How to Get Into Investment Banking?
Considering only footballers and celebrities get paid more than investment bankers, the investment banking industry is a tough nut to crack. However, to crack every tough nut, there are some pre-requisites, steps, and protocols. In investment banking as well, you need to follow a step-by-step approach to getting in.
Let’s get right into it and see how to get into Investment Banking?
- #1 – Understanding how Investment Banks Recruits
- #2 – Entry points – Knowing where you can begin
- #3 – Preparing yourself – Setting up the strategy to get in
- #4 – Master Investment Banking Technical Skills
- #5 – Master Investment Banking Soft Skills
- #6 – Finally – Investment Banking 101
#1 – Understanding how Investment Banks Recruits
The #1 strategy to get into investment banking is that you should know the industry through and through.
To know your industry, you need to do some research (if you’re completely naïve). Go through the resources on Investment Banking to get an update about what’s going on in the investment banking industry. And also know about the recruitment process (in detail).
Let’s dig in and see a brief overview of how the investment banking industry works –
- Be ready for a strict recruitment process: Banks are pretty strict about their recruitment processes and that’s the reason it’s hard for a newbie to get through. So if you want to be part of the investment banking industry, you need to be good (on the certificate and in the practical application of knowledge).
- Know that banks prefer newbies: Banks prefer fresh graduates who have no expectations or ideas about working hours. To work in investment banks, you need to work 100+ hours a week and hiring students who have no idea is always helpful.
- Top-notch university graduates are always ahead of the curve: Banks always prefer students from top-notch universities like Wharton, Harvard, Oxford, Stanford, etc. So if you are planning to go into investment banking make sure that you are from first-tier universities; otherwise it would be difficult for you to break in. You can also take the CFA ExamCFA ExamThe Chartered Financial Analyst (CFA®) Program offers a graduate-level curriculum and examination program designed to expand your working knowledge and practical skills related to investment decision-making. to better your chances of getting a shortlist.
- Banks prefer interns: If you are not part of a top-notch university, you can take a different route. You can land an internship with a top-notch bank. A couple of great internships can help you get into the holy grail of investment banking and you will also be able to experience the industry directly. These internships will get you the analyst role which is really the entry point to get into investment banking. Also, read Investment Banking Internship.Investment Banking Internship.Many investment banks offer internships in investment banking, with durations ranging from 3 months to 2 years depending on the profile you choose as an intern. And if you complete your internship successfully, you will undoubtedly see yourself as an investment banker in the near future.
#2 – Entry points – Knowing where you can begin
The #2 strategy to get into investment banking is to know the entry points.
There are primarily two entry-level positions that you should aim for if you want to go for M&A profiles. You have other options as well in audit, accounting, sales, and other options. But if you talk about a lucrative career in investment bankingCareer In Investment BankingAn investment banking personnel is a motivated professional who aims to help their clients reach their financial goals and objectives. The top four investment banking careers are - Analyst, Associate, Vice president, Managing director. , it’s M&A. Let’s have a look at the two entry points of M&A profiles in investment banking –
This is the junior-most position in investment banking. Normally undergraduate students or master’s degree holders are selected for this position directly. In a few cases, banks also consider people who have 1-2 years of experience. Analysts are hard workers in the industry. After working 3-4 years in the industry, they switch to private equity, hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques., or other bigger banks.
Associates are selected from top-notch MBA universities in most cases. Sometimes they are selected from the talent pool of analysts. They supervise analysts and directly work with the big shots of the industry like partners, managing directors. Usually, associates don’t leave and switch within a few years; they stay and aim for promotion in the long run. One of the reasons for which it becomes difficult for them to switch is barriers to entry in other domainsBarriers To Entry In Other DomainsBarriers to entry are the economic hurdles that a new entrant must face in order to enter a market. For example, new entrants must pay fixed costs regardless of production or sales that would not have been incurred if the participant had not been a new entrant.. Do have a look at Investment Banking Associates.
Here is the list of top Investment Banks –
- Bulge Bracket Investment BanksBulge Bracket Investment BanksTop 10 bulge bracket investment banks are - Blackstone, Goldman Sach & co, Morgan Stanley, J.P Morgan Chase & co, Bank of America Merrill Lynch, Credit Suisse, Citi, Deutsche Bank, HSBC, UBS.
- Middle Market Investment BanksMiddle Market Investment BanksThe deals of a mid-tier investment bank range from USD 50 million to USD 500 million. They offer the same services as the bigwigs, i.e. bulge bracket banks, but are not as geographically present internationally as they are.
