Banks and other financial institutions provide you with a wide range of services. These include everything from basic checking accounts to help with raising capital, completing mergers and acquisitions and more. The larger banks in the industry seem to meet most needs a significant portion of the time. However, there are instances when working with smaller boutique investment banks makes sense as well. It might even be a necessity in order to accomplish all of your goals. If you are not familiar with what these banks offer and their pros and cons, learning more about a boutique investment bank is a great first step to take before you reach out to a financial institution for assistance.
The Concept of Boutique Investment Banks
A boutique bank is a smaller financial institution. It typically has only one or two locations. There are, however, a few somewhat larger institutions that offer boutique bank services. They may have multiple branch locations across a region.
Larger banks and financial institutions take a full-service approach to meeting customers’ needs. A boutique bank typically provides service in one specialized area. Because of this, the boutique bank often fills gaps that larger banks do not fill. This means that most businesses will benefit from working with both larger and smaller institutions over the years.
Some of the areas of specialization for boutique investment banks include restructuring, reorganization, mergers and acquisitions, raising capital and more. Most of these banks may specialize in just one of these areas. However, others specialize in several key areas.
Each boutique bank offers unique services to their valued customers. Therefore, it is important to learn more about the services offered by each bank before reaching out to one.
Boutique investment banks are often founded or managed by individuals who previously worked for a larger financial institution in a managerial or executive role. Many of these individuals have felt constrained by the rigid environment associated with a large bank. They enjoy greater creativity and latitude when working with customers. They get that through the boutique financial environment. This latitude and flexibility enable them to serve their customers’ unique or niche needs better.
Advantages and Disadvantages of Boutique Investment Banks
As you might imagine, there are both pros and cons when it comes to this type of institution. The features and services vary substantially. Also, it is up to you to understand when and how to work with these banks. When you understand the advantages and disadvantages associated with them, you can make more informed financial decisions for your business activities.
Advantages of Boutique Investment Banks
As a business professional, there may be numerous times over the years when working with boutique investment banks is advantageous to you. Many of these banks specialize in a specific type of transaction, a specific type of industry or even a specific geographic area. This means that they often have an excellent reputation within their own niche although they may not be a household name commonly known to the public.
It also means that the individuals working in these banks have very specialized and refined knowledge of your industry that larger banks may not have.
You may find that the fees charged by boutique institutions are lower than with larger institutions simply because of reduced overhead.
While you may pay less money in fees, you may enjoy more personalized services. There is also some leeway to be creative with the financial services that they provide to you.
Many of these banks nurture long-term relationships. Their representatives often take a hands-on approach to serving clients. Keep in mind that in larger institutions, it is common for a file to be handed over to analysts, underwriters, and others. This can create a feeling of being passed off and even forgotten in the process. However, this will not be your experience when you with a smaller boutique institution.
You will often have direct access and regular communication with the key decision makers related to your transaction. You likely will have one or two points of contact in the bank to work with throughout the entire transaction.
These smaller boutique banks often focus their services on a niche they are very familiar and comfortable with. Therefore, you may find that they have more leniency with their requirements regarding exceptions and mitigating circumstances.
You may feel that larger financial institutions have gaps in their services, and you may fall in between those gaps. This is usually not the case when you work with a smaller boutique bank. Many people will turn to a boutique bank when a larger bank’s services fail them.
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Disadvantages of Boutique Investment Banks
As beneficial as a boutique investment bank can be in specific situations, the reality is that they also have their disadvantages. You should become familiar with the most common disadvantages before you decide to do business with one of these boutique banks.
Many of these banks are well-known within their niche. However, you may not be aware of all boutique banks that offer investment banking services in your area or in your niche. This can make it more difficult for you to find all of the boutique banks that may meet your needs. However, online searches, social networking, and other methods are decreasing this issue.
Boutique banks are small by definition. Therefore, they have the knowledge of your industry and are able to feasibly see how to meet your need. However, there may be instances when they lack the resources necessary to serve you.
For example, they may not have the capital or the human resources available to meet your needs. The services that are available through a specific financial institution are often very limited in scope. They are typically limited by the expertise of the individuals who work at the bank. Their unique expertise can be truly beneficial in some cases. However, you may find that you need to look very hard to find the right institution to help you with your current need.
These banks do offer personalized and creative services. Still, because of their refined specialization, it is often necessary for businesses to work with several of these banks over the years rather than just one. There is nothing wrong with developing more financial contacts. However, it can take more time and effort to do so. This is in opposition to banking with one specific institution that can meet all of your needs.
As a business professional, you must have financing and financial services available to meet all of your needs over the years. You likely will establish a relationship with a large, full-service bank. Even so, there will be times when this bank is unable to assist you with a complicated or industry-specific financial need. When this happens, you can search online. Find a boutique investment bank that offers the specialized services that you need. Thanks to their specialization, you may be able to overcome your current financial challenges and carry your business forward to the next level.
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