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IFB51: Investment Banker Turned Entrepreneur Talks Financial Freedom


investment banker

You’re tuned in to the Investing for Beginners podcast, finally step-by-step premium investment guidance for beginners led by Andrew Sather and Dave Ahern. To decode industry jargon silence crippling confusion and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now.

Welcome to Investing for Beginners for podcasts. Today we have another great interview for you today our guest is Alex from Wall Street Oasis.

Andrew: Wall Street Oasis is a website that’s been around for a very long time it’s one of the top websites out there. Resources for people who are looking to get into the financial world particularly when it comes to investment banking, venture capital, kind of that whole space.

That website has a ton of resources about you know whether you want to get in as for your career and like interview tips and all these sorts of things and they really cover just a ton of topics related to investing finance Wall Street and so I’m really happy to bring Alex on the show today. Alex thanks for coming on

Alex: yeah thanks for having me Andrew happy to be here.

Andrew: can you talk about your background for a bit and your role over at Wall Street Oasis to give our listeners some context for our interview today.

Alex: yeah sure happy to I let’s see I recently graduated from Business School I got my MBA from UCLA Anderson last May so almost a year ago. In so now my life’s been pretty different after school but let me tell you what I did before school.

So I’m 31 so for seven years I worked in investment banking at. First I worked for JP Morgan and then for Houlihan Lokey it’s kind of a smaller investment bank, but I focused on what’s called restructuring Investment Banking where you’re working with distressed companies and bondholders.

And so did the investment banking stuff for a while and then I actually left to go work for a digital media company. essentially just doing internal investment banking you know buying and selling websites stuff like that setting the strategy for the for the business.

And those were cool jobs but I always wanted to do something more entrepreneurial, and so I thought Business School would be a good way to kind of bridge my two worlds the finance hardcore finance stuff and then kind of my passion and work in startups and for myself. Not get told what they do all day long I mean I like working hundred hour days like you do in 100 hour weeks like you do in banking but I wanted to be doing those for myself.

So I went to business school try to find that entrepreneurial spirit that was somewhere inside of me, and now I’m finding it. And let’s see I went from making lots of money and Investment Banking to now I literally make hundreds of dollars per week in the start-up world.

That’s a change but in terms of fulfillment in terms of like career goals and objectives on checking off every single box right now.

Besides the money one so I’m confident that the money will come soon and as far as the Wall Street Oasis in business school one of the entrepreneurial things I did was I started the podcast and the guys on Wall Street Oasis heard it, and they liked it and they said why don’t you just come make a podcast for us and so now my podcast where I speak with top business leaders, CEOs, investors bankers, all that kind of stuff founders.

We have it it’s called The Wall Street Oasis podcast, and it lives there and we kind of talk about the ups and downs of someone’s career how they got to where they are the cool stuff then not cool stuff and kind of you know tip what tips they would have for trying to follow in their steps.

Andrew: that’s awesome you know I love the idea of kind of pursuing your own path and obviously you know we’ve talked previously, and our podcast is all about your path to financial freedom. it’s a very personal thing and what some of these what some of the defines as freedom is going to be different than my own who you talk to and it’s easy to get kind of lost in the way of like you said kind of working your tail off, but if it’s not aligned with your goals it can be a detriment rather than something that not only helps you financially with your goals.

But also it’s fulfilling to you, so I definitely want to get into that and get your take on that. But first for beginners we have a lot beginners in our audience and you mentioned your initial experience with various investment banking companies so can you just give like a 101 overview of that whole world of Investment Banking and you know how the companies can do what they do and how that provides a service to Wall Street how that contributes to the economy all those sorts of things.

Alex: yeah sure so I guess on a basic level Investment Banking at its core uses you do two functions you advise companies on issuing debt and equity so raising capital you know businesses need money to operate so investment banks help do that you know you see companies you know do an IPO or you mean less publicly see companies issue debt but that’s actually much more common, and debt markets are much bigger than equity markets.

But investment banks are the conduit that companies use to access the markets to do these things, so it’s like let’s say Apple, for example, was a private company and they’re like okay now we need to IPO. and so they go hire Goldman Sachs, and Goldman Sachs does what’s called a roadshow where they take you know Steve Jobs and the rest of the management team around the world on a private plane, and they go talk with investors all over, and they get people excited about Apple’s business and the prospects of the business and then they say ok we’re gonna you know issue the stock and it’s gonna go live on January 15th and come January 15th all those people that they’ve you know drummed up interest in will be there and they they place their orders and you know then Apple stock skyrockets on the day of its IPO.

