So, you just started your studies and discovered Investment Banking. You have heard about the career prospects, the steep learning curve and all the smart people you will be working with. There are many reasons why people become Investment Bankers. Once you have your motivation straight, it’s time to start thinking about Investment Banking recruiting. This is where we come in and help you with critical industry insights for your success.
There are a lot of misconceptions about the recruiting process and how to optimally prepare for it. You might have heard about tough Investment Banking interviews and aren’t really sure how to prepare for those interviews.
We went through the painstaking recruiting process ourselves and got to the other side with an arduous trial and error process. Having been on the street, we interviewed a ton of candidates for various roles. With all that experience, what would we tell our former selves today? Here are the top myths and false believes that you need to debunk. They will slow you down at best or completely derail you at worst from breaking into Investment Banking. Here are also the top facts that you need to accept. This is the music you need to dance to if you want to land your Investment Banking gig.
Myths
MYTH: Networking is super important for recruiting. This industry is just too competitive. You can’t just casually talk to a couple of full-timers and expect to get an interview. It does not work like that. A top-tier candidate with top-of-the-class grades and strong internships will always outperform some obscure candidate who came in with a “recommendation”. All your “bro-Analyst” can do is screen your CV and have you apply via the official channels. The only way networking makes a difference is when your dad knows the MD of the shop. Then you might get invited, but you would still have to interview just like anyone else. So, if your dad is not friends with the MD, it’s not worth trying to network for three months just to get rejected after your first round. You are better off casting your net wide and churning out another 10x applications.
MYTH: Being at a target university will guarantee you interviews. Corollary, you have no chance from a non-target university. This is simply not true. If your GPA is subpar, you will not get invited regardless of how well your university is ranked. Yes, there are target universities from which Investment Banks preferably recruit. However, this usually means 2-5 candidates of the entire class per year. Being at a non-target university means that you have to figure everything out by yourself. There will be no company presentation to point you to Investment Banking. However, the internet has leveled the playing field. Everyone, target or non-target, now has the same information about Investment Banking.
MYTH: Joining the “finance club” will automatically get you invited. Extra-curricular activities matter less than you think. 95% of your CV is about your university, your GPA and your internships. 95% is about you appearing smart and competent. Compared to your GPA and internships, your “finance club” does not carry much weight. However, extra-curricular activities are great for referencing in your story as your spark. You joined the finance club and somehow got interested in Investment Banking.
MYTH: You don’t need specific interview preparation. Your finance and accounting classes are good enough. This couldn’t be further away from the truth. Your college courses are useless and do not prepare you for an actual Investment Banking interview. Interviewing is a specific skill that you must build on top of your academic studies. The competition for these positions is super intense. There are only so many of them and everyone wants to break in. You can’t just “wing it” and hope for the best. You will find out the rough way and get rejected. You need to know what you are doing to have a realistic chance. You must appear technically competent while being a non-combative and cooperative candidate who can work in teams.
MYTH: I’ll just memorize every interview question and it will be fine. Memorization is not a good strategy. You will get quick beginner gains. However, this strategy does not scale very well. You need to keep memorizing more and more questions to be prepared – even the most obscure questions. Your answers will be static. Your interview performance will depend on the interviewer asking the exact questions. And even if you get the answer right, we can smell it when you appear too rehearsed and we will twist some of the concepts around. It is better to learn based on the main topics vs. just mindlessly memorizing all questions. You need to develop an understanding of the concepts.
MYTH: You can just apply whenever you want. Deadlines are not important. Wrong. Investment Banking recruiting moves quicker than you think. Every bank has deadlines. If they don’t have deadlines, the shop will most likely fill all their summer internships slots by November the year before. People who apply late (1-2 weeks before the deadline) will not be looked at. By that time, the bank is already extending offers and having final interviews. Even if you get invited, your chances are not great. Recruiting is on a rolling basis. When a suitable candidate successfully runs through the entire recruiting process, he will get hired. So, get your applications out 5 to 8 weeks before the deadline. Ideally, you apply two weeks after online applications are open. You should be busy writing applications throughout September and October – yes, since day one of your semester. That’s how quick Investment Banking recruiting moves. You missed that timing? Consider smaller boutiques, Big4 transaction services or Management Consulting. And try earlier next year.
