The Allure of Wall Street

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January 15, 2005

MSNBC.com

The Allure of Wall Street
Big money, hard work. Why so many of us feel the pull

CURRENT MAGAZINE

By Justin Raphael, U-Penn

Updated: 12:09 p.m. ET Dec. 1, 2004

Winter 2004 - Eighty-five Broad Street is about the last place you'd expect to find a metaphor. The sandstone skyscraper that serves as the headquarters of investment banking giant Goldman Sachs is far from the dive haunts of the Village literati. But standing on the corner, gazing north, what you see defines the very essence of Wall Street. More impressive than the neoclassical New York Stock Exchange are the hosts of young suits flying up the street. These are summer analysts, seeking an offer and the money, power and respect that seems to be carved into the Exchange's marble surface. But is there more than cash around the bend? What really drives the future investment banker?

Money
Peter Cappelli answers these questions for a living. In 2002, Cappelli, George W. Taylor Professor of Management and Director of the Center for Human Resources at the University of Pennsylvania's Wharton School, co-authored a survey of 200 investment bankers in an effort to gauge the effects of 9/11 and the dot-com bubble on Wall Street. Cappelli and the executive search firm Spencer Stuart found that 73 percent of respondents said wealth was their top career objective. And, according to the May 2003 Occupational Employment Survey by the United States Bureau of Labor Statistics, they are achieving it. The national mean wage of financial analystswas $70,040. The mean for the New York metro area was $93,280. By contrast, an August report of the Census Bureau put the 2003 national median income at $40,668 for men and $30,724 for women. Hence the analysis of Jeff Bell, head of Spencer Stuart's global securities practice, seems alarmingly correct: I-bankers "have gone to Wall Street to get rich. Period."

Money not only gets bright twentysomethings into banking; it also keeps them there. Only 14 percent of the bankers Cappelli surveyed say they would remain in the industry if "they couldn't make a lot of money" and 51 percent say they have often thought about quitting. Why? "Wharton MBA students who comeout of investment banking certainly don't glamorize the experience. Not that many of them seem to want to do it again as it seems to burn people out," Cappelli says.

Perhaps money can buy happiness, but can it compensate for stress or make up for the lack of a social life? Apparently not, says Cappelli's survey, and therein lie the untold chapters in the Wall Street story. The survey confirms that I-banking careers are short and getting shorter: 83 percent of respondents were between the ages of 23 and 44 and 88 percent expected to work in another career prior to retirement. This high turnover means that most bankers simply aren't working long enough to make the money that many of them claim justifies their many sacrifices.

What is more, what bankers are making is less'�"and less certain'�"than it once was. Matan Feldman, a former banker at JP Morgan, Lehman Brothers and Chase, notes, "Investment banking is a cyclical business." In just three years, the industry swung from "merger mania" to a bursting dotcom bubble after which he says, "Recruiting and compensation at the analyst and associate level declined sharply." Bell concurs in the survey: "[A banking] career is short, you have almost no control over it, you could get downsized or merged tomorrow, your boss could get fired or you could get fired." For the switched-on undergrad, then, money is not the end of the story. It is just the beginning.

Prestige
At Wharton, undergraduates wear their ties and slacks for dates with recruiters at Hunstman Hall more often than with that cute girl from finance recitation. They see banking as part of a series: top college, top grades, top job, top of the world. Pay is, at least in the beginning, fairly immaterial. Barbara Hewitt, Associate Director of Undergraduate Career Services at Wharton says, "While the money is a plus, it is not why students tell me they enter banking."

The prestige of Wall Street is growing by the year. Of course, as Cappelli notes, investment banking has been "one of the premier jobs in the economy for a couple of generations but especially since the 1980s." At Wharton, 55.2 percent of the class of 2003 entered the financial services industry. Yet the real explosion in the field is evidenced by its invasion of the liberal arts colleges. At Penn's School of Arts and Sciences, of the 65 percent of the class of 2003 who intended to work, 18 percent entered the financial services field. That figure was 17.3 percent at Cornell and 37.1 percent at Princeton.

Why? More like "Why not?" says one Amherst alumnus and former Goldman Sachs analyst who asked to remain anonymous. "It's the easiest thing to do. At elite schools, they come to recruit. These schools have a large network in these firms and that's known and they're known to be prestigious. So you'll be an analyst, then get a private equity job, and then [Harvard Business School] and high society."

Hewitt corroborates the impression that there is a certain inside track to success: "The banks visit campus early in the fall to recruit for full-time positions, and are very assertive about wooing students. Many of the alums are actively involved in the recruiting process and devote a lot of energy and time to it."

And if the mythical pipeline from the Ivy League to Wall Street is as least as old as Gatsby, new facets of the job market are broadening the interest in the field. "One reason [banking] may seem more popular now," Cappelli points out, "is that other promising entry-level jobs are less common, especially management training programs at major corporations."