And so that that’s kind of what an IPO is and that’s what investment makers do there and then on the other side investment banks also helped companies buy and sell one another. So M&A; mergers and acquisitions and so this is a lot of ways that investment banks generate a lot of fees it’s like don’t go to a company and they say we think you should buy you know X company and they say okay great let’s start doing that and so the investment bank really is just providing advice.

So I was an analyst in an investment bank, and you know the goes up from there analyst associate vice-president managing director. But on these teams really you’re putting together two things Excel models that like you know give the cash flow projections of the business and PowerPoint presentations where you like take what those financial models are saying and make them look pretty and neat and you can give to a CEO or a hedge fund manager a private equity investor.

And so really the investment baking is called the sell side so like they’re selling securities to the market and you know people get into those jobs really in two places it’s kind of they’re kind of a kind of call them window jobs because you can get into investment banking right when you graduate from undergrad easier if you go to a specific what they call target school.

Probably like you know one of ten schools in the country and they the index and the banks come and do on-campus recruiting there, and you just drop your resume and you can you can get one of those analyst jobs where you sign up to work 100 hour weeks, and actually you make you know six figures your first year out of college. So it’s nice if you’re like you know want to make a decent amount of a lot of money actually.

But and then you can also get the job right out of business school another window opens up, and you can go to way more business schools than you can on the undergrad side probably like the top 50 business schools it’s relatively easy to get a job into Investment Banking. Coming out of it like the exit opportunities are way more prevalent numerous whatever you want to say on the analyst side out of undergrad. Those guys get a lot of looks at going to hedge funds going to private equity funds becoming investors. When you come out of business school and you go get a job in invested making that’s it you’re gonna be an investment banker for a while now and yeah so that was pretty much what I did I was in a group that’s called you know banks are usually set up in two different industry groups whether they’re it’s health care, or you know media and technology.

And so they cover calling all the companies and the investors and in those specific industries. I wasn’t in an industry I was in a product group, and the product was restructuring. So like distress companies that are not going to be able to pay back their creditors or you know like going to have some type of problem, and their equity is trading very low, or their bonds are trading less than 80 cents. Usually, debt trades that are on you know par a hundred cents, and so that’s treating 80 cents there’s speculation that they’re not going to pay back that debt.

And so that’s when we’re structuring bankers get involved and help guide companies through bankruptcy court or try to get deals done more commonly outside of bankruptcy court and that was my job I was the analyst so I was putting all the financial models and working hours and it’s cool you get a great skillset you get you know your one-on-one with CEOs and big-time private equity investors.

You know behind the scenes begin making Board of Directors presentations so it’s pretty cool and you get paid well but you give up your life you sacrifice your life for that job so a lot of that compensation that you know six-figure compensation is to compensate you for giving up your entire life.

You know you’ll think you’re going to hang out with your girlfriend up Friday at 5:30 and you know you get working Friday at 6, so it’s like your weekend is over. So it was cool it’s a good skill set I always saw myself as being more entrepreneurial-minded, and like you know as an investment banking analyst there you’re really compensated in the structure they want you to operate right down in the middle of the fairway like you have a very defined role.

And I always was you know like often the rougher on another completely different hole saying like oh what if we did things this way or could we do things that way, and that’s not a kind of attitude doesn’t really like thrive at the lower echelons of Investment Banking. Literally the lower echelons of any big company so I wanted to do something where that creativity and outside-the-box thinking could be rewarded, so I went to business school and talk about entrepreneur entrepreneurial stuff next.

Andrew: yeah maybe just have some time to even hang out with friends or a girlfriend or anything right.

Alex: I mean there’s you know there’s pluses and minuses to it you they like you make a lot of money you know we have any time to spend any of that money so you can save. But and you know they say it’s like dog years you learn one seven years’ worth of stuff for every one year you’re there, and that’s kind of why you’re so attractive to future employers. You know you’re at the top level of the capital structure, and so you’re really learning a lot and getting a lot of exposure, and it’s it’s a really great place to begin your career, but it’s definitely not for everyone.

And I would say on the analyst side ninety-five percent of the analysts leave like within a couple years, so it’s a good skill set and like everyone knows what they’re getting into the bank knows that like they’re going to work you hard to get the value out of you and then you’re going to go get another job you usually with they call the buy side which is the private equity funds or the hedge funds where you’re actually making the investments putting taking the capital risk.

And those guys make even more money, and they have more stress and that’s usually the transition this is what they call 2 3 2 where you do 2 years of investment banking 3 years out of some kind of buy-side fund and then you go to business school for two years and then you either go back to the buy side or you know start a business.

