pelihu wrote:
I just had a conversation yesterday with a good friend headed to JP Morgan. He said that he'd be really mad if he worked all year (like a dog in his words) and got paid just the minimum guaranteed bonus (about $35-40k). He'd rather know up-front so he could decide to go do something else. I had essentially the same conversation with a full-time associate at the firm I was with over the summer. Certainly, nobody wants to see their job evaporate, but working all year with little to no bonus (and there's a school of thought that associates work harder when there are no deals) would be terrible.
You know, call me overly optimistic or jaded as I don't have student loans, family commitments, or anything of that nature to deal with yet - but I would just go ahead and work at JPMorgan even with the crappy bonus. Yes, the money is great in banking in the boom years, but I think the real reason that most people enter banking is for the skillset. If you want to go into private equity down the line, JPMorgan IBD is an excellent place to hang out for a couple of years before the markets pick back up. If you join JPMorgan today, you would work dog hours and make about the same as your consultant or general management friends, but what about 3-4 years from now when things pick up? Your consultant/GM friends will be clearing $200K if they're really lucky. You'll either be a VP at JPMorgan or a VP at a private equity fund and making a multiple of that.
I understand one hole in my logic - deal flow is going to be light. I'm not sure how valuable of an experience it would be to just sit around pitching non-stop and I don't know if PE firms would value this experience much.
Oh, and another assumption in my logic - compensation levels will return to normal in 3-4 years and our whole industry won't be completely turned upside down. Who really knows, I guess.
Pelihu -- Why is everyone switching to consulting? What is their logic and their long-term plan? I know that you've been looking at consulting opportunities pretty closely, as well. Are a lot of people just assuming that this go-go era of Wall Street (1980-2008) is over and things will never be the same again? I suppose that an exit to private equity or venture capital is also a very realistic exit opportunity out of consulting if you work on the right projects and really want it?
And one last question if you don't mind - let's say that a particular group within an investment bank is actually doing well in this climate (maybe restructuring?) and actually executing deals and collecting fees. Will the associates and VPs in this group get paid decent bonuses? Or will they be shafted due to the overall firm's poor performance.
pelihu wrote:
I agree with the idea that the Investment Banking divisions are largely not to blame for the financial crisis. When firms were looking to re-trench over the summer, they all looked to their IBDs as core businesses with no downside risk (just collecting fees). Got memos from the CEO during the summer saying just that. Now, the IBDs did do the LBOs with private equity firms that got levered up to insane levels, and the paper from those deals got stuck on their balance sheets. However, I'd say those things were early indicators of frozen credit markets rather than a cause.
This makes perfect sense - thank you for the insight.