Boutique Investment Banks and Bulge Bracket Investment Banks: Pros and Cons of Each
“I work for a boutique investment bank,” responded Todd cockily, smirking and now pulling up his pants over his temporarily retreated beer-gut, illustrating that this was one of those hardcore New York male-anorexia and exercise weeks. He would be spilling out of pants next week no problem after this weekend’s depression-gorge.
Todd paused and collected himself. “Yeah, I mean, I just really wanted to be closer to the deals, you know. Get more exposure.”
-The Boutique, Leveraged Sellout
For a lot of people, when they really decide they are going to enter investment banking, they tend to lean towards the big firms first: Goldman Sachs, Morgan Stanley, and even UBS.
However, people sometimes ask me about boutiques. This could refer to regional boutiques that have just 1 or 2 offices, or this could mean the “top” boutiques such as Evercore and Lazard.
Not everyone has the option of going to a top bulge-bracket investment bank. If the market isn’t doing well, or if you don’t know anything about finance, or if you are trying to transfer from other industries such as law or healthcare, you would need to consider settling with a boutique.
Is it possible that a boutique is actually better than a bulge bracket bank in some cases? Are there people who would prefer a boutique?
The Main Difference Between A Bulge Bracket And A Boutique
Bulge brackets usually work with much bigger deals. In the corporate finance world, $50 mil is chump change. Goldman Sachs often advises on acquisitions worth billions of dollars, whereas boutiques do much smaller deals, usually under a billion.
Benefits of working in a boutique include getting to working in smaller groups, getting more responsibility, and being more than a mere “number-cruncher.”
While these can be true sometimes, the main difference at the Analyst level is that your boutique experience will be much more random.
Problems With Randomness
Make no mistake: you can get tremendous experience at a boutique and learn more about actual deals than you might at a bulge bracket. But you might also spend all your time creating pitchbooks and doing useless work if the senior bankers can’t make rain.
Out of my friends, I’ve observed both scenarios. One guy at a boutique learned the whole job in 3 months because he was virtually running a deal himself.
Another friend spent most of his time making pitchbooks, making coffee (no administrative staff, thank you very much) and did deals that were so small he never learned much.
Don’t think that you’ll necessarily get a better experience as a boutique. The probability of getting large deals to work on and having good post-job opportunities are much higher at bulge bracket investment banks.
Is A Boutique A Road To Nowhere Then?
No. But, before making the decision about boutique, you need to do careful research about the dealflow, work environment, and the people. To get a more down-to-earth view, try speaking with Analysts and Associates instead of senior executives.
No matter how much diligence you do, however, the sad fact is that there will be time lag between when you interview and when you start, and a lot can change in a year… or even a few months.
Even at a relatively major bulge bracket bank office like UBS LA, just the departure of few star employees wreaked havoc on the branch, and such departures would have an even more pronounced impact at a small boutique.
Still, you should do your homework as much as possible.
But Still, Is There Any Justification For Applying to Boutique Investment Banks?
I strongly recommend that you spread your net wide and consider all your options. Unless you have some kind of personal connection at a boutique, though, there is little reason to prefer it to a big name bank.
Lifestyle at boutiques is usually not much better. Yes, occasionally there are cases of Analysts only working just 60 hours a week… at certain offices. However, at the “top” names like Evercore, banking analysts work bulge bracket hours. Furthermore, once you get up to 80 hours or so a week, there’s honestly not much difference between 80 vs. 90 anyway.
Although boutique investment banks still offer exit opportunities, many firms still doing most of their hiring out of bulge bracket firms.
At top-tier boutiques and middle-market banks, compensation can be comparable to bulge bracket banks, but at smaller regional banks, the pay can be a lot less, as much as 50% less sometimes.
One situation where you might want to choose a boutique is if you’ve received few offers from banks, you’ve confirmed that the boutique will give you significant responsibility, and you like the people and corporate culture after researching the firm. Your team is very important, and good experience is not worth it if you end up wanting to shoot yourself because you hate your co-workers.
Riyan Richter is a Associate Author to several financial news and tutorial websites, including Breaking Into Wall Street and Mergers & Inquisitions. He writes about investment banking, economic news, bulge bracket banks, the job search, career advice, and networking.