Listen to this article
The recent death of a 22-year old first-year analyst at a Wall Street firm has prompted much reflection. As former investment bankers, we believe the analyst track cannot only impart lessons about the industry, but also about management.
Financial analyst jobs are highly valued for the training, prestige and future opportunities they provide. They are widely sought by the most competitive students from all over the world. They also pay very well (for 22 year-olds). But they do come with an expectation of 80-100 hour workweeks and a total immersion in the firm that allows very little time for developing a “real life.” It has been this way since anyone can remember.
Part of the reason for this intensity is the unpredictability of activity in capital markets, which includes prospecting for and executing new issues of securities, IPOs and mergers and acquisitions. This year’s activity level, for example, is considerably higher than last year’s. When activity levels surge it is all hands on deck, something everyone knows.
But another part of the reason for the high workload is cultural. The firms believe that having a relatively small staff of high-grade junior employees to handle the business provides a more intense form of training that produces a cadre of professional mid-level employees with long-term career potential.
Analyst positions originally were awarded with a two-year contract, after which the individuals were expected to go back to school for a MBA. In recent years, the two-year contract has been replaced with an open-ended job offer that signals some but not all of the analysts will be upgraded to associates.
The first two years at the elite firms is focused and intense to a degree that most 20-somethings have never experienced. It is a tough, sink-or-swim process that separates out those that have the aptitude, personality and preference for this type of work. It can be nerve-racking and physically demanding. In some ways, it is similar to the elite military training for Seals or Special Forces units. It is tough, especially for foreign-born individuals to whom the high-pressure, American work environment is completely alien, but that doesn’t mean people are expected to work themselves to death.
Of course the firms have a responsibility to provide some sort of watch over their young analysts, to be sure they are not loaded down with more than they can be expected to deliver. Some sort of mentoring has to be part of the package with intervention from time to time to shift the work around when deliverables are due so they are not all expected at once, a common nightmare.
Most of the firms recognise this and have attempted to ease the pressure by hiring larger analyst classes, reducing weekend work and offering counselling and other support services. Nevertheless, much of the pressure on the analysts is self-induced and too often individuals struggling with their jobs are unwilling to seek help for fear of appearing weak or falling behind.
We have some advice that might help young analysts get through the initial two years: first, relax a little. Remember that the training is all about establishing a reputation for being professionally reliable, which means getting the work done accurately and on time, without pestering others with a lot of questions about how it is to be done. Reliable analysts get promoted, those that aren’t don’t.
Second, learn to handle chaos and disorder. Most analysts work on several deal-teams at once, the requirements for deadlines, meetings, etc change from week to week, sometimes creating convergence or overloads on the system. It can certainly seem chaotic, but successful analysts learn to look ahead a week or two, prioritise and anticipate what has to be done, and plan accordingly. If conflicts emerge, let your boss know well ahead of time, maybe suggesting an alternative way out. This also means there are times when the analyst has to say he or she is too busy to take on a new assignment.
Third, a tough training environment is going to have to be endured before you can really judge whether or not the work (and the career) is what you want. You can always decide to do something else later, but, for most people, the best advice is to stick it out.
There are many benefits to completing a two-year hitch as an analyst. Some then decide to seek MBAs or other graduate degrees with the expectation that their analyst experience will help them gain a coveted position as an associate in a top financial firm. Others may stay on, being promoted to associate without having to go to business school. And many decide to go on to hedge funds, private equity firms or other non-financial destinations where they can establish the kind of work-life balance they want.
The two-year analyst programme is the best training experience for financial and other careers that there is — even if you decide you don’t like investment banking. Thousands have successfully gone through these programmes. But they all had to adapt to the work environment to do so.
Professors Murphy and Smith are former investment bankers who now teach finance at NYU Stern School of Business in the US