Should You Work at a Boutique Investment Bank?

Investment banking is dominated by large, well-established multinational firms (bulge banks). These include Goldman Sachs Group Inc. (GS), Citigroup Inc. (C), and JP Morgan Chase & Co. (JPM). But a big bank isn’t your only possible career path. You could choose to apply to investment banking boutiques, which are small, independent firms that are usually owned and operated by one or a few individuals. Here’s what you might encounter if you go the boutique bank route.

Key Takeaways

• Bulge banks are large, multinational firms.
• Boutique firms are smaller and more independent. They may focus on niche areas of investment banking, like mergers and acquisitions, restructuring, or leveraged buyouts.
• While bulge banks usually enter deals worth $500 million or more, boutiques handle deals worth $50 million to $500 million. 
• Boutique banking offers certain benefits (like more independence), but there are also risks.

1. More Independence

At a bulge bank, investment bankers can ask a dedicated quant team to develop and test quantitative models. There is a dedicated legal team to consult on legal matters, technical writers for documentation, and a presales team to prepare the proposal.

At a boutique bank, in contrast, there are enormous opportunities to do the entire deal on your own. A boutique bank may expect and allow bankers to operate more independently by scouting for opportunities, convincing prospects, structuring the deal, and taking it to closure.

At bulge banks, especially at the entry level, bankers may find themselves confined to a limited role and dependent on processes, rules, approvals, and resources. For example, instead of scouting for opportunities, the banker may receive sales leads and pitches from an established team, making the defined job comparatively straightforward.

In a boutique, the banker gets to do everything, from drafting pitch books to quantitative modeling to deal structuring. Though this offers the experience of independence and creativity, some might consider certain tasks as too administrative and unrewarding.

2. More Prospecting

Though boutique investment banking has been gaining market share, the market is still dominated by bulge banks. Businesses tend to trust large, established global firms more than smaller shops, even if the latter charge lower fees. This results in bulge banks having a huge pool of readily available clientele. Boutiques may have to hunt down prospects, usually other small-sized companies. Boutiques have an advantage in that bulge banks don’t often intrude into their smaller-sized market. But at the same time, big-ticket deals are usually out of reach.

3. A More Dynamic Environment

Boutique banks may decide to shift their focus completely—for example, by going from all leveraged buyouts to corporate restructuring. Large investment banks are slower to pivot.

4. Less Job Security

Few jobs are 100% secure, and even the best performers may have to face the ax during bad times. However, given their diversified business divisions, large size, and global presence, a bulge bank has greater flexibility to shift people around, say from merger and acquisitions (M&A) to the equity research analyst department, or from Europe to Asia as business needs rise and fall. Boutiques do not have the same level of flexibility, due to their smaller size and specialization.

Note

It is easier to get information about bulge banks than boutiques.

5. More Risk

A few individuals can make or break even a large, multinational investment bank. One merger and acquisition deal can go wrong on a legal technicality, or a case of interest rate rigging by one or two individual traders may incur fines in the billions. Large investment banks have the capacity to absorb these losses. Boutique banks, in contrast, run on personal rapport and network connections. In the absence of dedicated legal or audit departments, the risk is far higher in boutiques as one or two key individuals can break the entire business.

In addition, banking scandals happen. Even if an individual banker was not involved, their career can be seriously affected in the long term if they’re associated with a boutique bank accused of wrongdoing. Some individuals might face increased scrutiny at a new employer because of a past association with a disgraced boutique bank.

Bulge banks are not immune to irregularities or failures, but they have an advantage: their established brand value can absorb certain incidents.

6. Less Standardized Salaries

Bulge banks typically offer a uniform salary to associates with similar skills and experience levels. Salaries may vary more in boutiques based on personal preferences or very particular requirements.

Important

When switching jobs, especially to hedge funds and private equity firms, candidates with experience with bulge banks are preferred due to their better corporate exposure.

What Is a Bulge Bank?

A bulge bank is another name for a large, multinational bank.

What Are Examples of Bulge Banks?

Bulge banks include Goldman Sachs, Citigroup, and JP Morgan Chase.

Is It Better to Work at a Boutique Bank Instead of a Large Bank?

This depends on your interests, strengths, and goals. There may be less job security at a boutique bank, and the risk is higher if something catastrophic happens: a boutique bank is less able to weather losses. But you’ll likely have more independence and more opportunities to take on various tasks, getting more of the deal done on your own.

The Bottom Line

Though big banks are the classic career path, joining an investment banking boutique offers great advantages. There are risks and downsides to consider, however. Ultimately, the choice comes down to who you are, and what you want: your temperament, aspirations, and expectations.