Andrew: before we completely deter anybody who’s maybe somewhat interested in what you kind of did and maybe pursuing that further would you say the skillset you learned when you talked about modeling financials and cash flows and all those sorts of things. Do you think that parallels not only becomes irrelevant in the industry but also in like making your own personal investments in the stock market or do you think they’re too kind of uncorrelated things?

Alex: oh no they are 100% correlated you will be able to understand at the most intricate level a company’s position in the market a company’s positions just by reading their financials by like quickly reading you company’s annual reports their quarterly reports. You know when you first start these jobs, and they’re like here you know just familiarize yourself with a certain industry with a certain company and they have these things called Pibbs which are public information books and the amount of printing I mean that we had an entire like area of the building of our office that was dedicated to printing and there was like five full-time people that work in there.

And they just print all day long you’re printing you’re printing that’s on these public information books they’re print like every analyst research report every you know annual and quarterly filing for the last five years every piece of information public information that you could find on something.

They’ve printed, and so they’d come by your desk you know like with a wagon with like 18 inch to 36-inch stacks of paper, and they beg alright you know familiarize yourself with this you get up to speed read this Get Smart they would say. They’d always be saying that get smart and you make me and how do I like this is going to take a month to read all this, and so, in the beginning, it seems really daunting, and then, in the end, you can go through you know like a hundred and twenty page in your report probably in like five minutes quickly ten minutes doing a pretty good job.

And you just like get really familiar with what you’re looking for what’s what the changes are what’s boilerplate what’s not boiler placed and then extrapolating the numbers that are in the report putting that into a financial model and making projections off of that I mean this just becomes second nature.

It’s a great skill set to you know for any point in your career really especially yeah if you want to look at that stocks like this is doctor these companies and so you’re looking at companies and understanding them relative to their peers all day long.

investment banker

Andrew: yeah I’d argue the same type of thing obviously I have a completely different background than you do I’m very DIY and kind of dug into the annual reports and I remember the first time I saw him I was like oh man like a hundred plus pages of an annual report like how can anybody even glean anything useful out of these things.

But you come to find out that after looking through enough of them you see enough similarities and the numbers start to paint a picture even better than the words do if that makes sense. And you can really if you’re going to be a DIY person or somebody who’s trying to pick stocks himself. You’re not necessarily going to be able to obviously get the kind of research that the industry can do narrowing down on particular companies and kind of getting in every nook and corner.

But you can still be able to differentiate between for example a business that’s really having trouble and their business model versus one that has plenty of cash and earnings and lots of growth potential. I think at least being able to do that can put you miles ahead of maybe the average investor who’s kind of just going off what their friend said they’re going off what they saw on TV or maybe they like a particular product.

And so I think you know I don’t want to speak for you necessarily but if it’s a skill set that you can pick up either doing it in the industry or learning it yourself. Then it’s it can be very useful, and it’s a lifetime skill, and it’s something that I don’t know like. I would say it’s very important to be able to do that if you want to get into the stock market and so do you see not to say that there’s like some magical pillar or anything but other than just kind of digging into the numbers is there any other ways you think people can kind of at least get a general grasp with it.

I mean even if somebody does want to pursue it let’s say if they if they can even just try to do it themselves once and then see if if it kind of intuitively makes sense and then they can either pursue it in the industry or pursue it individually you know before kind of going through the whole slog of doing all the school and everything like that.

Alex: Yeah I mean absolutely as you said it is a good skill set and but you know there’s just as there’s a quantitative element to it there’s also a qualitative piece to it. And there is great research reports industry reports that are out there that you can access for free just by you know searching specific companies going to look at companies specific investor relations like every public company has an investor relations website.

You can go there and get all of their filings you can see their investor presentations that they make to on like you know investment bank and all these day’s things like that so you can just kind of start to familiarize yourself with the business. You can listen to analyst calls you know quarterly earnings so you can start to do all these things and yeah even without having to ever open Excel you can start to get a grasp of what’s going on this business and what’s important and what the key drivers of it of it are.

Andrew: okay cool was there a turning point for you where you kind of said you know what this isn’t a path I want to take as you mentioned uh not being able to go out five-thirty with a girlfriend was that a particular memory burned in your mind that kind of made you decide that okay now my priorities are kind of shifted I want to structure my life differently I want to pursue freedom more so than in a higher sense than just having a lot of money.

Alex: I mean yeah I can tell you like a hundred different poor investment making horror stories from you know me being the office and getting a call them that like my childhood my childhood dog just died and me telling my boss, and he goes oh okay let’s get back to this model.

