When Extravagance goes Wrong in Banking

This is a story I always like telling my closer friends as I felt it shows how money, the emotions that come with it and the inability to handle those emotions could ruin a man’s life.

This was actually a colleague’s friend story. He was a hedge fund manager. The fee structure is that a hedge fund manager could earn a lot of money if it was a favourable market to him or he was just really lucky. The difficult part of course is investors would never really find out.

Sometimes, the hedge fund manager can retire after a number of years in the market so the idea is to stay in the game.

Having been on the buy side myself, I felt it was an extremely demanding job and definitely not for everybody. It is much more stressful than a sell side job as you get anxious over daily movements of your stocks especially in volatile markets.

I would say, it is a good job to get into if you are in your mid-late 20s and ambitious. If you are older then unless you are really passionate or really good otherwise, I would say most of us are pass that age because physically and mentally you are probably more suited to doing something else.

The idea of most fund managers or I guess in fact most front office finance jobs, is to hang around for as long as possible so they are exposed to some good years, which they will earn a lot. Of course, I also felt these “good years” have become less and less as commissions continue to go down, competition continue to rise, tighter regulations, markets becoming more efficient.

Anyway, going back to our story, the hedge fund manager did make a lot of money during the good times and what happened as I was told, was he started getting involved with girls, which is very easy I think especially in banking.

The way I think about is that there is actually not much satisfaction from doing a banking job most of the time other than making good money. And there are so much stress and insecurity in it. So sometimes the easy way out is to engage with girls and if you are married, effectively extramarital relationships.

So the wife of this hedge fund manager decided to divorce him and he was asked to pay upkeep based on his compensation during the good years. As mentioned, the good years only happen in between many years and as soon as he is divorced the good years also went away.

Since he needs to pay upkeep based on his good years compensation, he was not able to meet them and he ended up in jail as a result.

There is actually a chapter on Sex Transmutation in Think and Grow Rich that probably all men should read. I managed to find a link below.


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