- Top Boutique Investment BanksTop Boutique Investment BanksThe top boutique investment banks are - Perella Weinberg Partners (Global M&A Advisory – Boutique), Lazard (Global M&A Advisory), Rothschild (Global M&A Advisory – Boutique), Evercore Partners (Global M&A Advisory – Boutique), Greenhill & Co. (Global M&A Advisory – Boutique, Blackstone (Global M&A Advisory).
#3 – Preparing yourself – Setting up the strategy to get in
The #3 strategy to get into investment banking is to prepare yourself.
If you do what everyone does to get into investment banking, then maybe your application will end up in the heaps of rejected files! So, you need to make the effort to stand out from the crowd. Here’s what you should do to get into the investment banking –
- Plan ahead: If you ever dream of getting into investment banking, you need to act earlier. If you think of an investment career after getting into employment elsewhere, it would be difficult for you to break in. So, plan early and take the following steps.
- Concentrate on the knowledge as well as marks: Only knowledge won’t count. You need to have proof of it. People who have great GPAs will easily impress the top banks and they will be the first preference for interviewers.
- Do an MBA from the top-notch Institute: It is difficult to score high in investment banking without an MBA from a top-notch institute. Top tier banks usually hire MBAs because of the following reasons –
- When you get into the top-notch MBA Institute, a pre-screening is already done; otherwise, you wouldn’t have been chosen in the first place. It saves banks time to screen top-class candidates from general ones.
- During your MBA days, you learn a lot about the complexities of financial models and you are always on your toes to submit the project, write a detailed analytical report, & build the toughest financial models. That saves banks the cost of training you.
- After MBA, you directly join as an associate (in most of the cases), you are given a lot of responsibilities and you don’t need to do all the work (you can delegate the most to analysts under you). As a result, the attrition rate at banks gets reduced.
- Build networks: Online applications don’t work. How can online applications beat-up face to face relationships? Instead of submitting applications, call up the top bankers directly and ask for advice or suggestion about how to get into investment banking. They will suggest to you and help you understand how to get in. Moreover, you will have a relationship built up with them instantly. During your MBA as well, build a network as much as you can. Talk to people who have already passed out of the institute. Build rapport with the professors. And also with students who would have different backgrounds and different things to share. Building networks will always triumph online applications.
#4 – Master Investment Banking Technical Skills
The #4 strategy to get into investment banking is to master the Investment Banking technical skills.
According to research, it takes 6 seconds for a recruiter to slide through a resume before she selects or rejects a resume. For investment bankers, it would take even lesser time. So take the time to build a resume that will help you stand out in the crowd. Make the resume shorter and also make sure that you answer this question in your resume – “why you’re the best person for analysts/associate position in investment banking?” The resume should easily be scanned under 10 seconds.
As mentioned earlier you need to be the best of the best to crack the job in M&A profiles in investment banking. You should have the ability to work harder than anyone in the room plus you need to be top-notch in your skills e.g. financial modeling, accounting, valuation, Excel, writing skills.
- Be proficient in Financial Statement Analysis – The keyword here is Financial Statement Analysis. This means you are expected to be proficient in vertical analysis, horizontal analysis, ratio analysis, cash conversion cyclesCash Conversion CyclesThe Cash Conversion Cycle (CCC) is a ratio analysis measure to evaluate the number of days or time a company converts its inventory and other inputs into cash. It considers the days inventory outstanding, days sales outstanding and days payable outstanding for computation., ROEsROEsReturn on Equity (ROE) represents financial performance of a company. It is calculated as the net income divided by the shareholders equity. ROE signifies the efficiency in which the company is using assets to make profit., ROCE, etc.
- Master Valuation Skills. Equity Valuation is the process of estimating the potential market value of a financial assetFinancial AssetFinancial assets are investment assets whose value derives from a contractual claim on what they represent. These are liquid assets because the economic resources or ownership can be converted into a valuable asset such as cash. or liability. Valuations are required in many contexts including investment analysisInvestment AnalysisInvestment analysis is the method adopted by analysts to evaluate the investment opportunities, profitability, and associated risks in their portfolios. In addition, it helps them to determine whether the investment is worth it or not., capital budgeting, merger and acquisition transactionsMerger And Acquisition TransactionsA merger and acquisitions (M&A) agreement refers to an agreement between two existing companies to merge into a new company, or the purchase of one company by another, which is done generally to benefit from the synergy between the companies, expand research capacity, expand operations into new segments, and increase shareholder value, among other things., financial reportingFinancial ReportingFinancial Reporting is the process of disclosing all the relevant financial information of a business for a particular accounting period. These reports are used by the stakeholders (investors, creditors/ bankers, public, regulatory agencies, and government) to make investing and other relevant decisions. , taxable events to determine the proper tax liability, and litigation.
