Watching Millionaire Inside

Dear Whizzard,

Thanks for sharing your life experience, it has been most enlightening and I hope to emulate your success. I am a mid-30s banker and currently have a networth of US$1m. I am currently building up capital to invest into the next stock and property down cycle. I missed the last cycle as I did not have enough guts and capital to take that risk. Hopefully I don't miss it again.

James

hi James, did you accumulate your US$1m net worth through working as a banker, or did part of it come from investments or even, say, inheritance? Thanks.

I accumulated it mainly from my salary and bonus. I did not manage to make much money from stock market as I did not increase the asset allocation sufficiently to stocks early enough. I also missed the property cycle, although I did manage to buy a place quite cheaply for staying. The US$1mil networth excludes my residential property.

I made about $500-600K in the last 4-5 years, I used part of the money to fully pay my house and my car. I had been pretty prudent with spending and therefore most of the salary/bonus went into savings.

I used to be an accountant in an MNC before switching to banking. I was only making $60K/year when I was an accountant and figured out that accounting will not take me anywhere, that's why I took a pay cut and started fresh in banking.

From my personal experience, starting out on the remunerative career is critical in accumulating a certain networth. If I continued with my accounting job, I would probably be making only $100-120K/year now. I don't think I could have invested my way to a US$1m networth by mid 30s.

James

hi James, thanks for sharing. Do you mean you made $500-600k _per year_ in the last 5 years? Are you working in an investment bank or doing sales in a retail bank?
I too agree with you on starting out on the right career - do you have any advice for me on switching careers? Is it important to know the right people, or do I just apply through head hunting firms and keep on trying?
Thanks again.

I made $500-600K/year in investment banking. Senior guys make even more than that, more than US$1mil/year during good years. Only top tier firms make that kind of money though, I am in a mid-tier firm and will never make that much but I don't need that much anyway.

Unfortunately, switching to an investment banking career at mid-level is almost impossible unless you do an MBA with a top MBA school. I don't have an MBA but I switched much earlier in my career and having an accounting degree helps.

Forget about headhunting firms if you don't have experience in investment banking. For mid-tier switch, it is easier to get into equity research. Some investment banks do not mind hiring research analysts with domain experience. For example if you were in URA, you could possibly make a good property analyst or if you worked in LTA or SIA, you may make a good transport analyst or maybe you worked in a minerals MNC, you may make a good commodities analyst. Having domain knowledge gives you insights and connections into the industry which other analysts will never have, I have seen many real life cases of such switches. Equity research don't pay as well as investment banking, but top equity research analysts in top tier firms get paid $300-500K/year. Mid-tier firms pay S$150-300K/year, still pretty decent.

My advice is:
1. Figure where your competitive advantage is? ie what is your current job and how do you use that experience rather than start fresh. Pitch yourself that way, you can maybe start as a research assistant/associate to an experienced sector analyst.
2. Get a Chartered Financial Analyst (CFA) first, it shows that you are serious about switching careers. If you pass it, it shows you have the aptitude to embark on a finance career. If you can't pass the CFA, keep trying. But if you continue to fail, I think its better that you drop your dream as you may not be suited for finance.
3. Read about investment banking and equity research/valuations. There are lots of books of these topics
4. Send out your CVs to all the research houses/investment banks
5. Speak to as many headhunters as you can

It will be hard work and you need to invest time, I did all of the above when I wanted to switch careers. Timing and luck is critical, 2007 was a year full of new hirings as many investment bankers/analysts switched to hedge funds and private equity funds. So was 1999/2000 when many also switched to dot-coms. I suspect that 2008 will be tough to switch to banking as there will be retrenchments and hiring freeze this year. But it is perhaps something you can work towards in the next couple of years. Nothing is easy, I took almost 1 year before I found my job and having some luck is crucial.

Hope this helps. Good luck. James.

Another piece of advice - the world of finance doesn't just revolve round equities. Read up on Fixed Income, FX, Derivatives etc - most people in Singapore don't know much about these financial instruments, hence having knowledge of these would be helpful. Just my 2 cents' worth - I work in FX derivatives trading with an international bank BTW.

hi james, what were the hours like? I know of many who earn good bucks but worked crazy hours. The saying is that you have to milk it really well for a few years cause you;ll be burnt out by then. Is that true?

Hi Sunny,

Actually it depends on the firm. My firm is a mid-tier firm and its european therefore somewhat more relaxed. The top-tier US firms are the killers. Also time is more manageable after certain levels.

Most of the time, investment bankers switch to private equity, hedge funds, corporate after a number of years. Money in the privare equity funds and hedge funds is still pretty good with a better lifestyle, there is a life after investment banking for the bankers. It's not all that bad, the skills and contacts that you pick up in investment banking are invaluable and highly transportable.

James

hi, anyone care to share what an investment banker actually does? and are all investment bankers tagged to foreign banks or local big banks too have investment bankers?

WHAT DOES AN INVESTMENT BANKER DO?
In gist, investment bankers help firms raise funding via the capital markets (bonds, equity, convertibles and other hybrid such as mezzanine financing as well as buy-out loans) and advise on mergers & acquisitions as well as divestitures.

CLIENT COVERAGE
Usually, these are the client coverage guys e.g. they take care of clients in the Real Estate sector or known as sector coverage or country coverage e.g. taking care of clients in say a specific country Malaysia.

They spend their time cultivating client relationships and sending proposals to clients in the hopes of landing a fund-raising mandate or a M&A mandate. Their value comes from the quality of their relationship with the clients and how they are able to land deals with these clients since the space is very competitive. Clients in turn place a value on such bankers based on their ability to deliver & execute, the quality of their advisory expertise & domain knowledge as well as their connections within the industry sector and access to the capital markets.

PRODUCT COVERAGE
There are also investment bankers who are on the product-side i.e. they are the specialists in structuring and executing a transaction once the mandate has been landed e.g. an ECM guy would execute an IPO or a follow-on equity offering.

LOCAL OR FOREIGN BANKS?
Both local and foreign banks have their respective investment banking teams. The foreign boys have been in this game for centuries and have an established global network in terms of industry expertise and access to the global capital markets whilst the local banks are visible mainly in the domestic investment banking activities and weaker in terms of cross-border deals.