Investment bankers make money and make a shitload of it. The economy may be soaring to dizzying heights, streets can be filled with blood or the country may find itself on the precipice of collapse. Just as well, the ibanker will keep printing money. Fear not for his or her fate my dear reader. The business is such that there will always be an angle to make money. In the worst of times it only means that some ibankers will be forced to walk the plank. Yet the bank, and the lucky, remaining bankers, will continue making money. Lots of it. But only after putting clients’ interest first. After all, it’s about the immense dedication to clients.
I can think of few better examples to address the phenomena of an ibank’s uncanny ability to make money through dedication to the client then my first advisory project at Paris Berkeley Capital.
The client was a large Qatari bank with an annoying problem. We were the doctor and our opening hours were as follows: anytime, any day, and no appointments necessary. We always made time for clients.
An opportunity knocks
It was a morning like any other. I was in the middle of preparing one of a handful of presentations imminently due when, all of a sudden, Mario, one of the Managing Directors in my team, walks up to me, taps me on the shoulder and asks me to follow him into a meeting. He didn’t have to ask, I brought along a notepad and pen. By now it was second nature. I was so used to being given a shitload of work at any moment that I even carried pen and paper to the toilets out of habit.
We take the elevator to the floor reserved for important client meetings. Mario knocks twice and opens the door. We enter the room and proceed with introductions. The CEO of the Qatari bank strikes me as a distinguished gentleman. A bit of research carried out earlier revealed to me he was a close confidant of the Emir of Qatar and a very influential man in the Gulf. I’m glad to meet him.
The CEO’s countenance suggests to me that the nature of the meeting is of utmost importance so I am particularly attentive from the moment I take my seat…
CEO of Qatari bank: “Gentlemen, we need your advice in connection with our portfolio of assets.”
That was how the discussion began. The short of it was that the Qatari bank had made some terribly bad investments over the last five years and now needed strategic advice on what to do with the crap they had bought which was now festering away inside the organization. They wanted to minimize further losses and to turn around their predicament.
Following a five-hour marathon, we got a verbal confirmation that our firm, Paris Berkeley Capital, would be mandated to assist the Qatari bank deal with its problematic assets. Mario was absolutely delighted. As for me, I was thoroughly excited about the prospects of working on this project.
Mario: “We will put all our resources to work to ensure you receive the best and most effective advice.”
Sweet closing line Mario. I’ll never forget those words: “all of our resources”. And on that note the meeting came to an end.
The next day our lawyers got to work drafting a Mandate Agreement outlining the scope of work and more. When it finally made its way to our team it was time to put in the finishing touches, namely how much we were going to charge the client. The draft agreement from the legal team landed in our inbox at exactly 8:33am and at 8:35am Mario yelled out my name from across the room.
Mario: “Get over here!”
The fees charged were to be a combination of a retainer, i.e. monthly fee, and a success fee. For the purposes of this post I’ll only touch on the retainer.
I arrive at Mario’s desk.
Mario: ”Put in £250,000 as a retainer, print it off and bring me a hard copy so I can read everything.”
The ibanker: a bit unsure ”£250,000 per month?”
Mario: with a condescending tone “Yes, per month. You want to get paid don’t you?”
The ibanker: of course you stupid idiot “Yes. I’m curious though. How do you determine how much to charge for a retainer?”
This is when I learned a very important lesson about high finance.
Mario: “It’s not science. Look, we can’t bill a client who makes over a billion US dollars in profit each year £25,000 per month. That’s a fucking joke and not worth our time. We’re not some smalltime consultancy from around the corner doing some graphic design work. Building logos or whatever. The very fact that we are an international investment banking powerhouse means we can charge…no, we have to charge a serious fee. High fees mean people take us more seriously and it upholds our image. Beside, we will provide the Qataris the best advisory services in finance.”
The Mandate Letter went back and forth several times between both organisations until it was finally signed. Then it was time for me and Mario to do some £250,000-per-month-retainer-type-of-advisory. I was supremely excited.
To my dismay, however, as soon as our work was officially due to start a couple of emergency projects came up and so someone else was asked to look after the Qatari bank advisory mandate. Oh well. I moved on.
Clients’ interests always come first
Three months, and £750,000, later, I was asked to review a presentation that was prepared for the Qatari client. I was to go through and comment on a document prepared by the project lead – that is, the individual doing the bulk of the work on the mandate. The presentation was to be completed by the end of the day and sent off to Qatar in anticipation of a call tomorrow with the client. The mandate required us to put in one call per month with the client in order to update them on our findings and to provide recommendations on how to reach their objectives. I got working right away and put the other eight urgent items on my plate on hold for the moment.
As I went through the presentation I was surprised to find countless simple and amateurish mistakes, errors and typos. This thing is due tomorrow and this is the state it’s in. Who the hell worked on this? I found out exactly who it was.
His name was Matt and he was a 22-year old analyst we had just hired three months earlier – right after signing the mandate. With occasional supervision from a Vice President whom Matt met with once a week this was “all of our resources” we had put to work. We were charging the Qataris £250,000 per month to have a 22-year old recent college grad, getting paid £4,000 to £5,000 per month, and with next to zero experience, do 98% of the work. The remaining 2% was carried out by a Vice President who jumped on the monthly update calls and said a few things here and there.
If that’s not a hustle then I don’t know what is.