Bank on Banking

Taking 1 part of the compound question at a time, first, let me say that most 2nd year analysts get 3rd year offers, but many 3rd year analysts do not get associate promotions – even those 3rd year analysts that are on the more competitive side of the spectrum.

If you are one of the analysts who do not receive a 3rd year offer, you usually know it in advance, as you will have been rated poorly in your second year and should have already been looking for other opportunities, whether in banking, P/E, B school, corp fin, buy side, etc.

If you are one of the analysts who do not get an associate offer, you might be caught a little off guard, as you can be ranked fairly well, 3, 3+ or 4 out of 5 (5 being the best), and get an associate offer, or not get one – this often depends on your group’s methods of bringing on associates traditionally, the need to bring on associates in your group, whether you are interested in staying with your group or moving to another and even the condition of the market and level of deal flow. If you are ranked a 5, you should get the promotion, and generally 4s have a strong shot at landing the promotion as well – although this does vary from group to group and bank to bank. Since it is generally the B school entry point, the associate promotion is a trickier matter since some banks rarely promote, while others try to grow from within, and the same goes from group to group within banks.

If you are not promoted or not given a 3rd year offer, you will have to move on – whether that means you find a new home within the bank, move to a boutique, P/E, other buy side, commercial finance, corp finance, etc, you will be termed out upon the expiration of your contract, either at your 2-year mark, or your 3-year mark (depending on your situation). Since it is the end of a contract, you will not be given severance, but you will be given a bonus based on your ranking just as the other analysts are given bonuses based on their rankings. A 3rd year 3+ who doesn’t get promoted, should get the same bonus as a 3rd year 3+ who does get promoted, although the promoted analyst will usually get an associate sign on bonus, raise, and so forth. This, of course, is far different than those analysts who receive buyouts from their banks or are simply fired – in that case there is no necessity to provide a bonus accrued, but rather a severance package or buyout package (depending on your situation – essentially the difference is severance you don’t choose, buyout you “get to choose” although if you don’t take the buyout there is often a much better chance of being laid off).

If you do not earn a 3rd year and you haven’t yet found another opportunity, your marketability will be a bit less than if you are not promoted to associate simply because it is easier to get the 3rd year offer than to get the associate promotion. At the end of the day, however, not getting an offer/promotion is not as important as your experience with the firm over your 2 or 3 years. Deal experience, project responsibility, modeling skills, contacts, etc, will carry you in your pursuit to find a new employer – you may have to look at some smaller shops, boutiques, etc, but you should be able to find a home (generally speaking – market conditions definitely play a factor in the ease, or lack-there-of, of finding new opportunities). Although you might be asked whether you received an offer or not, and if not, why not, you can absolutely craft an answer that doesn’t lead to you shooting yourself in the foot – bank on your experience and sell those experiences. Sometimes the team just doesn’t have the deal flow or is told to let some analysts go – and particularly in this type of market, it is still alright to use an answer like this – as long as the real reason isn’t something awful that your former employer will shout from the rooftops.

Finally, regarding B school, while it is difficult to get into top schools with just 2 years of experience, if you can point to strong experiences over those 2 years, coupled with some leadership activities whether in college, during your professional career, or both, craft some articulate essays and get some solid recs (even though you don’t get a return offer, most bankers will still write a letter supporting your candidacy as long as you tried and were a decent analyst – in other words you weren’t let go because of a terrible attitude, etc), you should definitely have a shot. The application and review process is often a good bit about luck, so give it your best, and if you don’t make it that year, you can pick up a nice non-profit gig, or work in corp fin, etc for 1 or 2 years, build some fresh experiences and then reapply – that is, if B school is something you are seriously interested in. Also, since you are coming from a banking background, you will be expected to do well on the GMAT (although regardless of your background, for top schools, you will be expected to do well on the GMAT – in the 700s) and that is something you will want to prepare for if you haven’t already.

To quickly recap – if you don’t receive the 3rd year or promotion, don’t panic. You should know at least a few months in advance as the process takes place generally around the half-way point of your 2nd or 3rd year (depending on which you are going for, of course). Once you get the word you need to move into action. While you don’t want to completely slack on your work as you never want to burn bridges or screw over your chances of getting needed recommendations, you should absolutely start reaching out to your network and headhunters. Put the feelers out, polish the resume, and work on getting your name back out there. Make sure all of your deals, modeling work, and so forth is articulated clearly and well on your resume before sending it out – you can probably even ask a colleague or two to take a quick look when they have a spare second. Next, be open with your boss – if you need a bit of time to interview on a particular day, just give a bit of notice – they know you’re being let go and you need to move on in, probably, the next several weeks, to a few months – not a hell of a lot of time. Remember to relax and not lose your cool – you can absolutely find something else, even if temporary, you just need to keep your eyes and ears open (and, ideally, have your contacts do the same).

That’s about it – if anyone has any other questions on the topic, or any topic, feel free to send me an email HERE or drop a comment below! Stay tuned for future posts on what a analyst really does, navigating the SA prep and interviews and much more!