- Become a financial modeling ninja – Financial modeling means forecasting the future of the company or an asset by way of an Excel Model that is easy to understand and perform scenario analysis. What if your boss calls you at 1:00 a.m. in the morning and asks you to come to the office for building a complex model? Can you do it? Financial Modeling ninjas can do it. And you need to aim for that level if you want to get promotion pretty fast. You should be so good in financial modeling that no matter what mental state you are in, you can craft out a complex financial model without much hassle. Also, have a look at this Top 20 Financial Modeling Interview QuestionsTop 20 Financial Modeling Interview QuestionsIf you're looking for a job in financial modeling, you'll need to prepare for questions like "What is financial modeling?" What is the benefit of it? , What is the best way to create a financial model?, What method do you use to forecast revenue? and so on.
- Become awesome in Excel – Investment Banking AnalystInvestment Banking AnalystInvestment Banking Analyst works with investment banking team and expertise in the area of Accounting, Financial Modeling, Project financing, Project Valuation, and Financial statement Analysis. These analyst has deep knowledge in Excel and they are good at VBA to analyze the market data and financial modeling. The analytic work consists of building a financial model for different projects like Infrastructure projects (i.e. Power projects, real estate, etc.). spends around 10-12-14-16 hours each day working on excel doing financial modeling, valuations, making pitch books, and financial statement analysis. Make sure to become an Excel expert.
#5 – Master Investment Banking Soft Skills
The #5 strategy to learn how to get into investment banking is to master communication.
- Start with this checklist: Investment banking is not something that everyone is made of. With just 20,000 entry-level jobs globally, it would be impossible for you to get in if you don’t tick “yes” for most of the following checklist –
- You know the field through and through.
- You are the hardest worker in the room (read 100 hours a week).
- You are a person who has the gift of connecting with people personally.
- You are always presentable and very well dressed.
- You ask very good questions during a conversation.
- You are a voracious reader and always try to improve your knowledge base.
- You are a great salesman.
- Become a great salesman: Most candidates neglect this skill. But if you choose to earn havoc in investment banking, this is the most important skill. On a regular basis, you will handle deals from small to big, but one thing is always common – it is your ability to make the sales. Better you’re in your ability to sell, better would be your compensation at the end of the month.
- Work on your communication: Of course, when you are aiming to get into investment banking profiles, you must be a great communicator. But we are talking about an extraordinary communicator who can deliver great presentations whenever required and who can make sales call so very well that the customer feels he is the best guy to buy from. If you’re great that won’t cut. You need to be the best communicator among all.
#6 – Finally – Investment Banking 101
The #6 way to learn how to get into investment banking is to create your own story.
By now, you know what you need to do to get into investment banking. If you follow the above steps and build the skills, you will certainly get into the analyst role. But the hard part is taking action. Here are a few tips to help you get started right away –
- Structure your story: You need to tell a story that sells. And for that, you need to be proactive. Structure your story in the following manner –
- First, create a beginning. Talk about where you are from, what you did, and how you have come here.
- Next, talk about your financial intelligence. You need to tell briefly how you got to know about M&A advisory in investment banking.
- Then, talk about how you grew your interest in investment banking. Talk about your internships (if any) plus any professional training that you took. You may enroll for Investment Banking Course and demonstrate your IB Skills.
- Finally, talk about what future you hold before your eyes, the deals you want to close, the funds you want to work on, the value you want to add.
- Share your story everywhere: Whenever you’re networking or cold calling a banker, make sure that you are sharing your story. The story will highlight all your strong points (and why you should be the most preferred candidate for M&A advisory) and make it as brief as you can.
- Gather contacts and cold call them: Go to social media websites and investment banking networking events where you can network and gather contacts. Then sort out all the contacts and cold call them. Cold calling will help you get an internship (if not a position of the analyst) in an investment bank.
- Prepare for interview questions: Preparing for interviews in advance will help you ace more interviews. So, look at different interview questions that are asked in investment bankingInterview Questions That Are Asked In Investment BankingThe purpose of this Investment Banking Interview Questions and Answers is simply to help you learn about the investment banking interview topics. and prepare them in your own way. Better preparation always yields better results.
- Remember three things: First, when work is there, there’s no time to sleep. Second, don’t make mistakes; don’t ever. Third, the greed of better pay, compensation, salary, profit, bonus, benefits is good. If you don’t have these or don’t want to develop these three traits, an investment banking career is not for you.
Finally, Investment banking profiles are not for everybody. Earning $100,000 to $150,000 per annum plus bonus is not for everybody. You need to work 100+ hours per week which will leave you only 68 hours to take care of your family, health, do your chores and fix other things. You need to prioritize to put your work first before anything else. You need to make the trade-off if you really want to get into investment banking.
If you want to get into investment banking, don’t think; take the first step right away.
This has been a complete guide to how to get into investment banking. You may also have a look at the following articles for further details