Let’s set the stage…

Last week I wrote about 3 Ways Wall Street an investment banker can break into BigTech from a technical point of view.  Now the question becomes from a bigger picture, should they transition or move within Wall Street?

The picture is mixed if you are an investment banker who wants to make a change. I define change here as moving to another investment bank, FinTech, BigTech, Corporate America, etc.

Let’s dive into the possibilities.  First, why if you make $500K+ and work at a top investment bank would you want to move? I can think of many reasons:

  • You tasted the good life from working from the burbs, and the NYC subway in the Summer is just too much
  • You want to mark yourself to market since another investment bank will pay your more than your own investment bank
  • Your company’s stock lags all others (CS, DB, etc.) and a lot of your compensation is tied to the stock
  • Your senior management is ridiculous, even for Wall Street standards

When I was at Merrill Lynch and moved to Credit Suisse in NYC, it was for the money. The decision was easy since Merrill Lynch placed my value at X and Credit Suisse at Y.  Y>X by more than a few pennies.  Both were great investment banks.

However, that was in 2000 when the market was very different than it is today.

Current market conditions to move within investment banking

Historically, Wall Street makes its hiring in Q1/Q2.  This summer might be even slower than history since I have been told that so many people are going on vacation or “COVID breaking out” that flights are fully booked, and rental cars are impossible to find.

Investment banks are also so focused on bringing people back that management is distracted, albeit for good reasons.

Ken Moelis, CEO of Moelis & Co. explained on an investor call that since the investment banks’ stock prices have improved dramatically, hiring away an investment banker has become more expensive. When one investment bank hires another the hiring bank picks up the cost of the employee’s current stock options and deferred stock.

For example, if I have $2 million in stock options and deferred stock (which vest over time) and work at Goldman Sachs, leaving would mean I lose the $2 million.  If JPMorgan wants to hire me, they must pay me not only more than I make now (base + bonus) but also assume responsibility for the $2 million I’m leaving on the table.

Since investment banking stocks, in general, have gone up between 50%-100% over the last year (GS about 85%, JPM about 60%, MS about 100%), the value of deferred comp keeps increasing.  The higher the price, the lower the demand.

Current market conditions to move to FinTech and BigTech

The opposite effect is happening in Fintech and BigTech.  So many of my investment banking clients want to move to Google, Stripe, Amazon, Robinhood, Square, etc. When I was that age, consulting was the rage. Why FinTech/BigTech now:

  • Investment Banking is a hard business on the body and soul
  • The work in FinTech and BigTech is arguably more interesting since it represents the newest horizons
  • The stock prices of FinTech and BigTech are expected to keep increasing so any deferred comp earned will only increase as well
  • Try a start-up where you have more decision-making authority and can make a difference
  • You can work remotely-maybe!

FinTech and BigTech are hiring even at the senior level. They generally don’t follow the “hire in Q1/Q2” model that Wall Street does. They are growing while investment banks are shrinking. You know when Star Trek’s “Starship Enterprise” is thinking of changing its name to “Google Enterprise”, there is a trend.

As we used to say when I was in investment banking, “You always have a target on your back, it’s just a matter of time before you get shot”. I got shot in 2007 as the market was crashing during the Great Recession.

I considered myself lucky since I survived 15 years with Merrill Lynch and Credit Suisse.

If a smart banker lived on their base and pocketed their bonus, then since the base at FinTeach and BigTech is roughly comparable to investment banking, your lifestyle won’t change.  Even if you lived beyond your base and bonus, some investment bankers just want out.

FinTech and BigTech folks are reinventing the world without working crazy hours, dealing with asshole bosses, and living in a toxic culture.

Conclusion

It’s a lot easier for senior bankers to move to FinTech and BigTech than it is to move to another investment bank.  I would make that move now if you are in a position to.

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