts with M&A backgrounds.
Plus, with cutbacks at all banks, there's simply less spots to fill across the board. They're not going to magically hire people in huge number anytime soon until the industry sorts itself out. The next few years will be spent on reform of the financial industry - from how these firms are organized, to regulations. Until that reorganization is well on its way, you're simply not going to see much job growth in this area. Uncertainty of what the business is even going to look like is the best way to kill any thoughts of expanding headcount. And this kind of thing doesn't take 1-2 years. Try 3-5 years realistically. The financial industry isn't going to die, but it's not like it's recovering from a minor head cold. It's more like recovering from a near-death bout of pneumonia.
There will be less jobs, but not necessarily less "demand" from students - because when times are tough students don't have the option to "choose" what they want. They will apply for openings wherever they can get them.
In short, you need to look at other options as well outside of IB (or even outside of finance altogether) if you want even have a job at graduation. I don't want to scare you, but it's wishful thinking to assume that the job market will be "healthy" by 2011 given the structural changes that are happening in financial services right now. In this environment, you just have to be realistic about finding *something* that will put food on the table and keep the lights on.
And this has nothing to do with whether you're going to Tuck or any other b-school. Frankly, when you're an employer and you're sh*t scared about going under, you won't give a sh*t about b-school reputations - they really don't care about "maintaining their relationships with the schools". MBA students and b-schools in terms of relationships are near the bottom of their priority list when times are rough. Put it this way. They royally screwed the b-school students at ALL top b-schools between 2001-03 by reneging on offers, firing recent grads with little severance, etc. The recruiters were more concerned about saving their own asses - the last thing they could care about is pissing off the universities. So you had HBS grads moving back with their parents, Stanford grads unemployed for 18+ months, Wharton grads going back to their pre-MBA jobs, etc. And you know what? It has no effect whatsoever on the MBA-recruiter relationship even in the short-term. By 2005 onwards, the MBAs were back in force clamoring to get into these banks and consulting firms and b-schools were more than willing to accommodate, as if getting royally screwed a few years earlier had never happened.
Right now, the employers/recruiters have all the power. They can completely d*ck you around with no consequences - 5-7 years later the next generation of MBA students will still clamor for these same kinds of employers.
That's why when you go to any recruiting event in b-school, take everything these folks say with a GIGANTIC grain of salt.
If you really want to banking, by all means go for it, but be fully prepared to look at other non-finance jobs. _________________
Can you please provide us some insight on consulting in the current environment? What are your thoughts? Does it make sense to you that many current students are flocking to the consulting firms? How do you think the consulting firms are doing financially in this environment? _________________
Expect the job market to be tough across the board.
Consulting services are discretionary expenses. They are usually the first things to get cut or forgone. Their businesses are highly dependent on the health of the corporate sector. Anyone who tells you otherwise either has a warped view on the importance of a consultant's function, or is trying to reassure themselves that consulting operates in a bubble.
Think about it. Money has to come from somewhere. If companies have trouble accessing the capital markets to raise money (either by borrowing or finding investors), they will have less money on hand to do any sort of expansion, let alone even trying to stay above water. In this kind of environment, companies cut back on expenses. Even Microsoft is laying off workers. We're just entering the start of a recession -- we're nowhere near the end of it just yet. When companies are trying to sell off their inventory and squeeze out every last buck from their sales team and from their product line, the last thing they are going to be doing is spending millions on a bunch of powerpoint slides. The consulting firms will hurt.
In this kind of environment, companies don't need "thought leadership" any more than a family whose house is burning down needs a marriage counselor or shrink. They need to focus on more basic needs like making payroll and not defaulting on their vendors, lenders, landlords, etc.