Competition
The lure of power and money creates a pervasive sense of peer pressure. Who wouldn't want to get rich quickly? In Hewitt's view, this recruitment funnel has contributed to the banking-by-default phenomenon. "Some students, who might be a bit unsure about what they want to do, end up taking banking jobs during the fall semester because they feel it is risky to wait." Many leap on the recruiting bandwagon because they are scared of being left out of the elite circles that have become home during their college years.

This herd mentality has made those coveted spots ever more attractive. A former summer analyst with Lehman Brothers, who also asked to remain anonymous, thinks that banking jobs are not only scarce because they are desirable, but also desirable because they are scarce. He says that, in his opinion, any attempt to "dissuade people from banking adds to the mystique appeal."

This chicken and egg effect clearly benefits banks at the expense of their future employees. While big firms attract an ever more impressive set of the best and brightest, those who do get the prized jobs are expected to prove that they can work longer and harder than anybody else. The former Goldman analyst says that one supervisor told him, "We already have to turn away a lot of people from these jobs'�"imagine if we made it only forty hours a week. If you're going to let people make $55,000, you have to have costs to de-incentivize it."

Applicants, however, have been given ammunition to fight back, if they are willing to invest in it. The competitive environment has also spawned a niche industry akin to the college and SAT prep frenzy. Feldman, a former recruiter for JPMorgan, started WallStreetPrep.com, a company preparing students for a career in the financial services industry.

"Major firms offer inhouse training for incoming analysts and associates," Feldman says, "but the reality is that as corporate belts have tightened, firms increasingly want incoming analysts and associates to ramp up and be able to contribute fairly quickly. This is why summer internships and financial modeling experience are playing an increasingly important role in the recruitment process."

Banks have become temptresses: they have an interest in students wanting what they can't have. And by playing hard to get with their offers, they only fuel the cycle of desire. Banking is hot, to some degree, because it is hot.

Ambition
I-banking has also remained consistently lucrative and powerful. If a banking career is attractive to elite undergrads because it promises riches, a deeper cause lies, again, in the reverse: bankers are wealthy because they remain the focus of the business world.

Banking is an "experience that is respected across the economy because the field of finance is so powerful and the role of investment banks so important," says Cappelli. "New entrants going into I-banking get a lot of experience and a great credential that will pay off in other jobs." Feldman agrees that banking is "a great resume builder for anything you may want to do later on in life."

Investment banking has become an investment'�" and not just a financial one'�"in the future. In the same way that parents pay thousands for SAT courses because they think an elite college can open doors, Ibankers put up with long hours and little socializing because of where it can take them. The two or three year analyst stint now functions as a law degree for the quantitatively inclined. On a business resume, J.P. (Morgan) can give you as many options as a J.D. And in Feldman's view this experience has as much human capital as a sort of pre-MBA, a natural first step for those with their sights on the Fortune 500: "[Banking] provides a rare opportunity for recent graduates by offering unparalleled professional exposure, financial rewards, exit opportunities and prestige for entry level candidates. This is certainly a demand driver for students looking to come out of the gate fast," he says.

This ability to develop key skills and then take them into another job is a vital facet of the banking craze. In the Lehman analyst's view, "the real distinction lies between corporate ambition and entrepreneurial ambition. Some people are perfectly content with climbing the corporate ladder to their house in the Hamptons, [but] I feel as though my experience'�¦will give me the skill set necessary to succeed as an entrepreneur."

Adrenaline
But still the question remains: Is there anyone out there who truly loves the "game" of ninety-hour weeks and million-dollar Excel spreadsheets? Anyone who stays in the business, says one survey respondent, "The truth is, no one does this for 15 years just for the money. If one has made it this far it is because he finds an adrenaline rush in the job that he can't replicate anywhere else." Hewitt, too, thinks that "it is more about the challenge and the opportunities banking offers, and less about the money."

The former Goldman analyst couldn't agree more. It was why he left. "Some people get excited about doing the deals and there is something satisfying about getting it done'�"from pitching the idea to the client, getting them interested in it to run some numbers, the closing dinner. But I couldn't get excited about deals '�¦ and I knew something was wrong."

For Feldman, however, the pace of a college analyst stint at Lehman Brothers London seemed just right. "The internship was incredibly interesting because it exposed me to a very fast-paced, vibrant environment that I found alluring." So maybe, in the search for the story behind the rush at 85 Broad Street, we need look no further. Maybe that highspeed panorama has all the answers: bankers rushing because they love the rush; avoiding eye contact because they relish the competition; wearing custom-fit monogrammed shirts from Jermyn Street because they adore the prestige; dashing to lunch because they're going somewhere one day.

Wall Street, like the market, runs on the simple and ruthless truth of profit: one is either making money or losing it. But while money is the sole rule of the Street, it is far from its only allure.

Justin Raphael is a junior at the University of Pennsylvania.

URL: http://www.msnbc.msn.com/id/6622239/site/newsweek/