Domain Query: To become a bankster...

Jonny H. is weighing up the opportunities and the costs of a career in investment banking versus a career as an actuary:
I am currently debating between becoming an actuary and an investment banker. The earnings ceiling as an investment banker is much higher (though by no means do actuaries make a meager living), but I value balance and having time for hobbies and women. The hours in the Wall Street world sound brutal (upwards of 80/week) whereas actuaries hear work around 40-50. It's a bit of a dilemma for me and I would really appreciate your thoughts on it.
The tl;dr answer to this question is: don't EVER go into banking unless you know damn well what you're getting yourself into.

Read the rest for the longer version. This might take a while.

I'm somewhat unusual in that I've seen a bit of both worlds. My first job (which I hated) was with a company that specialises in HR, actuarial, and pension consulting; I was part of a small boutique shop that was absorbed by this company to create an "enterprise risk management" practice. (Great idea on paper, completely useless in the real world.) I then moved into the capital markets side of the industry, but I kept in touch with people who lived and worked in the investment banking profession and I have a pretty good idea of what the banking life involves.

Here's the skinny on becoming an investment banker:
  • Your degree doesn't matter in the slightest. Nothing you learned in it will be of any use. Your two most important skills are going to be: how good you are with Excel, and how well you can speak in front of a PowerPoint presentation. That is literally all- and most banks require you to take a course in Excel when you join.
  • Investment banks love to make a big deal about how they focus on "bright young talent", but the reality is that connections and networking matter more in banking than in most other industries. Plenty of dumb jocks get snapped up as bankers, while the real maths geeks generally choose to become quants instead. Oh, and ladies, if you think you'll have a great career as a high-powered banker, the odds are very much stacked against you. With a few exceptions, in the M&A and Leveraged Finance groups, women tend to be eye-candy more than anything else. They can't hack the hours, the sexism (oh yes, it's there), and the pressure. And not all of the affirmative action programs in the world can change that.
  • Getting in the door will be really hard if you don't have a "name" degree. That is, if you don't have a degree from an Ivy League school, or at least from one of the schools where your target bank recruits heavily, then you don't have a snowflake's hope in hell of getting in- all of that polite talk of "inclusion" and "diversity" notwithstanding.
  • The hours are extreme, yet most of your time will NOT be spent working on anything. You'll spend 14-16 hours a day in the office, but you'll do maybe 5 hours worth of actual work on an average day. Only when a deal comes in will you really work your tail off, but that's not very common these days. The rest is just "face time".
  • The effects on your physique, your health, your social life, and your psyche will be severe. After 70-hour weeks of chair parade, your muscles will go flabby and you'll not have much time, if any, to hit the gym or go running. There are banksters who stay in very good shape but, trust me, they're exceptions, not the norm. Your health will deteriorate in kind. Your social life will be basically non-existent, and you will always be chained to your CrackBerry.
  • You will be paid extremely well. I would argue that you will be paid out of all proportion to your actual contribution to society. Starting salaries in New York investresultsment banks, some 5 years ago, had the base set at 200K, never mind bonuses, for fresh graduates. The markups are significantly higher for freshly minted MBAs from NYU or Columbia or Harvard. You'll have loads of money, and you can buy really nice stuff with it, for sure. But you'll never get a chance to actually enjoy any of it.
  • You'll always be looking over your shoulder. Banksters have a very high turnover rate because of the brutal hours, the lousy lifestyle, and the extreme pressure- and of course the fact that banking is such a super-cyclical industry. When times are good in most places, they're amazing in banking. When times are bad in most places, they're miserable in banking. That cycle means that you'll constantly be on the lookout for the Next Big Thing.
  • The "s*** rolls downhill" principle applies more strongly in banking than in almost any other industry I've seen. Basically, the FNG always gets dumped with all of the hard work and analysis and the MD gets all the credit. And when the FNG stops being the FNG and new blood enters the team, the same story repeats itself with him, and the former FNG takes out all of his frustrations and angst on the new new guy.
This is the reality of life in banking. I don't mean to scare you away, but you should know what you're in for. If after knowing this you still want to go into banking, then more power to you. I believe that people who go into banking aware of what awaits them are the ones who genuinely do well in that industry, and are also the ones who manage to stay reasonably sane in the process. A well-adjusted bankster may well be a contradiction in terms, yet oddly enough, they do exist (I'm very good friends with one- a woman, no less).

Two rather good books on the subject:
(As for why banksters all seem to have such weird names- I have no idea.)

So what about life as an actuary? Well, it so happens that I know something about that too:
  • Depending on where you work, the hours really aren't too bad. If you work at an insurer or reinsurer, you'll spend a lot of your time trying to accurately gauge risk in a portfolio; this is especially true if you end up in an Asset/Liability Management or a Variable Annuity Hedging group. You'll work 8-10hr days and only when something goes haywire will you be pulling all-nighters.
  • If you end up working for a consulting practice, the hours are significantly more variable; when you're on a project, you could be working 70-80 hours a week, but when you're "on the beach", then you're going to struggle to get through a 35-hour week without being bored out of your skull.
  • Actuaries are known for having one-track minds. I can assure you that this stereotype is entirely true. Actuaries are trained to think about risk and probability in very specific ways, and within the limits imposed by that paradigm they are exceptionally good at figuring out how to manage risk in a portfolio. However, they have great difficulty stepping outside that paradigm. Actuaries make singularly bad financial risk managers because they lack any real understanding of how financial risk actually works. It's just something to be aware of in case working as an actuary isn't your thing.
  • You're always focused on your next exam. The actuarial exams are tough, and they take a long time to prepare for and complete. You have to be highly motivated to study for them. Once you have those qualifications, you're in good company, and the more qualifications you get, the more demand there will be for your particular skill set. However, at some point you're going to run into a major conflict between the highly specialised technical nature of the actuarial exam, and the more generalised management skills needed to get to the highest-paying positions in most companies.
  • You'll likely enjoy a rather better lifestyle. The actuaries I worked with for the most part had stable lives and families, mostly enjoyed what they did, and had the flexibility that they wanted out of life. That's not to say that my experience was universal, since I worked in a consulting shop, but they generally seemed to be pretty well-adjusted characters for the most part.
So there you have it. In my personal opinion, becoming an actuary is a better bet for long-term happiness and stability. Becoming a bankster is great, for a while, but sooner or later it wears you down. As with any career, I would argue that you should treat money as just a means to an end- a way to keep score, a way to achieve independence, and a way to give yourself security and comfort, but nothing else. Let's face facts- having to work for someone else blows, no matter how much you like your job, so why not go for the job that gives you useful transferable skills, a decent lifestyle, and enough time to do what's really important to you?

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