MBA students or experienced bankers in transition tend to think first of the "bulge brackets" (if the term still exists after the demise of Lehman Brothers and Bear Stearns) or "money-center banks" when they look for opportunities. Beyond this tier, they may want to consider "boutiques." Loosely defined, they are smaller investment banks with more focused businesses and with, perhaps, a variety of interesting opportunities or career paths for those in corporate finance.
The best known include Lazard Freres, Allen & Co, Greenhill, and Evercore. Others include Sandler O'Neill, Jefferies, Thomas Weisel, Perella Weinberg, Financial Technology Ptnrs, W.R. Hambrecht, Southwest Securities and many others. They include minority-owned firms such as Loop Capital, Utendahl Capital, or Williams Capital.
They avoid being all things to all people and have specialized businesses or advisory services. They are less capitalized, smaller, and will likely not have large brokerage and trading arms. Although in this environment they are enduring some decline in business, they will all less likely have been pummeled by large trading losses, complex CDO or CDS transactions, huge mortgage-related positions, or highly leveraged balance sheets.
Lazard Freres, for example, is widely known as a top-tier mergers/acquisitions advisor, but also has a thriving restructuring group to help companies in a downturn like the current one. Greenhill was founded when Morgan Stanley president Robert Greenhill decided he wanted to run his own advisory firm. Like Lazard, it is now a public firm. A Goldman banker formed FT solely to advise companies involved in financial-services technology.
Allen & Co. is best known for big deals it has done and big contacts it has in media and telecommunications companies. Sandler O'Neill, which survived the 9/11 attacks in the World Trade Center, has a specialty in advising financial institutions.
Loop Capital, based in Chicago and headed by Jim Reynolds, specializes in municipal finance and institutional brokerage.
Williams Capital Group was formed years ago when Christopher Williams decided to go on his own after stints elsewhere, including Lehman Brothers. It now has offices in New York, Chicago, Texas and Shreveport and focuses on fixed-income, corporate finance and private equity.
There are pros and cons in exploring "boutiques" or setting up a career there. Some are highlighted below.
1. They tend to be innovative and creative. If you have a good idea, because there are fewer formalities, the firm will frequently encourage it, nurture it, and try it.
2. There is organizational flexibility. They may be willing to create positions for people with special talents, financial experience or skills. They may also be willing to promote and advance people at a faster pace.
3. They tend to be focused on clients in specific industries (health care, financial insitutions, media, technology, etc.); hence, they look for people with industry expertise and unique experiences. And they may be deal- or transaction-oriented, not bogged down by processes and policies.
4. They are out of public view. (This can be a "pro" and "con.") As banks, they are regulated, but they don't "move markets" or attract too much attention. They tend to conduct business (corporate finance, bond underwritings, investment management, etc.) quietly.
5. They avoid conflicts of interest. Big banks manage conflicts of interest with clients all the time. They advise or finance clients who may also compete head-on with them. Boutiques are less likely to be faced with looming conflicts, because they are smaller or they ensure they avoid them.
6. They don't have as much risk exposure in trading markets. Proprietary trading is not often a major revenue source. And often, they don't have the capital to support unusual trading positions.
7. They may not have the sophisticated risk-management organizations large banks maintain, but many are private or closely held, and as a result, they tend to be risk-averse in how they deploy capital. They are careful and deliberate in taking on big investments, trading positions or global expansion.
1. For career transitions, boutiques may not be easy to approach. They may not have formal ties to business schools or rigid recruiting processes. So there may be barriers to entry if you don't "know somebody." They rely on alumni networks and special contacts.
2. Those not minority-owned may not have formal diversity programs or stated diversity objectives. Some may not demonstrate a "compassion" for diversity, although they will extend to hire anybody if talent, experience, or know-how finds them. Some don't have a good track record with under-represented minorities, but most are open-minded about possible solutions.
3. The business and revenues of "boutiques" may not be diverse. They may rely too much on one or two business lines. Lazard, however, is an example of how to remain stable by managing a restructuring business to offset possible declines in its asset management, advisory and M&A businesses.
4. They may not have formal development programs and career paths, which have long defined careers at big banks. At big firms, new associates are hired into programs or "classes." They are trained, rated, ranked, and promoted based on contributions and timetables. At boutiques, promotions and career paths are less rigid, but may be too subjective.
5. If history is an indication, founders and owners may be quick to sell out. Recall Alex Brown, Hambrecht & Quist, Wasserstein Perella, Montgomery and others--all eventually acquired by big firms. Boutiques sell themselves if the price is right or if growth is limited. But they are always forming and re-forming (e.g., Perella Weinberg).
6. The lack of capital discourages global expansion. They may not, therefore, have a big international presence or global clients.
All in all, for those exploring finance, these firms offer special experiences and opportunities to shine. They readily give enormous responsibility to those who want it and don't want to "wait your turn." They are good places to learn a lot and make a difference.