Or you know you’re working back-to-back all-nighters and like you missed a period here in this deck. You like just say thank you know so um yeah like you know it’s very known that you’re getting a good skill set from them and they’re going to work you hard that’s the trade and yeah so I realized that this whereas I was getting a great knowledge base and making good connections and seeing cool things in the industry and yeah making good money.

Well the money is good but you know I’m like probably on an hourly basis it’s not that good but I mean it’s still great money you can’t you can’t not that, but they say like you know they ‘ll pay you just enough to punch you in the face. Oh, it’s like someone’s like hey I’ll give you $100 to punch you in the face you know I need like $160 I was like they know that number.

So it’s like all right we’re going to give you a hundred sixty-one dollars and like so every time you get it yeah it’s great it’s just enough to enough to keep you there so yeah I want to go to business school, and in business school I actually like the most impactful moment of my business school time was I mean I had so many cool elements of it traveling and meeting people starting businesses.

But I’d say the most important time I was in this communications class something some kind of communications thing that wasn’t exactly what it was called, but we the professor said I want you to write down you know a couple of times when you felt like you’ve been your most authentic selves. And he defined authentic self as feeling like you’re firing on all cylinders using all of your facility is really feeling alive and so fine I wrote down a few a few times I’m looking at this list, and I’m like shit every one of these times I’m doing something entrepreneurial I’m starting a business.

I mean clearly, this is what I need to be doing you know that’s something anyone can do you identifying what you want to be doing what your passion is tough. I would recommend you know kind of thinking about this authentic list of when you felt like you’re really giving it your all.

And you can start to you know piece together what you might be good at doing and so that’s kind of when I came to the entrepreneurial stuff and then I got another podcasting business and I’m also at a start-up where we’re making a mobile app for it’s a payments company and you know I’m still doing investing on the side yeah my life’s taking the kind of a different trajectory than a lot of my friends.

Andrew: and I’m 100% with you when it comes to entrepreneurialism I mean you kind of have couple options, and obviously it’s not for everybody but at the end of the day you can put in a ton of hours to make somebody else richer you can put in a ton of hours and make yourself richer and there’s smarter ways and not as smart ways to kind of pursue that obviously, you don’t want to take out like 10 million dollars in debt and go into a failing business model.

what kind of resources do you like to kind of get your kick-started with the whole entrepreneurial thing and how is that journey kind of gone for you?

Alex: well it’s really just a question of getting comfortable with the risk, and I have kind of always been a risk-seeking person a lot of people that do investment baking then I mean at the beginning levels yes everyone every 20-year-old 21-year-old kind of has an innate ability to take a lot of risks.

But people that kind of gravitate towards these big companies are generally more risk-averse they like getting a nice paycheck they like you know learning from others and getting told what to do versus you know you like someone like you know Elon Musk or you know he’s kind of wide-eyed Wild West type entrepreneurs that are like shooting from the hip.

You’re taking a lot more risks, and you’re seeing a lot more things but when you’re young like what do you have to lose really. You don’t hope you probably don’t have families, yet maybe you’ve got you know girlfriends or boyfriends or whatever, but maybe you have some student debt, but you need to service.

I would say that that’s probably the main limiting factor is like okay I need to make you know a thousand dollars a month to service this debt so how can I do that and you know there are lots of ways that you can make a thousand dollars a month you can you know have a full-time job you have a part-time job you can have a side business you can be investing. And so yeah I kind of took the route of I saved up some money during the investment banking thinking, and I paid for business school, and so I came out, and I took alright let’s take a swing for the fences now while I’m still young.

I mean I’m 31 so probably a little older than a lot of your listeners but I just wanna really be able to live with myself if I didn’t take that take them seeing another professor I had in business school talked about entrepreneurs having like a music man I came member how he said it but he was like you know entrepreneurs have music inside of you, and you can’t die while that all that music is still inside of you and you know you got to find an outlet to let that out.

And so I’m exploring all of my outlets right now you know hopefully one works the odds are that none of them will work right. The odds of having a successful startup are very low. But I’m learning probably as much if not more as when I did Investment Banking, and so I think that’s a huge piece of it it’s just always learning always putting yourself you know the next day like I learned more than I did there the following day and you know I’ve got an MBA I’ve done investment baking I can always get a job.

But that’s hopefully I don’t have to do that hopefully you know one of the things sticks.

Andrew: yeah that’s really cool now you mentioned some of the business teachers you’ve had that have really had a big influence on your life and I know you’ve had a ton of cool finance leaders on the Wall Street Isis podcast.

Were there any that really stuck out to you as far as really giving you a huge learning or you know.

