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Advice for former investment banker

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Jan 22, 2009 8:44 pm

I am a former investment banking associate with an MBA from a top ten school looking related career options, as things are pretty dismal in banking right now. 

  In the financial advisory area of the industry, does everyone start out at pretty much the same level, or are there investment teams looking to bring on experienced hires?  I am best at valuation, financial modeling, financial statement analysis, and writing, however I can do the sales and marketing part as well.    What are the options for someone with my profile.  I already have my 7/63.   Thanks-
Jan 22, 2009 9:24 pm

Not necessarily so.  There may be some teams that would consider bringing someone like you on.  Maybe few and far between though and I can't tell you where to look.  That said Ferris isn't too far off the mark, but I'd bet there are some out there, especially if you have some HNW contacts.  

Jan 22, 2009 9:41 pm

Interview with a boutique money management firm and forget retail.

Jan 22, 2009 11:11 pm

 consider being a wholesaler for a money manger. this would allow you to use both your analytical & sales skills.

good luck

Jan 23, 2009 12:27 am

I have researched that a broker's gross is the gross commissions that he brings in.  I assume this is a percentage of AUM, maybe 75pbs or so, and sales commissions.  What is the general breakdown a broker's salary between the AUM management fee and commissions?  Also, if a bank is charging a client X bps per year, how much of that does the brolker actually see?

  Thanks again-
Jan 23, 2009 1:51 am

Although you would likely be paid a salary for the first 2 years, the long term math is:

  AUM x 75bp (rule of thumb but variable depending on practice)= fees/commissions x 40% = Advisor compensation.   So... $50 mill AUM x 75bp = $375,000 fees/commissions x 40% = $150,000 in compensation.   It takes about 5 years of hard slog to get there. See the "500 Day War" thread for what it takes.   Best of luck.
Jan 23, 2009 2:13 am

If you really are skilled in explaining modeling and portfolio analysis, etc., to prospects, that will help you build your business. Knowledge can set you apart from the competition.
I’ve been embarrased by sitting down with a smart, knowledgable, rich prospect and having nothing in my quiver but the ICA guide.

Jan 23, 2009 3:11 am

wachovia isg (soon to be wells) could place you in a team with a salary to build your book.

your credentials should offer about 50m salary for 2 years and you'll have the sr brokers' c-book and all his retail bank branches with the opportunity to work with the biz/commercial bankers (run bank services for corps 5-50MM and 50MM-300MM respectively).     Biz bankers only work with legit people, but your credentials are there.  You'll be capped at 85m for the first 2 years with commission, but once salary is done, the sr fa benefiting from your production has to pass your book back to you (specified in the contract)   if you're legit, the sr fa cleans up the back of the book and takes a sizeable override for your efforts. after 2 years, the sky's the limit....possibly equal partnership or similar arrangement based on production   no other program compares.  with your credentials, you could be an equal partner with a $MM producer in 3-5 years.   there's $$$millions of opportunity, but layers of admin.  fair challenge for the opportunity.   this is where the ed jones cats bark in disbelief...cold walking just doesn't make sense...
Jan 23, 2009 4:11 am

I’m similar to your situation, couple different hedge funds and sell-side experience, just started at a small broker/dealer as a sales assistant getting paid around $5K a month (taking a massive pay cut). The banking jobs and hedge fund jobs arent coming back so I figure get in now before every laid off banker/hedgie is thinking the same thing. No one cares about your banking experience, the only thing that matters is selling. I’ve found that with more intelligent potential investors I can explain that I’ve invested at a multi-billion fund and unlike a typical sales guy I actually know what I’m talking about when I discuss investing. Seems to work as a pitch but I’m very new to this.   

Jan 23, 2009 12:55 pm

Thanks for the feedback; I agree with your opinion re permanent dislocation of banking and hedge fund jobs.  Would you mind telling me what your typical day is like?  I know of another guy in our position who is considering a similar move.  

