Investment Bankers 是否一班只想賺錢的無夢青年????????
是一個很簡單, 又唔使用腦的行業. 點解d人成日以為自己做Ibank好勁???
以下是我見過寫得最簡單直接的描述....but where do I go from here?
What Investment Bankers actually do
Investment bankers are agents. We don’t create anything
and we don’t buy anything; we just sell things that aren’t ours to
begin with. And we make a lot of money doing that, thank you very much.
If the business world were like Entourage, bankers would be the agents,
private equity firms and large companies would be the studios, and
companies would be the actors and movies. Private equity firms buy and
sell companies. Studios buy and sell actors and movies. Bankers make
introductions and try to sell things. Agents make introductions and
sell their clients.
Investment Banking: High-Price Items, High Commissions
Imagine the average used car salesman. If his average selling price
is $15,000, he’ll have to sell a lot of cars to make a decent amount of
money - or move up to higher priced cars.
A real estate agent, by contrast, might sell houses in the $500,000
to millions range. Sure, the percentage fee is lower than what the
used car salesman might get, but since the total dollar value is so
much higher, it’s easier to make a lot.
Now picture the investment banker. He sells companies for millions, hundreds of millions, billions, or even zillions of dollars. Even with a 0.1% commission, that’s a lot of money.
And for smaller deals (e.g. under $1 billion), the commission is usually more like 1% rather than 0.1%.
High Margins Are Easy With No Expenses
Ok, but what about all those other people in financial services who work with a lot of money but don’t make a lot of money?”
So now we arrive at the second reason why investment bankers make so much money: the margins.
Sure, commercial bankers deal with a lot of money as well. What
passes through their hands every day has a lot of 000’s on the end, but
the key difference is that their margins are just not as high because their commissions are lower and their expenses are higher.
You can’t exactly convince someone depositing $1 million in a bank
account to give you 1%, at least not without the use of weapons.
Investment Banks: People Are The Only Expense
Banks, by contrast, have very little in the way of real expenses.
There is no Cost Of Goods Sold; there is no factory needed to make
products. All you need for an M&A deal is 4 people and an office.
Investment banks’ only ongoing, non-personnel expense is office maintenance. Oh, and all that ink to create large stacks of pitchbooks for every meeting.
Travel? Food and hotel expenses? For a deal, they are charged back to the client.
And even if they weren’t, next to a multi-million dollar fee, these expenses are insignificant.
Thus, investment bankers make a lot of money because they
sell things for huge amounts of money while taking a generous
commission and having hardly any expenses.
What about others in finance? This Seems Too Good To Be True, How Do They Do It?
Mostly by artificially limiting the number of people who can
actually break into the industry. Wall Street is a very small place
and it’s no coincidence that such a highly lucrative industry would
want to remain small and highly lucrative.
Do you actually need an Ivy League education and 4.0 GPA to do a finance job? No.
But making it really, really difficult to get an investment banking job is a good way both to limit how many people break in and raise the prestige (and pay) of the industry. Will It Last?
These are 2 separate questions: will private equity and hedge fund
managers continue to get paid so well, and will investment bankers
continue to get paid so well.
In the old days, the “2″ part of the “2 and 20″ fee structure was
intended to give investors a way to “keep the lights on” before any of
their investments paid off. It was never intended to generate more
cash than actual returns on investments.
And indeed, in a recent survey, 57% of pension managers say this structure is “unsustainable.”
But who will be the first to accept significantly lower fees? Raise your hand. Yeah, that’s what I thought.
On the investment banking side, some of the fee structures (e.g. 7%
for IPOs) are dated as well and some of the “products,” such as sellside M&A, are often commodities. Clients should not be paying millions of dollars for commodity services.
Fees at these levels should not last but they likely will
last because there is very little competition in the form of other
banks willing to undercut and charge less. No one wants to be the
first guy in the room to make 1% on an IPO rather than the usual 7%.
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