Bulge Bracket vs. Boutique Banks: An Overview

Aspiring investment bankers can work in one of two types of investment banks: bulge bracket or boutique. Bulge bracket banks are multinational, brand-name banks that regularly handle billion-dollar transactions and employ thousands of people in financial centers around the world. Then there are boutique banks—smaller, younger banks that specialize in certain areas of investment banking and handle smaller deals.

Bulge Bracket Banks

Bulge bracket banks have a global presence and usually have a solid market capitalization. These large banks cater to clients like large institutions, corporations, and governments. They provide a full range of investment banking services and products worldwide. Bulge brackets commonly have investment banking divisions that handle large mergers, acquisitions, and underwriting services that private companies need for their IPOs.

Bulge banks dominate market share, handle the biggest deals and command the greatest prestige and brand value in banking. They include Bank of America Corp. (BAC), Barclays Plc (BCS), BNP Paribas SA, Citigroup Inc. (C), Credit Suisse Group AG (CS), Deutsche Bank AG (DB), Goldman Sachs Group Inc. (GS), HSBC Holdings Plc (HSBC), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS).

Boutique Banks

The fastest-growing segment in investment banking is the boutique segment. Boutique banks are smaller and tend to focus on one or two prime areas in investment banking—say mergers and acquisitions and asset management. Compared to bulge bracket banks, boutiques are more flexible in terms of hierarchy, structure, and operations. They may not have the cache or resume power of a bulge bracket, but employees across the board are usually happier at boutique banks.

Some popular names in this category are Evercore Partners (EVR), Blackstone Group LP (BX), Jefferies Group, Lazard Ltd. (LAZ), Moelis & Company (MC), Piper Jaffray Cos (PJC), Qatalyst Partners, Houlihan Lokey, Greenhill & Co., Inc. (GHL) and Perella Weinberg Partners. (For related reading, see Key Financial Ratios to Analyze Investment Banks.)

Because of the work-life balance advantage at boutique banks, there is generally less employee turnover.

Special Considerations

Both bulge bracket and boutique banks have their benefits and drawbacks. Aspiring investment bankers should consider these when applying for positions.

Training: The training provided by boutique banks to new recruits or interns is more on-the-job, which means getting real-time exposure and enhancement of skills right from the beginning. There is more interaction with seniors during this time period and real preparation for the job rather than classroom teaching. While this can be an advantage, the disadvantage is there is less focus on foundation building through formal structured training. On the other hand, bulge bracket banks offer classroom-based, formal training.

Experience: A boutique bank is more likely to offer new hires a wider range of experience, as well as more involvement in processes, be they deals or asset management. At a boutique, a new banker would be able to take on more responsibility and play a more prominent, and challenging, role in deals. This can help build confidence and leadership skills.

Salary: A boutique may not offer a starting salary as attractive as a bulge bracket, but these banks offer more room for negotiation on remuneration going forward, as the employee isn’t one of the many at the same level working for the organization. Bulge banks tend to offer more competitive salaries and are more likely to offer a reallocation package and higher bonuses. However, an employee’s influence on his or her pay package is likely to be limited, as there are many people working at the same level and under the same standardized pay systems.

Exit Opportunities: Employees from both boutique and bulge bracket banks can transition into private equity and venture capital. However, boutique bankers may be at a disadvantage. They will not be able to claim experience with enormous deals like their bulge bracket peers. Considering connections, many private equity firms and venture capital firms are founded and staffed by bulge bracket alumni.

Job Security: No job comes with a 100% guarantee against layoffs and pink slips, but if only because of their sheer size, bulge bracket banks do downsize staff when necessary. Boutiques do not hire as many people at the same level.

Working Hours: Investment bankers work long hours whether they are at a boutique or a bulge bracket bank. However, hours may be more predictable at a boutique bank. New deals will be more visible, and bankers can plan their hours accordingly.

Key Takeaways

  • Bulge brackets are the largest banking institutions in the world and regularly handle multi-billion dollar deals. Employee satisfaction is not a paramount concern.
  • Boutique banks tend to specialize in certain areas of investment banking, aiming to give a more personalized service to their employees and clientele.
  • Work-life balance at bulge brackets tends to be less enticing, but the resume power and skills learned with large deals can have enormous benefits for an employees career trajectory.
  • Bulge bracket banks tend to offer more powerful training materials to new hires.