Virtually every business student dreams of life as the managing director of a major investment bank, and it is easy to see why. Top investment banking directors can earn several million dollars per year, travel all over the world and get to see their names printed in publications such as The Wall Street Journal. In terms of respect, lifestyle and prestige, managing directors are at the very top of the finance world.
There are not many of these jobs, so competition is fierce, and it takes a grueling amount of work to get that far. In February 2015, the salary benchmarking firm Emolument released a report on how long it takes to become managing director (MD) at an investment bank. The results were not surprising: It takes at least 16 years at most major investment banks. Even the company with the fastest career path, Goldman Sachs, requires a more than 12-year process, per the report.
Sixteen years may not sound like a long time to wait to make $3 million per year, but this amount of time is likely to come after undergraduate school, a two-year internship and an MBA program. Once work begins, most investment bankers work between 90 and 110 hours per week, the equivalent to more than 16.5 hours per day for six consecutive days.
If you maintained that level over the course of 16 years, it equates to 13,866.67 hours on the job. By comparison, it would take nearly 29 years of 40-hour workweeks to hit 13,866 hours.
Breaking Into Investment Banking
Ivy league business schools, places such as Wharton, Harvard and Columbia, are the go-to breeding grounds for entry-level investment banking jobs. Students begin the process of attracting investment banks at an early age by targeting internships, strategically networking with older professionals, and taking classes to get into a good master's program.
Even the lowest-level analysts are the brightest, highest-achieving business students. It is a grind to get an analyst job since banks are looking for those who can willingly build active schedules and show they can work long hours with superb results. The first step toward managing director is getting in on the ground floor.
Surviving the Investment Banking Culture
Investment banking has a well-earned reputation for difficulty and cutthroat meritocracy. Bankers are expected to work as many hours as needed and are virtually never off the clock. The culture is, in a word, intense.
Career advancement comes from embracing the challenge. Most banks have a "put up or shut up" mentality, even for junior analysts. Low-level analysts are treated like commodities, and most report being told they are easily replaceable. This is actually true, as there are hundreds of eager business students pining to take every available slot.
Advancement is as much on you as your senior co-workers. Investment banks are not known for holding hands or emphasizing training. Andrew Gutmann, author of How to Be an Investment Banker: Recruiting, Interviewing, and Landing the Job, frankly states that "a junior banker's career development also takes a backseat. As a junior banker, you are there to work, not to learn."
Your friends are likely going to be your co-workers, with whom you spend almost all of your time. This can lead to a great deal of camaraderie among analysts, especially those who make it to the associate level together. From an emotional and interpersonal perspective, the most important aspect of surviving the first few years is to develop strong relationships inside the firm.
Putting in the Time
The great majority of managing directors were senior vice presidents, sometimes called principals or directors, at the same firm for several years. Most senior vice presidents were vice presidents for three or four years and had proven their skills at executing deals and managing relationships. Vice presidents come from a pool of top investment banking associates, usually after their third year with that title. And most associates are selected from analysts who managed to survive for a few years.
It seems a little odd that such a results-based industry has a de facto graduation schedule for promotions of three years here, two years there. But banks want to know an analyst or associate can keep pace and produce year in and year out.
To make managing director, you are going to have to prove you can help the bank make money, and part of that process is mastering every level of bank operations.
What Investment Banks Want From a Managing Director
Part of becoming an managing director is putting in the time, but a bigger part is convincing the bank you are what it is looking for. Each managing director has to know the bank and its clients inside and out and, more importantly, has to be able to tactfully balance all of the personal relationships. An effective managing director knows when to delegate and when to interfere, when to hire and when to fire, and even when to walk away from a deal.
Investment banks are businesses in search of profits, but the managing director cannot just have the bank's short-term bottom line in mind. The bank's clients need to trust the managing director, who acts as the spokesman for the bank in a deal. Effective managing directors know that the clients are the ones who really pay their huge salaries.
Managing directors drive revenue by looking for and winning deals. They do not spend a lot of time executing deals, so most investment banks are far more interested in a great schmoozer and prospector than a technical mastermind.
There are a few primary reasons an analyst may never work his or her way to managing director. The first and most common is burnout. Even if an analyst is able to adjust to the long hours and demanding work, there are tremendous exit opportunities, meaning there are other excellent jobs with good firms that are fighting to pick up the scraps from investment banks. It is very tempting to accept an outside offer and leave the 100-hour weeks behind you, especially if you do not make associate or vice president as quickly as you expected.
Many other analysts and associates never reach the managing director's office because life gets in the way. They might get married or have children, they might have to take care of aging parents, or they may get sick or hurt. Investment banking does not leave much time for life outside the firm. When presented with hard choices, many choose to focus on everything else and leave the bank behind.