Posted in Investment Banking on 27 April 2016

Over the past decade, boutique investment banks have taken an ever-increasing share of the market from their larger cousins. This greater prominence and higher deal-flow has compelled them to find a more competitive approach to hiring: in some cases with grass-roots hires straight from universities, but more often than not by enticing analysts from the renowned graduate training programmes of the major banks once they have accrued a few years’ experience. The battle-lines are now firmly drawn between the boutiques and the Bulge Brackets, not only to earn a place at the table on deals, but now also in regard to the attraction or retention of talent. With the recent high levels of M&A activity in the market – completed deals in 2015 totalled $4.8 trillion – this competition looks likely to intensify, and makes the decision over which path one should take all the more significant.

As the ‘younger pretenders’, some of the boutiques have been able to shape themselves from the outset in such a way as to lay out clear differentials between themselves and their larger, more established competitors. In what is the simplest, but perhaps most significant, example, it is their size itself which helps define them. While a boutique may to a certain extent lack the infrastructure of a Bulge Bracket, and with it the capability to run as comprehensive a graduate scheme, develop numerous sector-specialist teams, or have as all-encompassing a network to develop new business, it also should be spared some of the bureaucracy and hierarchical rigidity associated with the larger banks. Invariably this is an attractive proposition for the more entrepreneurially-minded individuals, giving them a better chance to experience greater deal exposure, and work closely alongside senior, well-respected investment bankers. Aside from this potential to get closer to the action and thus to develop faster and further, there are also positive implications for the ‘softer’ side of workplace culture. Even at the most junior level, people rarely like the idea of being a tiny, nameless cog in a sprawling machine, and the boutique environment allows for some level of interaction with personnel at all seniorities across the length and breadth of a bank, and thus, if all goes well, to feel rather more valued. Practically speaking, smaller and simpler reporting-lines tend to result in more consistently efficient delegation, which in theory lends itself to better use of hours in the day, and consequently some improvement in work/life balance compared to equivalent roles in a Bulge Bracket. There is no point in pretending that people slope off after a 9-to-5 stint, and my friends in boutiques who have recently pulled all-nighters while in deal-mode may be having some sharp words with me, but there is still truth to this notion, reinforced by the usually more collegiate atmospheres which these tighter-knit teams promote, and the fact that retention rates at boutiques tend to be higher than at the larger investment banks.

As a counter-point, one might assume that a negative consequence of this reduced scale in a business would be a commensurately lower impact among prospective clients in the marketplace, and thus involvement on fewer deals. Even if a boutique were to gain consistent increased traction and bolster its deal-flow, would it be able to react successfully to the heavier requirements placed upon it? In response to these arguments I would note that one of the top 10 banks for European M&A transactions last year was a boutique with a very lean team, or cite the international boutique which was able to manage its growth in line with market activity and saw a 20% increase in revenues over 2015. Certainly these are neat examples, but they do bear witness to the fact that the boutique banks can very easily prove to be Davids to the Bulge Bracket Goliaths. This could not be achieved merely by luring promising junior analysts from their big-name competitors; they must have reputation, and to achieve that they need stability, track-record and leadership. In regard to the last of these, the more stream-lined team structure of a boutique can have even more resonance for senior deal ‘rain-makers’ than it does to junior bankers, with greater ownership, a less political environment, not to mention the potential of partnership, proving especially attractive to those who have grown weary after long years caught in the tangle of a Bulge Bracket. In turn, around these cornerstone hires, boutiques are able to develop a sense of pedigree and longevity, as well as forging strong reputations within the specialist fields of said senior bankers, even if this can mean narrower spectrums of sectors covered.

Yet despite all of these factors, there is – albeit to a lesser degree – a counter-flow of talent from the smaller banks to the big household names. Even the aforementioned trend of boutiques poaching their analysts from the Bulge Brackets is a clear testament to the outstanding training capabilities and dominant presence in the advisory market which the largest banks possess. Their potential for personal development and reward has always been impressive, but it seems that recently there has been a concerted effort by many of the Bulge Brackets to offer even more. In terms of compensation, while a couple of the boutiques have stretched themselves to vie with them, the top tier banks have always delivered, and yet in the last 18 months or so the figures for both base salaries and bonuses have been increased notably in many cases, and dramatically in others. In tandem with these remuneration incentives, they have also implemented schemes for accelerated promotion, for example Associates being selected 6 to 12 months in advance of the standard 3-year threshold. In addition, for those so inclined, internal transfers to other teams within IBD, or even to international offices, are not only more feasible within the enormous scale of operations of a Bulge Bracket, but in some cases are proactively offered to employees, both to aid their development and to revitalise their roles with some added variety.

Such attractions and benefits as these are undeniable, although when seen alongside measures such as bonus claw-backs, they perhaps indicate at least a degree of fear or frustration amongst these larger banks over their regular losses in personnel to other institutions. However even this thought forces us to reflect on the quality of training which the Bulge Bracket banks provide, as – for all the departures which they concede to their boutique bank rivals – so many of their brightest stars are snapped up by the buy-side. Crossing the fence to join a private equity or hedge fund is regarded by many as something of a Holy Grail in terms of career progression, and, while there is a cachet to certain boutiques in their particular areas of renown, statistics dictate that even now it is a Bulge Bracket background which carries the most weight with the majority of buy-side employers. As a consequence, this alone can be the determining factor for many individuals as to which investment banking path they choose to tread.

In the end though, the question at the heart of this article demands an entirely subjective answer – there will always be idiosyncrasies peculiar to you, your circumstances and your plans, which will have the most vital bearing on your career decision-making. For one person, a Bulge Bracket’s scale, resources and brand-name may offer rigorous training, potential development flexibility, and the greatest credibility to future employers, but another will find it anonymous, disconnected, or stifling. Similarly, while some analysts might balk at the idea of a boutique not having access to every headline deal, or helping them court the attentions of the top-brass at a leading buy-out fund, others will revel in the close interaction with senior management, the impressive deal-flow and scope to build transaction experience, and the chance for greater autonomy, responsibility and impact in the otherwise often regimented world of investment banking.

For further information on Altus Partners and our Advisory practice, please reach out to Jake Tapsell at