MYTH: Cover letters are not important. Yes, cover letters are annoying. Yes, they are cheesy and time-consuming. Recruiters only spend about 30 seconds on it and then move on. However, you cannot cut corners and just send the same generic cover letter to every shop. Here is the secret: a stellar cover letter will not set you apart. However, a bad cover letter will get you rejected. It’s best to get it done as efficiently as possible. We recommend setting up a clean template that you can re-use and then just update 2-4 sentences per application. That way, you have enough customization while not getting caught up with starting from scratch every time. Writing cover letters is more art than sciences. It’s a balancing act between customization vs. efficiency. Here is a cover letter format to get it done right and then move on.
MYTH: Bulge brackets and elite boutiques are where it’s all at. Ahh, the most “prestigious” institution, that’s the place to be, right? Well, the Investment Banking landscape is much more diverse than you think. Yes, bulge brackets and elite boutiques are one part of the industry that mainly covers mid to large-cap transactions. Yes, if you get drafted by a brand-name institution, go for it. It’s a great steppingstone. However, not all of you will be drafted by the flashiest institutions. There are also a bunch of middle-market and regional M&A boutiques that are a lot easier to break into compared to gunning down the most prestigious institution on the street. Don’t look down on lesser-known shops. They are all legit places to break into Investment Banking and learn the craft. Remember, you take the job you are offered. You are better off casting your net as wide as possible vs. focusing exclusively on bulge brackets and elite boutiques. Just make sure you join an actual M&A team that does deals.
Facts
FACT: Investment Bankers don’t care about whether you have a bachelor’s or master’s degree. Yes, you’ve read correctly. Investment Bankers do not care whether you have a bachelor’s degree only or a master’s degree. Once you are invited, everyone is equal no matter what degree or where you came from. It does not matter. The only thing that counts is interview performance. You all are going to receive the same entry-level offers and start as the same first-year Analysts. No differences. Savvy finance students can start earning money earlier with less schooling, less tuition spent and less student debt.
FACT: Your grades matter a lot. Your GPA is very important. It matters a lot because it represents effort over time. This is the first thing a recruiter will look at. Where did you go to school and what’s your GPA? Do whatever it takes to maintain a minimum GPA of 3.5 (US) or a British upper second-class (2:1). In ECTS grades, it would be anything above a B+. In German grades, stay above a 2.2 – preferably a 1.9 and above. You want to be in the top 20% of your class to maximize your chances. There is no official cutoff grade. But if your GPA drops too low, your application will not be competitive enough. At some point, other candidates will outcompete you with better grades and more relevant internships. Your GPA can slip a bit beneath the target ranges if you have relevant internships to compensate for. But the general rule is to keep your GPA within those ranges.
FACT: Internships matter more than you think. So, your college year is coming to an end and you feel like relaxing. Well, you are out of luck. Summers are for internships. Next to your GPA, having relevant internships is a crucial bargaining chip. You need to build your Investment Banking resume with relevant internships. Everyone who managed to break into Investment Banking has at least 2-3 internships under their belt. It is widespread for Investment Banks to hire from their pool of interns. If you don’t have any relevant experience, GET relevant experience. If you can’t land an Investment Banking internship right away, build your resume towards finance and transaction-based business. Start with an internship at Big4 accounting or Big4 transaction services and then move into smaller M&A boutiques.
