Investment Banking (IB) has an aura around itself. There are elements of awe, prestige, intrigue and glamour all surrounding it.

Investment Banking: Bulge-bracket or Boutique advisory?

If you are a CFA, CA, aspiring CFA or an MBA Finance and wish to make it big in IB, you need to make smart choices at every stage. One major choice in this direction is deciding whether to work in a bulge-bracket firm or boutique advisory firm.

What’s the difference between them? There is no official definition or criteria for Bulge-bracket banks. Bulge-bracket includes big multinational investment banking firms such as Goldman Sachs, Bank of America (Meryl Lynch), Barclays, Citigroup. JP Morgan Chase, Morgan Stanley which undertake deals worth billions of dollars.

On the other hand, boutique advisory firms are medium sized enterprises which handle relatively smaller deals and specialize in a niche industry. The employee strength of these advisories are also limited and they only focus on their core operations with no-frills attached. Pinc, Maple Capital Advisors, Avista Advisory etc. are few leading boutique advisory firms in India

Here are a few parameters which have been used differentiate between bulge-bracket firms and boutique advisory firms:

(1) Scope of work

Bulge-bracket: Bulge-bracket banks offer a huge portfolio of products and services which include M&A advisory, trading securities, underwriting and sale of financial products such as equities, commodities and other derivatives. New hires may not be put immediately on core operations and may have to simply be involved in the sales and marketing of the bank’s services or products. Junior bankers usually are not part of large deals and have to start with small and medium sized deals.

Boutique advisory: Boutique firms are very discreet in recruiting new analysts and do not indulge in mass hiring. However they offer new hires to be a part of the M&A advisory panel from the initial stages itself. The culture is more partnership-oriented and the focus is one developing closer relationship with clients.

(2) Learning opportunities

Bulge-bracket: Initial training provided in classroom-based environment which makes foundation stronger. Bulge banks offers exposure to big-ticket deals in the long run and thus an investment banking professional gets trained on wide spectrum of activities.

Boutique advisory: In depth learning experience and close involvement at each stage of the deal. Working at a boutique bank facilitates learning across different roles. The focus is more on on-job training in real-time situations. Most of the boutique banks focus on a niche area so you can expect enriched knowledge regarding a particular sector or market.

(3) Work life balance

Bulge-bracket: There is definitely huge pressure on the analysts in terms of performance and working hours. With so many deals happening every now and then there is continuously flow of work. The pattern of work is also unpredictable.

Boutique advisory: There is also work pressure in boutique investment banks, however it is relatively lesser than bulge bracket banks. Also, the workflow is more predictable. In a nutshell, the work-life balance is better

(4) Growth Prospects

Bulge-bracket: Analyst, Associate, VP, Director. Mostly move to Private Equity or Venture Capital firms. After a certain stage of growth and experience bankers from investment banks also choose to start a boutique investment firm, Venture Capital or Private Equity firms.

Boutique advisory: Their growth prospects outside the company are limited to just other boutique investment firms. Due to limited exposure to high worth deals, they are unable to be absorbed by bigger investment banks. In internal growth also the opportunities are limited because at partner level they always prefer external hires who have previous experience in bigger investment banks.

(5) Salary   

Bulge-bracket: Higher base salary but less room for performance-linked remuneration. Also scope for employee influence on pay package is lesser.

Boutique advisory: Base remuneration not as attractive as bigger investment banking firms, but lot of scope for performance-linked pay such as bonus and incentives. Sometimes the variable component is also attached to the size of the deal. Some of the other factors that determine the pay of top professionals are contribution to talent development, introduction of other business lines

Brand Value:

Bulge-bracket: Needless to say that the prestige and glamour quotient of working in a traditional bulge bracket firm is unparalleled. These are some of the best investment banking organizations in the world and coveted workplaces. Being a part of these banks is truly an honour.

Boutique advisory: Due to the size of deals undertaken and the availability of finance, boutique banks score low on the brand value. These banks will be a preferred option by those interested in gaining specialized knowledge and learning the ropes of the business very well minus the glamour factor.

What’s your pick?

The above mentioned parameters show what would in store for you when you choose to join work in a Bulge bracket bank or Boutique advisory firm. However, you decision would depend on lot many other factors as well. “Are you certain about your area of specialization?, “What matters most to you-Brand value, domain knowledge, compensation, close involvement in deal making or independent working culture? or “Do you see yourself long-term in this field?” are few of the questions that will help you to make an informed choice.  This is a major decision so take your pick responsibly.