Thesis on retail banking

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thesis on retail banking

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Also, while you can get into top mba programs from vc roles, it would be tough to move into private equity, go back into banking, or go to a hedge fund. Corporate finance corporate finance is quite different from these other exit opportunities because its arguably not even a front-office role. In other words, youre not working with clients or companies that your firm might potentially invest in corporate finance is mostly internal and related to your companys budgeting, internal processes, and financing needs. Youll earn less than in the pe/HF/am exit opportunities, but youll also have better hours and a more regular lifestyle. The end goal in corporate finance is to become the Chief Financial Officer (cfo which has various trade-offs. Becoming a managing Director in investment banking.

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The day-to-day work is more stressful since you monitor the markets constantly, but youre less likely to writing have a disaster on a pending deal that kills your weekend. You should consider these roles only if you have a track record, an undying passion for investing, and specific ideas ; you dont necessarily need those in pe since you can talk about your deal experience, but its essential here. The main downside to these roles is that you develop a very specialized skill set, which makes it difficult to move to different funds or different industries. Its also tougher to get into top mba programs because its difficult to explain a complicated investment thesis to admissions committees. By contrast, its easier to explain a deal or a difficult client situation, so you have an advantage coming from IB/PE roles. Venture capital Venture capital is sort of like private equity lite: you still work with entire companies, but the deals consist of minority-stake investments. Since you invest in early-stage companies, theres less financial analysis, and you spend most of your time analyzing the market, finding interesting companies, and networking. You also earn quite a bit less than you do in private equity, but the hours and lifestyle are better. If you want a long-term career in venture capital or you want to work at a tech or biotech startup in a finance or business development role, vc is a good path for you. But if not, its not necessarily the best option: Its even more difficult to move up the ladder since firms make hard distinctions between Partner-track and non-Partner-track positions.

Someone will now ask for a ranking of exit opportunities. I wont do that, but I will briefly describe the trade-offs of the most common ones: Private Equity Private equity is best if you enjoy working on deals, but you want to think about them more critically and work with companies over the long term. You have a lot of options if you go into pe and decide you dont like it: you could go to business letter school, join a portfolio company in a finance role, or even move to some other exit opportunity. You get more of a generalist skill set because youre not doing just one thing over and over: Its a mix of financial analysis, negotiations, leadership/team coordination, and sales skills (if you do sourcing or fundraising). Compensation is another positive, but to make serious money in the 8-figure range or beyond youll have to advance to a very senior level or start your own firm. Besides the fact that its so difficult to get into private equity, another drawback is that its very tough to get promoted up to the top. Partners at these firms have such cushy positions that hardly anyone leaves voluntarily. Hedge funds asset Management Hedge funds are so different from private equity that its almost deceptive to group them together. The main difference is that you follow and invest in individual companies, or other securities, rather than buying and selling entire companies.

thesis on retail banking

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The right Industry background Its tough to move from something specialized, such as fig investment banking, into a more general team, such as a healthcare or consumer/retail-focused private equity fund. Relevant Pre-banking Experience ideally, youll have previous internships that are related to this exit opportunity, such as vc or pe internships if youre aiming for growth equity roles. You should avoid super-specialized groups such as fig if you dont want to work in those industries in the long term. But other than that, you shouldnt obsess over your group too much. Yes, youre more likely to get solid true deal experience in some groups, but its difficult to predict deal flow in that critical 6-month window when you first start. Yes, its better to be in m a, leveraged Finance, or a good industry group than the ecm or dcm teams, but its not the end of the world if youre in capital markets. Which One is Right for you? Rank the Exit Opportunities!

Its better to think about exit opportunities like this: Ill test various fields with internships in university, or with pre-mba internships or school-year internships during a masters program, then go into investment banking, and then think about returning to one of those fields. What do you need for the best Exit Opportunities? To pursue the best exit opportunities the most selective or prestigious ones you need: a bulge-Bracket or Elite-boutique bank you have the best chance of winning mega-fund offers if youre at one of these. The specific bank matters less than the type of bank youre. So if you have a choice between two bulge brackets, dont choose based on which one is more prestigious: Pick based on the team and culture you prefer. If youre at a middle-market or smaller firm, you can still win exit opportunities, but youll have to do a lot more work on your own and aim for smaller companies. The right geography there are far more exit opportunities in New York, london, and Hong Kong than in other cities in North America, europe, and Asia. And its tough to make an East coast to west coast move, or vice versa, if youre in the. A top Undergraduate Institution and gpa yes, these still matter, especially since recruiting starts so ridiculously early.

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thesis on retail banking

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Yes, those are big numbers, but writing theyre not that much of an increase over investment banking compensation: Associates currently earn between 200K and 400K all-in. You do get a bump if you go from being a 2nd or 3rd Year Analyst at a bank to a buy-side role, but you wont double your compensation. 6) youre not an Early mover Anymore everyone Knows About These Industries Finally, all these industries are more mature and developed now. If you had joined a hedge fund in 1996, you would have been an early mover. But in 2016, youre another one of the tens of thousands who wants to move. Its better to join new industries early because there are more opportunities, and it can be faster and easier to advance. With many investing roles, theres now too homework much money in search of too few good opportunities.