FACT: Getting invited is only half the battle. To give you some perspective: 10% to 15% of applicants will pass the CV screening and be invited to a first-round interview. 20% of those interviewed candidates will receive an offer. Now, this sounds daunting at first, but the bottom 50% of those invited can be easily avoided by getting the basics right and avoiding the most common mistakes. Those candidates didn’t even bother preparing. The next 30% can be simply outworked by going the extra mile and not cutting corners. The next 10% weaseled themselves through the application process and were just barely good enough. The final 10% are stellar candidates that know what they are doing. That’s why proper interview preparation is so necessary. You need to know what you are doing if you want to have a realistic chance. You can’t just “wing it”.
FACT: You need to know every bullet on your resume. Look, every bullet on your resume is fair game. Everything you put on your resume can be asked and challenged. We all know there is some exaggeration on your resume. It’s a sales letter, after all. But do not lie or claim things that you cannot back up and defend on your resume. If something appears fishy, you might end up being grilled for 5-10 minutes on a single bullet. If we get triggered, we want to understand in very detail what you did, how you did it and what results you achieved. At this point, 99% of your claims will fall apart – especially those claims related to getting the job. What does this mean for you? Don’t lie. Don’t make stuff up that you cannot defend. Know your bullets! Everything on your CV is fair game.
FACT: Final round interviews with Managing Directors are mainly behavioral. Once you reach the final rounds, a Managing Director does not care about your technical abilities. Associates and VPs checked your technical competence. A Managing Director is only interested in sustainably growing his business. In other words, whether you are still smiling if you are crushed with work. Do you REALLY want to be here? Do you even know what this shop is doing? Will you bail out if you get a better offer from Goldman or Private Equity? Is this guy an entitled brat or can he actually work without complaining? To prepare yourself for the final rounds, you need to have a super-strong grip on your story. You need to know it like the back of your hand. You need to come off as polished, prepared, non-combative and committed. Then, the bank will extend an offer.
FACT: Recruiting is like a messy auction process. It’s not like your college environment where everyone who meets the deadline gets the same grade. Recruiting is more like a messy auction process. The top 2-4 candidates win and everyone else loses. Each firm can arbitrarily change the rules within its recruiting process. You applied late and the bank already extended all offers? Too bad for you. You are a competent candidate with high credentials yet failed to build rapport with a Managing Director? Too bad for you. You applied on time, but HR lost your resume? Too bad for you. How can you mitigate this? Accept that you are not in control. Have a strong resume, apply as early as possible and apply everywhere! Cast your net as wide as possible. These are your only options to mitigate this messy process.
FACT: Investment Banking internships are extended job interviews. Most Investment Banks prefer to hire their full-time Analysts from their pool of interns. During the summer internship, the bank gets an excellent impression of what they are getting without the risk of a full-time contract. The bank had about three months to test drive their candidates to see what they are made of and whether they fit into the team. Internships are serious business. A full-time offer can change your life. If you don’t hit the ground running, the bank will just let you go at the end of the internship. You are then left without a return offer. Banks extend offers very conservatively. You need to perform close to the level of a full-time Analyst to land an offer.
Where does it leave us?
We hope that you now have a better understanding of what it takes to break into Investment Banking. Most myths revolve about finding some magic shortcut or simply cutting corners, such as some magic networking trick or thinking you can “wing it” in an actual interview. All those misconceptions will slow you down at best or completely derail your efforts at worst.
We made all those mistakes. Our two biggest mistakes were believing that college finance classes were good enough for Investment Banking recruiting and not taking interview prep more seriously. You only have so many chances to land your Investment Banking gig while you are in college.
Our advice is to start as early as possible. The earlier you start, the more time you have to figure things out. Get your GPA in-line, work through all the essential topics for interview prep (don’t cut corners) and get relevant internships.
Most candidates that get hired are hardworking individuals that go the extra mile. Yes, you may find a trust fund baby here and there, but the majority of full-timers earned their spot. They got the right credentials and prepared properly for their interviews. The actual shortcut is simply hard work.
Additional resources
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