Alex: yeah so you know you have sometimes were like like I spoke with the founder of Google Voice a couple weeks ago Craig Walker and you know he’s had a twisty-turvy career you know there is no straight line success career. Nobody has that I don’t care if like you’re the CEO of a huge company and like you went to Harvard like your life is, and your career is going to have zigs and zags.

And so he was talking about how you know basically this when I was talking about the learning as much as you possibly can taking the job where you’re going to learn the most. But also he attributes a lot of the success he’s had in his life to finding people who complement him. Recognizing you know where he can team up with other really smart people that bring skills and knowledge that he doesn’t have and partnering with them to do something cool.

And then I had a CEO coach who started his career off at Goldman Sachs and work for Carlisle you know he’s big prestigious firms and he talked about you know identifying what you want in life and how to get it and he kind of said that like you know you ask yourself what do I truly want and you know people ask themselves that but he said that that’s the false question and really the main question is you need to be asking yourself is what can I do every day that helps me to keep exploring what I really want kind of back to the learning thing.

You went on to say that really the goal is not to find some fixed answer but the goal is to establish a process in life where you’re constantly striving to put together what’s going to make you happy and you think of success then as a process it’s not a mystery. You can put parameters around it and you can put you know I’m going to come home from work, and I’m going to do X and y every night, and I’m going to read, and I’m going to enlarge my mind and meet new people, and so yeah it’s just breaking success down into its into its various elements, and you can make it a system.

You can turn that you can turn that into the trick so I thought that was that was interesting yeah I mean there’s so many cool stories I had on like a manager at Google who manages 5,000 people and he talked about what they look for in hiring people and there’s this trait that they call googliness and that’s ability to thrive in ambiguous situations, and that’s one of the huge things that they look for.

You know you want to get a job at Google go listen to that interview and he like lays out the whole process of how they interview people. But you know yeah it’s having the podcast has been has been cool. It’s given me a lot of access to some real interesting minds.

Andrew: yeah I know personally for myself I’ve learned a ton from podcasts in a lot of different areas listen a lot of different entrepreneurial podcasts a lot of podcasts about investing and it’s just amazing how much your mind can absorb when you’re listening to those, and you know you’re getting knowledge from these people who live these experiences and so you can live vicariously through them. Learn from their own mistakes and kind of pick out the best pieces of information, and obviously, I’m a huge proponent a podcaster myself I love listening to them. You know what what better way they like combat something that you can’t change like a commute and the traffic in front of you then a good podcast with some with some good knowledge.

What is the main kind of the theme of your podcast from our discussions it sounds like you have like a wide range of you have like this hunger for knowledge, and it’s inspiring.

What is there a theme are you just finding like cool guys in the industry and just picking their brain when it comes to entrepreneurship?

Alex: yeah you know it started off the kind of more finance focus more investment bankers more investors, and it’s just slowly moved we’ve done like 30 episodes it’s just slowly moved into more business leaders, and you know you we just share secrets to success struggles along the way their career paths.

I like to talk about life in general sometimes I did a podcast last week on a CEOs boat in Marina del Rey here in Los Angeles, and so it’s pretty fun, and you saw on a boat you know you got to talk about other stuff besides finance and career and you know you got talk about passions and kind of how that fits into life and work-life balance.

And that Google guy I told you about he lives in Oregon and he flies his plane he’s got like a prop plane that he flies to San Francisco for work every week back and forth. and so you know like hearing the cool tickets look like that is awesome I think.

Andrew: yeah I love it I think people should go check it out where can we go to listen and where else are you online.

Alex: yeah so just go to wallstreetoasis.com you’ll see a link to the podcast up there you can find it on iTunes it’s just called the Wall Street Oasis podcast and you know I’m also happy to make myself available to your listeners Alex@wallstreetoasis.com if you like.

You know have a question about getting into Investment Banking or what it’s. Like you know happy to chat with happy to help out

Andrew: yeah I know you guys have like a bunch of templates for interview question examples if you’re going into the industry and it looked like for a lot of different pasts, and it wasn’t just Investment Banking.

Alex: so oh yeah I got some awesome resources of you know courses of like boot camps a mess and baking boot camps or private equity or real estate you know mock interview guides even a bunch of modeling stuff you know excel is important early in your career becomes less important as you mature and get to higher levels but like having that baseline understanding of how to build financial models on how to use Excel is important, and it always will be.

Andrew: awesome well thank you for coming on and spending your time with us Alex this was a ton of fun and a lot of good lessons and a lot of good insight especially for those of us who don’t know anything about the industry myself included.

Alex: so yeah this was great thanks so much for having me on, and I look forward to hearing from anyone that wants to get in touch with me thanks so much.