Retirement Redefined: Exploring The Post-Banking Lives Of Investment Veterans

Investment bankers are financial advisors to corporations and governments. They advise, negotiate, and plan business deals. They help their clients raise money for expansion and improvement, and they play a central role in the preparation of initial public offerings (IPOs) by young companies preparing to go public.

The role is demanding and stressful, and bankers work long hours. As a result, many investment bankers retire early or move to smaller firms. Some take up creative pursuits, like designing NFTs, while others become angel investors or real estate investors.

Investment bankers can become angel investors

Angel investors are often retired entrepreneurs or executives who may be interested in angel investing for reasons beyond pure monetary return. These reasons include wanting to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs, and making use of their experience and networks on a less than full-time basis.

Angel investors have a genuine interest in innovation and a desire to be involved. Many have been entrepreneurs in the past. Anyone who has the money and the desire to provide funding for startups can be an angel investor. They are welcomed by cash-hungry entrepreneurs who can’t get conventional bank loans or don’t want the burden of big debt until their ideas take off.

Angel investors can also mitigate the risk of their investment by allocating less than 10% of their portfolio to these types of investments. As such, angel investing is an excellent opportunity for retired investment bankers who want to remain active in the business world, mentor young entrepreneurs, and make a financial return.

Additionally, investment bankers often have the financial means to become angel investors after a successful career. They can leverage their industry knowledge, network, and capital to identify promising investment opportunities and support the next generation of entrepreneurs.

They can also become interview/career coaches

Investment bankers can leverage their industry expertise and network to become interview or career coaches for aspiring investment bankers. They can offer mock interviews, resume improvement tips, and insider knowledge about the recruitment process.

With their extensive experience, retired investment bankers can provide valuable insights and guidance to those seeking to enter the industry. They can share their understanding of the technical skills required, such as financial modelling, LBO modelling, and M&A analysis. Additionally, they can offer advice on soft skills, such as networking effectively and building relationships within the industry.

Becoming a coach allows retired investment bankers to share their knowledge and mentor others. It provides an opportunity to give back and help aspiring professionals navigate the challenging path of breaking into investment banking.

Some companies, such as Wall Street Prep, offer coaching services specifically tailored to breaking into investment banking. These companies pair individuals with experienced investment bankers as coaches, providing a more personalized learning experience. The coaches work with individuals to improve their resumes, cover letters, and interview performance. They also offer insights into the industry and help individuals navigate the recruitment process more effectively.

Retired investment bankers turned coaches can find opportunities to work with such companies or choose to offer independent coaching services, leveraging their professional network and expertise to guide the next generation of investment bankers.

Some opt for a quieter life and move into real estate

After exiting the high-pressure world of investment banking, some opt for a quieter life and move into real estate.

Real estate can be a good source of retirement income. The market is relatively inefficient, which means it's possible to find bargains with high returns on investment. The key is to find the right property in the right location and at the right price.

Before retiring, it's important to secure financing for the purchase, as mortgage lending guidelines typically require steady employment. It's also crucial to consider the costs of the transaction, such as agent commissions, which can increase the amount you need to borrow.

There are tax implications to consider as well. Rental property owners can claim a depreciation deduction on their federal income tax returns, reducing their tax bill. However, this also lowers the cost basis, potentially resulting in higher taxes if the property is sold at a profit.

It's recommended to aim for an annual return of around 8% on the capital invested in the rental property, net of all expenses. This includes the mortgage, taxes, insurance, maintenance, and allowances for vacancy and property management.

To maximise income, some owners choose to manage the property themselves, but this requires a significant time investment and the ability to deal with a variety of personalities. Screening potential tenants thoroughly is crucial to avoid problems like non-payment or excessive maintenance costs.

Overall, moving into real estate after a career in investment banking can be a lucrative option, but it requires careful planning and consideration of the associated costs and responsibilities.

They may choose to continue working in finance, but at smaller firms

Investment bankers may choose to continue working in finance after retirement, but at smaller firms. This shift is common among ex-bankers in their 40s who have not made enough money to retire. They may move to boutiques, private equity, or hedge funds. Joshua Matthews, managing partner at Maseco Private Wealth, noted that his clientele has aged and moved from big U.S. banks to smaller firms.

Working in smaller firms allows retired investment bankers to stay busy and continue utilising their expertise. It is a way for them to remain in the industry without the same pressure and long hours associated with larger banks. This transition can also provide a more flexible work environment, which may be appealing to those who want to slow down but not completely retire.

Additionally, working at smaller firms can offer retired investment bankers the opportunity to explore different roles and gain new experiences. They may take on more varied responsibilities, including business development, client management, and mentorship. Smaller firms often have flatter organisational structures, providing more opportunities for retired investment bankers to contribute beyond traditional investment banking tasks.

While the move to smaller firms can be a positive change, it is important to note that compensation may differ. Salaries and bonuses at smaller banks can be significantly lower than those at large banks, especially in regions outside of New York. Therefore, retired investment bankers considering this path should carefully evaluate their financial situation and ensure that the potential decrease in income aligns with their retirement plans and goals.

Some investment bankers become DJs or NFT designers

Some investment bankers pursue creative careers after leaving the industry, such as becoming DJs or NFT designers.

Former Goldman Sachs CEO David Solomon is an example of an investment banker who became a DJ. He leveraged his network of university friends and peers to make money on the side.

Ovie Faruq, a former Barclays credit trader, is another example of an investment banker who transitioned to a creative career. Faruq now collects and designs NFTs for a living, having sold a piece for $268,000 last year. He also invests in NFTs and finds that his new career allows him more free time and a less stressful life.

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