Simple math means that many funds will not perform well and will shut down. Youve already seen this in the news with many high-profile funds closing over the past year or two and more funds closing than opening. Many investors have also been clamoring for lower management fees less than the 2 of assets that funds typically charge which will reduce base salaries and make total compensation more variable. The best way to Think About Exit Opportunities These changes mean that you should not think of exit opportunities as the be-all and end-all. Even the word exit is problematic because it implies that youll only move in one direction: From investment banking to something else. But if you read some of the reader accounts on this site, youll see that reality is not quite so rigid.

Youll still be working all day and night on weekdays, but these changes have made 110-hour workweeks a bit less common. So the lifestyle improvement in moving from ib to exit opportunities might not be as dramatic anymore. 4) Theres a greater Variety of Exit Opportunities Anecdotally, it seems like more bankers are pursuing non-PE/hf exit opportunities now compared with 5-10 years ago. The tech startup is the biggest and most obvious new area, but there has also been more interest in corporate finance and areas like consulting and equity research. An optimistic interpretation of this trend might be: Aha!


Finally, people realize that there are other options outside of private equity and hedge funds. A more cynical interpretation might be: pe and hf roles have become so ridiculously competitive that bankers have to look at other options. 5) Private Equity and Hedge fund Compensation is Down and Probably wont Recover to Its Old levels For reference, pre-2008-financial-crisis pay was insane. Ib analysts who left banking and went to mega-funds would often earn 500K in all-in compensation, and it could be even higher at the top hedge funds. Pay dropped immediately after the financial crisis, and it hasnt recovered since then. Over the past five years ( the average all-in pe compensation across all levels has been around 250K 300K, with hf compensation around 300K 350K ( source: The job search Digest compensation reports ). But those are averages across all levels: If you enter after a few years in banking, youll be earning on the lower end of that range until you move up the ladder. Average Analyst and Senior Analyst compensation at hedge funds has been around 200K 250k over the past several years.

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For example, you could potentially move into hedge fund or asset management roles right out of undergrad if youve gone the cfa route and completed prior internships. 2) buy-side recruiting Now Starts Ridiculously early If youre working at a bulge bracket or elite boutique, headhunters will start contacting you a few months into the job, even if youve had no real deal experience yet. So you might not have writing much to talk about in interviews, at least if you focus on the mega-funds that start ridiculously early. It also means that you may not have much time to decide on your best option wait too long, and many pe and hf opportunities will be gone. You can still move into other industries, but youll have to focus on smaller funds or areas like corporate finance without hyper-accelerated recruiting. 3) The lifestyle Improvement Might Not be so great Anymore banks, realizing that investment banking jobs were no longer desirable next to jobs at Facebook and google, have been attempting to improve analysts lives for several years now. They started offering protected weekends, where Analysts get guaranteed time off from Friday night into sunday morning for one weekend per month, and some banks have gone beyond that and attempted to limit office time on all weekends. Banks have also been trying to keep junior bankers around longer by promoting them more quickly and paying bonuses in December/January.

thesis on retail banking

those drawbacks still exist; almost nothing about the work itself has changed. So what Has Changed? Much of the process that takes place before you can access these exit opportunities has changed. Also, the industries have changed everything from compensation to long-term prospects is different. Here are the main changes and how they affect the appeal of exit opportunities: 1) you need a sequence of Other Internships Before you can even Win an ib internship, let Alone a full-Time role Often, these internships will be at small private equity funds. There are three implications: These early internship experiences are a great way to test drive exit opportunities before you commit to anything. You might not even need investment banking to pursue some exit opportunities if you get the right sequence of internships early.

So lets start with the basics: An exit opportunity is another field that you go into after starting out in investment banking and working there for a few years. Often though not always this field involves investing in companies instead of advising companies, or acquiring companies rather than advising on those acquisitions. Examples include: Other examples include paper investor relations, equity research, a different group or a different bank, or an mba, though some of those are not true exit opportunities. Bankers are motivated to move into these other fields because the work is more intellectually engaging, the pay is higher, and the hours are slightly better. The most Common, Flawed Thought Process Behind Exit Opportunities. For many years, the thought process behind exit opportunities was: Ill suffer through investment banking for 2-3 years and work terrible hours, but that suffering will allow me to move into a more interesting and lucrative role with better hours in the future. In the original version of this article, i pointed out the flaws in this reasoning: The work is Not that much Different: Yes, theres less grunt work, and you get to use your critical thinking skills since youre acting as an investor but if you. The hours Arent Necessarily That Much Better: For example, youll still be working long hours that prevent you from having much of a life if youre at a mega-fund (one of the largest private equity funds or hedge funds). The hours are better at smaller firms, but youre still looking at 60-70-hour workweeks in many cases.

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Whats the easiest way to distinguish an American investment banker from a european one? You might point to one of the following: The european banker probably speaks 4-5 languages; the American one knows only English and 5-10 words of Spanish. The european banker is still having nightmares about assessment centers and logical tests, while the American one is still worried about a slightly-too-low gpa from a non-target university. The european banker is panicked over the possible breakup of the eu, while the American one is more concerned with a psychopath in the White house. But something much filsafat simpler also sets them apart: The American banker is far more obsessed with exit opportunities. And that might not be so smart in todays environment: Exit Opportunities What?! Many articles, videos, and forum posts jump into a comparison of different exit opps without defining what an exit opportunity.


Thesis on retail banking
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