Aspiring investment bankers can work in one of two types of investment banks: bulge bracket or boutique. Bulge bracket banks are multinational, brand-name banks that regularly handle billion-dollar transactions and employ thousands of people in financial centers around the world. Then there are boutique banks—smaller, younger banks that specialize in certain areas of investment banking and handle smaller deals. With changing market dynamics, boutique banks have been increasing their market share.

Bulge Bracket Banks

Bulge bracket banks have a global presence and usually have a solid market capitalization. These large banks cater to clients like large institutions, corporations and governments. They provide the full range of investment banking services and products worldwide. Bulge banks dominate market share, handle the biggest deals and command the greatest prestige and brand value in banking. They include Bank of America Corp. (BAC), Barclays Plc (BCS), BNP Paribas SA, Citigroup Inc. (C), Credit Suisse Group AG (CS), Deutsche Bank AG (DB), Goldman Sachs Group Inc. (GS), HSBC Holdings Plc (HSBC), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS).

Boutique Banks

The fastest-growing segment in investment banking is the boutique segment. Boutique banks are smaller and tend to focus on one or two prime areas in investment banking—say mergers and acquisitions and asset management. Compared to bulge bracket banks, boutiques are more flexible in terms of hierarchy, structure and operations. Some popular names in this category are Evercore Partners (EVR), Blackstone Group LP (BX), Jefferies Group, Lazard Ltd. (LAZ), Moelis & Company (MC), Piper Jaffray Cos (PJC), Qatalyst Partners, Houlihan Lokey, Greenhill & Co., Inc. (GHL) and Perella Weinberg Partners. (For related reading, see Key Financial Ratios to Analyze Investment Banks.)

Weighing the Pros and Cons

Both bulge bracket and boutique banks have their benefits and drawbacks. Aspiring investment bankers should consider these when applying for positions.

  • Training: The training provided by boutique banks to new recruits or interns is more on-the-job, which means getting real-time exposure and enhancement of skills right from the beginning. There is more interaction with seniors during this time period and real preparation for the job rather than classroom teaching. While this can be an advantage, the disadvantage is there is less focus on foundation building through formal structured training. On the other hand, bulge bracket banks offer classroom-based, formal training. This training often occurs before the candidates are introduced to real-time situations.
  • Experience: A boutique bank is more likely to offer new hires a wider range of experience, as well as more involvement in processes, be they deals or asset management. At a boutique, a new banker would be able to take on more responsibility and play a more prominent, and challenging, role in deals. This can help build confidence and leadership skills. However, boutiques cannot offer exposure to the most talked-about billion-dollar deals on Wall Street. For that, you must go to a bulge bracket bank. Working for a bulge bracket bank carries a certain glamour, especially when viewed from the outside. Just remember, at a bulge bracket bank, an entry-level employee is just a small part of a bigger team and may face stiff competition from peers trying to make their marks. On the other hand, the larger platform offered by a bulge bank can be a great resource for networking and making contacts.
  • Salary: A boutique may not offer a starting salary as attractive as a bulge bracket, but these banks offer more room for negotiation on remuneration going forward, as the employee isn’t one of the many at the same level working for the organization. On the flip side, there can be issues in getting a reallocation package, especially initially in one’s career with boutiques. Bulge banks tend to offer more competitive salaries and are more likely to offer a reallocation package and higher bonuses. However, an employee’s influence on his or her pay package is likely to be limited, as there are many people working at the same level and standardized pay systems. For example, at a bulge bracket bank, your starting base salary could be $85,000 with a possible bonus of $50,000. At a boutique, your base salary may be $60,000-$70,000, while the bonus may be only $25,000. The main difference in the salary arises from the bonuses, and these are typically linked to the size of the deals. As boutique banks increase market share and can take on larger deals, bonus sizes may increase. 
  • Exit Opportunities: Employees from both boutique and bulge bracket banks can transition into private equity and venture capital. However, boutique bankers may be at a disadvantage. They will not be able to claim experience with enormous deals like their bulge bracket peers. They also will likely not have the same connections. Many private equity firms and venture capital firms are founded and staffed by bulge bracket alumni.
  • Job Security: No job comes with a 100% guarantee against layoffs and pink slips, but if only because of their sheer size, bulge bracket banks do downsize staff when necessary. Boutiques do not hire as many people at the same level. Their teams are more compact. That is not to say that boutiques are layoff-proof, but they tend to be less aggressive in adopting the layoff strategy.
  • Working Hours: Investment bankers work long hours whether they are at a boutique or a bulge bracket bank. However, hours may be more predictable at a boutique bank. When there is a big deal brewing, everyone will know and everyone works overtime. Excess work at a bulge bank is less predictable. With multiple deals happening in different areas, extra assignments can come your way at any time.

    Rankings

    Vault compiles an annual list of the top 50 banks at which to work based on criteria like culture, satisfaction, training, work/life balance, compensation and overall prestige. The rankings are an interesting mix of banks from both categories. 

    The Bottom Line

    Bulge bracket banks offer brand-name cachet to a resume and usually have good classroom training resources for young bankers. Boutiques banks are popular for the work culture they provide. Consider the pros and cons of working at bulge bracket versus a boutique investment bank so you can make the correct choice for your career.