The UNFILTERED TRUTHS of Investment Banking!

Summary

In this video, Ben, a former investment banking analyst at JPMorgan, shares the realities of investment banking, highlighting the potential for high earnings and the opportunity to work on significant corporate transactions. He candidly discusses the demanding work environment, including long hours, client pressures, and the political nature of the industry. Ben also touches on the resilience and discipline gained from the experience and the common misalignment of interests between banks and their clients. He concludes by emphasizing that every job has its pros and cons, and he would still choose investment banking for the valuable lessons it provides.

Takeaways

• 💼 Investment banking offers a clear path to high earnings or transitioning to interesting roles with better work-life balance.
• 💰 The potential to earn a significant income is a major draw, with top investment banks paying top 1% salaries in the United States.
• 🏆 Investment banking builds resilience and discipline, which are valuable traits for any career, including entrepreneurship.
• 🔢 Technical skills in financial modeling and PowerPoint are highly sought after and can be a stepping stone to other lucrative careers.
• 👔 Working on high-stakes transactions provides early responsibility and exposure to top-level management, which is unique for entry-level positions.
• 📉 Despite the glamour, investment bankers are often at the mercy of clients, which can lead to unpredictable work and stress.
• 📱 The always-on-call nature of the job means constant communication and being available for work at all times, impacting personal life.
• 🚫 Deals can fall through despite extensive work, which can be demotivating and lead to wasted effort.
• 🔄 There's often a misalignment between bank and client interests, with banks pushing deals for fees rather than long-term client success.
• 🏦 Investment banking is highly political, and fitting in is crucial for career progression and success within the industry.

Q & A

What are the three good aspects of investment banking mentioned in the video?

The three good aspects mentioned are: 1) A clear path to make a lot of money or exit to an interesting job, 2) Building resilience and discipline, and 3) Working on significant transactions that are major milestones in a company's history.

How much money can one expect to make as a Vice President in a top 10 investment bank?

As a Vice President in a top 10 investment bank, one can expect to make around six hundred thousand dollars a year, which places them in the top one percent of earners in the United States.

What is the sarcastic remark made about investment banking in terms of resilience?

The sarcastic remark is that one can always look back and say, 'well, at least this isn't worse than banking,' implying that the experience of banking builds a lot of resilience and discipline.

What is the significance of working on transactions like M&A or IPOs in investment banking?

Working on transactions like M&A or IPOs is significant because they are major milestones in a company's history, and as a banker, you get to work with top-level management like CEOs and CFOs, and have a lot of responsibility even at a young age.

What is the confession made by the speaker about their early days as an analyst?

The speaker confesses that for the first six months of their job as an analyst, they did not touch a proper financial model because they were not prepared in building financial models, which they suggest is avoidable with the resources available today.

What is the recommendation for those looking to be prepared for a job in investment banking?

The recommendation is to use Wall Street Prep's financial modeling courses to be ready not just for interviews but for the job on the desk as a banker.

What are the three bad truths about investment banking?

The three bad truths are: 1) Being at the mercy of clients, 2) Always being on call and expected to respond quickly to communications, and 3) Deals often dying, meaning work put into presentations or models may come to nothing.

Why do deals in investment banking die?

Deals in investment banking can die due to various reasons such as the client deciding not to pursue the transaction anymore, market conditions, or other unforeseen circumstances.

What is the ugly truth about the valuation process in investment banking?

The ugly truth about the valuation process is that it often involves looking backward rather than forward, and analysts may have to manipulate numbers in financial models to justify a client's desired valuation.

How does the misalignment of incentives between banks and clients affect deals in investment banking?

The misalignment of incentives can lead to banks pushing for deals that may not be in the best interest of the client, as senior bankers are often paid to bring in large deals that generate significant fees for the bank.

What is the political environment in investment banking like, and how can it affect an analyst's career?

The political environment in investment banking is highly competitive, and if an analyst doesn't fit in or has personality clashes, they may be given undesirable work or receive poor performance reviews and bonuses, potentially leading to them leaving the bank.