The Fall of the Investment Banking Model
“The Great Migration”

There is no question that the last two weeks have been a tumultuous time to work on Wall Street and be involved in the equity, debt and credit markets.  Numerous respected and trusted professionals have stated to me that they have never experienced a time such as this, and some of these individuals have worked in the space for over 60 years.

The demise of the independent Investment Bank and the Investment Bank model has caused and will continue to cause ripples within the financial services space for quarters to come. believes that the changes made to the Investment Bank Business Model on September 22nd will cause a mass-exodus of talented professionals from the Investment Banks into the Private Equity and Hedge Fund space.

Private Equity and Hedge Funds

As the freedom and large performance base compensation packages Investment Bank employees have enjoyed and come to expect, are regulated and dissolved many will look to crossover to the Alternative Investment industry.  The best talent on Wall Street will quickly see the Private Equity and Hedge Fund space is one of the few areas where individuals will have the opportunities to be rewarded for their performance and given the freedom necessary to be successful.    We have already seen the beginning of this exodus over the last few months as well funded firms have used this time to recruit and hire experienced professionals from recently sold Investment Banks.  These funds have looked at this period as a time to strengthen their talent bench and expand into new products and strategies, including strategies which in the near past were dominated by Investment Banks or other banking entities.

While these funds generally would hire 2nd or 3rd year Analysts and a few post-MBA Associates, they have expanded their hires to Managing Directors and other senior professionals to join the funds in significant investment roles.  These funds are looking at recruiting talented professionals who can add value on day one.  The more senior bankers are usually valued for their rolodex and industry specific knowledge.  These former Investment Bankers may have to learn some new skill sets to work in Private Equity or a Hedge Fund but this is not an issue for these seasoned professionals. These funds are starting to represent a more stable environment in the mind of many employees. Furthermore, these funds have started to actively recruit at top schools for both MBA students and undergrads.  Some of the biggest firms have even created their own in-house training Analyst/Associate programs similar to those at the large Investment Banks.  

Alternative Careers Paths

If Wall Street professionals decide against or are not able to gain employment with a Private Equity or Hedge Fund firm, what choices are they left with? The first would be to go work for a smaller boutique investments bank.  These firms usually have less of a generalist feel and more of an industry and transaction focus. The boutique firms do offer professionals the ability to maintain the status quo in regard to their job duties but the pay is usually considerably less and the real upside potential is only positive if you are able to become a partner in the firm.  To become a partner you must bring revenue to the firm, so keep in good contact with your present clients and relationships.

Other professionals may look at going to work for an endowment or large corporate or public pension plan.  Although these roles are sought out due to their responsibilities they usually do not pay extremely well (especially the case for public) and for this reason are not on the top of most professionals’ wish list. These positions do offer you the ability to work on the investor side and in many cases they are very stable positions which offer a great balance of work and play.  If you decide to look at these opportunities remember in many cases they are located in less expensive communities and therefore the compensation numbers may not be as bad as they first look. It is vey important that you review the cost of living for the area in which the role is located.  Furthermore you will find that a few private pensions/endowments pay very well.


Although both of theses alternative careers paths are viable options for many Wall Street professionals they both have one major problem. In the majority of cases neither will allow you to maintain your present standard of living.  In the long run both paths may allow you to return to the standard of living you presently have but this is not an overnight solution.  To return to your standard of living with a pension plan you will most likely have to rejoin the private sector at some point which is what many professionals in this specific field do.  The main goal at a boutique investment banking firm will be to become a partner and drive significant revenue to the firm.  In this case you may even better your standard of living but again this takes time.

In this time of volatility in the marketplace you should identify what you like and dislike about your current role, and determine what you want out of your next role.  Take a pro-active approach to managing your career and begin to review your options now while you are still employed. You must realize that your competition is growing by the day. In this volatile economy, the earlier you start the process the better. Once you have identified what is important to you, it will make the job search process much easier. If you decide to look into the Private Equity and Hedge Fund space, start the process now and expect it to take some time.  These firms will have the power in regards to most of the hiring so it is important for you to stay focused and responsive to these opportunities.

© 2008 NyamiNyami Holdings, LLC