The only difference between banking and consulting recruiters is that consultants are better spin-meisters. They will come on campus and wax poetic about how great everything is, and then turn around and give you a job offer that you can't take (i.e. "we'll offer to have you start in 18-24 months after graduation at our discretion; in the meantime, you're on your own"). Or they will continue to extend the deferral every six months just to lead you on. Not saying that this is exactly how it will go down this time around, but if history is any guide, don't put it past the consulting firms to come on campus and say how wonderful everything is (or some form of spin) and have you guys fall for it hook, line and sinker. Because "oh, it's McKinsey, they can't do anything wrong...they're soooo smooth and beautiful and look how polished they are!" _________________
Very interesting view Alex. My personal feeling as a class of 2010 student applying for IB in London is that there are still jobs (in my case internships) out there, but the companies have become more and more selective in terms of schools and people. All the companies claim that they have remembered the lessons of the past (aka 2001 - 2003 crisis), and this is true to some extent in the sense that they are still recruiting (although numbers have drastically been reduced).
However, I don't think there'll be a lot of recruiting outside Booth, Wharton and HBS (maybe Columbia and Stern). I hate preaching for my chapel, but this is the time where it pays off to be in a top finance school. Plus I'm fortunate enough to already have an IB background.
I remember the only viable tip that I have received from the career advisers from my school: in such times of crisis, don't change all the variables of the equation. In my case I have almost changed none (came from IB in Europe, going back to IB in Europe). _________________
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I hope you're right, although back in 2001-03 they did continue with the recruiting dog-and-pony show. They just reneged on the offers. Or they fired people a few months into the job.
In this kind of environment, trust nothing coming from a recruiter's mouth and assume that no job is safe, especially in banking - the guy/gal doing the dog-and-pony show may be facing the axe as well.
As for banks remembering the lessons from the past, I find that really hard to believe - as a former banker yourself, I don't think I need to tell you about the management skills and foresight of investment bankers. It's a sales culture - it's always about NOW. And it's not about "the good of the firm" but what's good for ME. Also, again it's about incentives - they have no incentive to learn from the past - whether it's recruiting, or not getting involved in asset markets that look like ponzi schemes. The payoff is asymmetric - it's other people's money, it's not MY firm, so I'm going to do whatever I need to do to maximize my bonus (in good times) or to save my ass (in bad times) and to hell with the company and its brand or reputation. So long as their personal reputation isn't at stake, they could care less how short-sighted "company strategy" is. This may seem cynical to an outsider, but as you know banking is such a mercenary culture as bankers hop from one place to the next.
Also, in this context where you go to school may help you *get* access to jobs, but it won't help you *keep* the job beyond the first few months upon joining the firm. If the group you join needs to cut back after just hiring you, they're not going to care what school you went to. But they will care that you were a former banker (that will probably help you more than anything else). _________________
Yes, I do hope I'm wrong on this, but my hunch is that while the financials and headcount change with economic cycle, the culture in banking doesn't really change with the economic cycle - they change when the incentives fundamentally change (i.e. when the banks went from partnerships in the 1980s and before to publicly traded corporations in the 1990s and afterwards). So yes, if or when the regulatory environment changes, the culture will change too in the next 5-10 years or so. _________________
It's been barely a month since I last posted on this particular thread, and even within such a short time span things have changed.
Now, as you guys have probably heard -- there are now serious discussions of nationalizing some of the major banks. When Republicans are talking about nationalization as a viable option, you know things are REALLY bad. A few of my clients this past year were working in the eye of the sh*t storm, and the consensus amongst them is that the banks' books are even worse than they have let on publicly. Serious discussions about nationalization don't happen unless things are really that bad.
I sincerely hope all of you land on your feet somehow. In this kind of environment, even when you get a job offer, don't bail on recruiting completely - keep an eye out on other opportunities because that offer may be pulled from you. Also, even if you do start, don't count on your job being safe because there is a possibility that you could get laid off within 6-12 months; again, make sure you are always keeping an eye on what other opportunities are out there. I know this may sound paranoid, but in this kind of environment, you just never know - when companies (and most importantly, the managers making the hiring/firing decisions) are worried about their own self-preservation, the last thing they care about is you. _________________