Everybody likes to fantasize about the life they will have as investment bankers. They envision a life of luxury, prestige, power and international travel.
But the reality is often very different. In fact, I realized a few brutal, cold truths when I was working in IB, which gave me a completely different perception of this industry…
This article is not meant to depress you and dissuade you from pursuing a career in investment banking. It is only meant to give you a realistic picture of what you can expect, by sharing with you the aspects of the job that are not so glamorous.
So take a glass of red wine and play some Lana del Rey in the background: your idealistic vision of investment banking is about to get smashed…
Too many students still think that once they land a coveted job at a tier one investment bank, they will be able to afford a luxury penthouse in Mayfair, go to work in a Bentley Continental with tinted windows, and watch the time on a brand new Patek Philippe.
Yes, I’m exaggerating a bit, but still: candidates are clearly overestimating the purchasing power they will have once they land their dream IB job. If you incorporate the cost of living and taxes, the net salary that you get per month is far from astronomical, if not relatively modest, especially during the early years of your career.
To give you some numbers, if you’re working in M&A at a bulge-bracket bank in London (as a first-year analyst), you can expect to make a gross salary of £60,000 per year, or £5,000 per month. In the UK, based on this annual gross salary, you’ll pay around £11,500 in taxes. You also need to account for your pension contribution (the employer does it for you), which is usually around 8% of annual salary (can be 5%, depending on the employer).
That means that your NET salary (after pension charges and taxes) will be £43,700. That’s roughly £3,640 per month. Not a bad salary. But certainly not a great salary if you want to have a luxurious lifestyle in an expensive global city like London (the same applies to New York).
If you want to rent a studio in London, you should expect to pay at least £1,300. Add the utilities to that (around £130 per month), the internet bill (£30), and the cost of public transport (£150), and you end up with about £2,000 of disposable income.
Count at least £400 of food, excluding restaurants, and you have £1,600 for leisure, clothing, travel, and miscellaneous purchases. In a city like London, that’s not much, trust me.
Now, to be fair, these calculations don’t take into account the bonus – the famous investment banking bonus! On average, a first-year analyst working in a top IB division can expect to earn around £40,000 in bonus (in a good year).
On that, you pay roughly 50% in taxes, which leaves you with a net bonus of £20,000. Not bad. But it won’t make a drastic change in your lifestyle.
Investment banking salaries only start to become interesting – in the sense that they will allow you to live a wealthy lifestyle even in super-expensive cities like London – when you become a VP (a VP at a tier-one bank can expect to net over £8k per month, after taxes).
Let’s be frank: another reason why so many students want to work in investment banking is to impress their peers. They want to feel important, to prove to others that they have what it takes to get a job at some of the most prestigious and selective institutions in the world.
And there is nothing to be ashamed of. It’s only a natural human desire to display a sense of dominance. But the truth is: your parents may be impressed, your best friends may be impressed (or secretly jealous of you), but most of the people you know and meet won’t really give a s*** about where you work.
The average person in the street has probably never heard of investment banking. The girl you’re eyeing at the bar probably never heard of it either. And even if you meet people who do know about investment banking and how difficult it is to get in, they probably won’t care either.
The only type of person you can impress with your investment banking experience are students aspiring to work in finance – people you will barely interact with once you’re immersed into the hustle of the IB job.
So if you think that people will see you as a demi-god once you get that coveted M&A spot at Morgan Stanley, think again… Most people you know and meet will be completely indifferent. I know, I know, I warned you…
I’m not gonna lie: when I first joined Goldman Sachs as an analyst, I felt on top of the world. For the first few days after getting the offer, I felt immensely proud, I couldn’t stop thinking and dreaming about how great my life will become after this major career accomplishment. I knew that with that name on my CV, I could literally go anywhere I wanted.
Yet, two to three weeks after I started working there, this intense feeling of pride and the exhilaration of prestige had largely vanished.
I would still feel very proud of working for a world-class investment bank, but my level of excitement had normalized.
So if you’re aiming to break into investment banking for the social prestige and the feeling of pride that comes with it, be aware that this feeling doesn’t last as long as you think – and it should not be the primary reason driving you to pursue this career path.
This is hardly a surprise I know, but investment banking hours are hard, very hard. In the busiest periods, you may work over 90 hours per week, which can be extremely taxing both mentally and physically.
During these very intense periods, you may be very tempted to quit, and you’ll probably hear some junior colleagues complaining and even reconsidering their career choice…
The “good news” is: these super-intense weeks are not the norm. On average, you can expect to work between 60 and 80 hours a week, which is intense indeed, but not to a point where it can cause psychological damage (at least for most hard-working, driven people in good health).
But still, I would advise you try it out first before going all-in in investment banking, by doing a 6-month internship at a reputable boutique, for instance.
This comes as a logical consequence of banking’s brutal hours: realistically speaking, you won’t have time for anything else during the first years of your career – especially if you’re working in M&A where the workload is notoriously heavy.
Your life will mostly be about work. You will often work on weekends. It will become difficult to work out, due to the limited amount of free time and physical fatigue that comes with the long hours.
During busy periods, you will barely have time to go on dates, and it will become harder and harder to see your friends. And even in the case when you do have time (during week-ends, most likely), you may be too tired to do anything else other than sleeping and recovering from your hard week.
This is I think the darkest aspect of life as an investment banker: you’re trading your free time for professional success and career building.
I’m not saying it will be like that 100% of the time. But if you don’t feel capable of dedicating nearly all your time to the job, then you may want to consider another career path.
In case you think you can handle all these painful truths, check out our course on this page to land a job in investment banking this year.
Aurelian Tran is the founder of Alpha Lane and an ex-Goldman Sachs analyst who has spent 4+ years working in the investment banking industry.
He founded Alpha Lane to help students and young professionals achieve their highest professional ambitions, by securing offers at top-tier financial institutions.
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