Jan 23, 2009 2:21 pm

[quote=investor1] I’ve found that with more intelligent potential investors I can explain that I’ve invested at a multi-billion fund and unlike a typical sales guy I actually know what I’m talking about when I discuss investing. Seems to work as a pitch but I’m very new to this.   
I’d be very careful about how you position your experience investing at a hedge fund to prospects, no matter how intelligent they might be.  There has been enough high profile fraud in that area, combined with general performance well below the stated absolute return expectations, to cause most prospects to have alarm bells go off at full volume when they hear the phrase “hedge fund.”  You might consider focusing on your actual investing experience without stressing exactly where it took place, unless directly asked.

Perception is critical, especially with prospects who have little else to go on when deciding who to work with.

Jan 23, 2009 9:46 pm

I also was wondering what kind of financial data and information platforms do most retail firms use:  Bloomberg, CapIQ, Factset, Factiva, etc?

  Thanks again for the great feedback that I have received here.
Jan 24, 2009 4:19 am

Good point Morphius, I usually only bring it up when someone is extremely financially sophisticated, excellent point though. My typical day consists of calling a large database of warm leads, so basically leave a message for 20 people then one picks up the phone and sometimes they are interested sometimes they aren’t. There’s virtually no need for any data platform, keep CNBC on and yahoo finance up on your computer, at this point that’s all I’ve needed. Coming from banking or an investment analyst position you essentially don’t  use your brain all day other than to come up with good rebuttals, it’s really fun though, I love it, there is essentially no stress (as compared to having to pick stocks that go up to keep your job). I’m extremely new though and my leads are warm so it would probably be better to ask a guy who has truly been cold calling and done well at it. I think I can do really well in this format but its early in the process. I also don’t have kids and have more than a year of savings in the bank, if I had kids and no savings it would obviously be stressful but the job itself isn’t stressful.

Feb 4, 2009 7:38 am


I’m assuming that you would want to join the private client or private wealth mangement divisions of an investment bank:

You will likely find the attempt to transition over to being a financial advisor (aka “broker”) challenging, particularly so, in that you will be moving from an environment which is extremely white collar to one that is considerably less so. I remember one of the trainers at the beginning of my career observing that a successful broker has the most white collar job in finance, but the broker trainee has the undoubtedly the most blue.

Retail brokers (aka “Financial Advisors”, “Wealth Advisors”, whatever) are in the most “eat what you kill” segment of a financial institution. No base salary after training, no expense accounts until the higher levels of production (and even then they’re pretty measley), no flying first class for any distance, and pretty much the sense that you’re the least valued class of employee at the firm. You pay for most stuff yourself or figure out how to get a wholesaler to do it - it’s expected. You will even need to buy your own PDA. It’s a very budget environment compared to banking, even these days. Except for your assistants, who are even more poorly valued - horribly paid, overloaded (5 brokers per SA isn’t uncommon) and accordingly, pretty much act like DMV employees – when you’re age 16.

Your management will likely be incompetent. Not self-serving, but actually incompetent. You will regularly see terrible waste, mismangement, bad calls and arrogance. Their understanding of finance is generally extremely limited (at least by institutional standards). This is because most are failed trainees who were so focussed on kissing ass and playing politics that they never even really tried to be successful when they were baby brokers like you. Most are usually unimaginative, poorly trained politicians - the personifications of a “company man” cliche. Accordingly, the mindet that prevails is CYA. Due to this background and an emphasis on recruiting failed brokers for management, the vast majority of managers aren’t very able administrators, let alone entrepreneurs or respected leaders. The environment is highly ossified and bureaucratic.

If you’re lucky, you’ll have a sales manager who’s so checked-out that they show up late, leave early every friday, take 2 hour lunches, and pretty much see their job as not getting fired. But you should expect to get a stressed out type A who you must politely tolerate while they desperately try to convince you they chose management because they really wanted to… well, do whatever the hell managers do when they’re not forcing you to attend pointless meetings where they “recognize” the poor bastard who sold the most mortgages for that month with a laser printed certificate in a $5 frame. It’s really that glamorous.

Over the years, I’ve watched quite a few people try to make the
transition from institutional (banking, sales, research, etc) to retail
with little success. Their average longevity was about 1 year. Partly they are frustrated by the weak leadership and guidance, and the lack of support in landing clients. But, most of the time, they quit because they are horrified by how hard it actually is to build up a clientele.

Succeeding as a retail broker is quite a bit harder than any other division of an investment bank. A big part of it is the highly competitive nature of the business, but in most cases, the major impediment is the firm itself.

You’ll be readily shocked how your own firm will prevent you from distinguishing yourself from the competition, competently advising your clients or obtaining business - not because of selfish motivations, but actually because they simply lack the grey matter to understand something and hide behind vague insinuations of “liability”. The total lack of support you receive from your managers will feed your contempt. The handful of excellent opportunities you will have initially are likely to be squandered by incompetence or blocked by red tape. By the end of their first year, most brokers hate their firm.

Many from an institutional background are aware of these challenges, so when they look to enter retail; they tend to try to join established teams or team up wih corner office brokers. This is based on the correct assumption that there are things that only a big producer can do. Most of the time, a former investment banker will find a relationship easy to establish either before they’re hired or shortly thereafter. Unfortunately for you, while the team leadership or corner office broker is very interested in putting your bio on their pitchbook cover and mining your blackberry, they really aren’t interested in helping you develop your career. Virtually every relationship that would be the foundation of your future as a high net worth broker would also be of interest to any major broker at your firm.

There is the inherent contradiction; You cannot become viable until you build at least a few of the relationships that ANY other broker in your office would kill to get. Even if you work very hard to keep a relationship, it will naturally gravitate towards the more experienced member of the partnership or team. This will inevitably lead to a conflict. One that you will lose.

So, the only real option for you is the same one for everyone else - you need to start your own practice, roll up your sleeves and get to work. You will likely have to endure painful rejection. At first, your contacts will be of little value (they know how long you’ve been in the business and sophisticated clients are less likely to use a full service brokerage), so you’ll need to either focus on products or service rather than advice. You may have an easier time, but my experience with those who did succeed from your background is that they seem to have as tough of a time as the rest of us. All of them accepted business that was considerably smaller than they ever imagined they would need to. I suspect that it won’t be for a number of years until your institutional background serves you as a financial advisor, but it may help you grab some substantial transactional production at the beginning of your career. Whatever you do, keep your contacts warm.

In conclusion, I think you may find the experience very tough and you shouldn’t expect that your background (even your MBA) will give you much of a leg up. I would take a hard, hard look before you decided to do this.

Jul 19, 2009 3:11 pm

san fran broker,

That post is excellent.  I'm a new FA and everything, or mostly everything, I've read in your post I can agree with from the little I've seen so far.  I should have taken a good, hard look before entering this business myself.  Hate to sound pessimistic, but I truly think I may have made a not-so-great decision, for me, personally.
Jul 19, 2009 7:22 pm

Spot on San Fran!!!  I couldn’t have written it better myself.

Jul 19, 2009 10:58 pm

It’s unfortunate how little the average FA knows about finance.

  Most are hired from other sales professions (vehicles, vacuums, copiers, real estate) and their primary intellectual assignment is to learn the rules associated with retirement accounts and the tax law that affects investments.   Other than that, it's all about gathering assets and then handing off the money to real money managers and going and finding another warm body that can make out a check to American Funds, SMAs, etc.   I don't care if you have MBA, CFA, CFP, CLU and JD after your name, you'll still be equally as vulnerable to failure as the other 90% who don't make it in this channel of the business.   This is a crazy business; one of the few where you can be WILDLY successful without really knowing what you're doing as long as you can talk people into handing you a check.   (And by the way, incredible post, San Fran.)