Author: Fmi_Online

Investment banking, being one of the top career choices for fresh graduates, tends to attract many. Fresh out of business school, the allure of a six-figure salary, being immersed in the Wall Street culture, and the prestige of working for one of the world’s oldest business institutions can be enticing. Even if you have a unique combination of education, experience, and passion, gaining entry into investment banking can be challenging. Let’s look at the top ten challenges of breaking into the IB industry and how you can overcome them. 

Not knowing how to network

The importance of networking in investment banking can’t be overstated. How can online applications stand against personal, human relationships? Given the intense competition in the industry, online applications hardly work. In 2021, JP Morgan received 125 applications for each job opening in the IB department. 

One should focus on building their network right from their college. Career events, alumni networks, industry fairs, talking to professors, and campus placements are great places to start. You can also email bankers and others in this industry and request to meet for informational chats. This way you can start building a relationship with them even before applying for jobs. However, you must stay in touch after the initial conversation. 

Unrelated academic background 

While it is true that investment banks hire from a variety of fields, a liberal arts major can indeed get a job at Wall Street. However, as observed by Business Insider, a college degree in finance was pursued by a majority of the investment bankers on Wall street. Accounting and business degrees are also popular educational backgrounds. If you stick to the traditional fields of study that are most closely aligned with the industry, you’ll be tilting the odds in your favour.

Nonetheless, you can improve the odds by pursuing courses related to investment banking or finance. Alternatively, you can opt for a double major, with a second major in finance, if your college allows you to do so. At last, you can pursue an MBA in finance right after your graduation. 

Average college degree 

Investment banks recruit candidates from the best universities in the world. Ivy League schools, the LSE, the University of Cambridge, the University of Oxford, and the University of Warwick are consistently the top choices for recruiting potential candidates. Graduating from a decent college is the bare minimum and might help you enter into IB as an intern but your chances of getting hired as a junior analyst are much higher with a degree from a renowned institute.

Can you expect to break into IB without attending a prestigious institution? You can stand out and attract attention with your grades. Graduating at the top of your class will place you in an advantageous position. Moreover, you can also go for advanced degrees such as MBA to improve your chances of breaking into IB. 

Lack of technical knowledge 

The basics of corporate finance, economics, Excel and valuation are fundamental blocks that any IB aspirant must know. An investment banker works on multiple types of corporate transactions, and it is expected from the candidates to be well-informed about them.

One can overcome this challenge by reviewing the basics, going through case studies, practising questions, reviewing recent IB deals and through online courses. 

Lack of analytical skills

Analytical skills are an essential component of any job role in IB. You need to improve your analytical skills along with related skills such as communication, presentation, financial modelling, etc.

You can improve upon your analytical skills by studying deals on subjects like M&A, and IPOs, practising financial modelling and engaging in intellectual conversations regularly with your peers, seniors, professors, and analysts. 

No professional experience

You read that right! Lack of experience could be a serious challenge even when you are trying to break into the industry. Internships provide a path for candidates and fresh graduates to obtain full-time employment in investment banking. 

If you haven’t thought about internships yet, you must start applying to summer internship programs at all the top investment banks. An internship allows you to try out your desired field, gain exposure to the culture, get work experience, and impress potential employers

Not standing out

Trying to stand out in such a crowded industry is hard, especially when you are competing with top graduates from the best universities around the world. However, you must differentiate yourself from other candidates to gain an edge over your competition and make an impression in the eyes of the recruiters. There are several ways to do that – you can start by showing your passion and willingness to learn by pursuing online courses. You can start investing and maintaining a portfolio of different asset classes, along with your reasonings. Moreover, you can pursue summer internship programs in investment banking or related fields of finance such as asset management. 

Quality of resume 

According to research, it takes 6 seconds for a recruiter to go through a resume, before selecting or rejecting it. Use this time to build a resume that will help you stand out. Make sure that your resume is short and it includes keywords relevant to IB. 

A relaxed approach towards life

If you are not disciplined enough to go through the lengthy process of reaching out, sending cold emails, following up and facing rejections, breaking into investment banking would be a great challenge. You can develop a daily routine of sending cold emails and reaching out to potential employers without expecting great results in the initial attempts. You must prioritise this exercise as much as your studies and must follow your routine daily. 

Lack of confidence

Many candidates often fail to communicate their passion towards the industry during interviews due to nervousness. Although it is natural to be nervous, you must remember that the person interviewing also shares the same interest and had the same zeal as you a few years ago. If you have made it to the ‘super day,’ you must remain calm and use every opportunity to express your genuine interest in the field along with your willingness to learn and meet new people. 

The Bottom Line

If any of the challenges resonate with you, you must also understand that these challenges can be overcome easily. The trick lies in starting early and being consistent so that you have time to improve. 

Due diligence is a term mostly associated with law & finance. Due diligence literally means
investigation. This could be in terms of a product or a service. While the majority of the time,
it is used in case of investments.

Let’s assume, a consumer walks into a shop, they check the expiry date of the product. If it is
a bakery item, then they look for the freshness of the product. If the product is an electric
item, then they check the durability of the product. This basically means that the consumer
wants to be sure before purchasing the product. Here, the consumer is conducting due
diligence for the product. It is also considered a safety measure.

In the movie, Dark Knight, Coleman Reese is hired by Bruce Wayne to conduct due diligence
for the LSI holdings deal. Coleman Reese rather starts to investigate Wayne Enterprises and
finds many irregularities. He is shocked to see that the ‘applied science’ department has
disappeared overnight. Also, the R&D department is devoid of cash.

In the movie, Dark Knight, Coleman Reese is hired by Bruce Wayne to conduct due diligence
for the LSI holdings deal. Coleman Reese rather starts to investigate Wayne Enterprises and
finds many irregularities. He is shocked to see that the ‘applied science’ department has
disappeared overnight. Also, the R&D department is devoid of cash.

Types of Due Diligence

There are many types of due diligence that are conducted by businesses.

  1. Financial Due Diligence

    Financial due diligence is one of the most crucial forms of due diligence. This diligence is
    what Coleman Reese conducted. Hence, checking the financial statements. There are four
    main financial statements that companies draw. Cash flow statements, income statements,
    balance sheets, and the statement of shareholders’ funds.

    A thorough check helps in understanding past trends, unusual activity, and the business model. Understanding the company’s budgeting & forecasting figures help in a better grasp of the numbers. Checking cash flow statements gives an understanding of how much actual cash is with the company.

  2. Human Resource Due Diligence

    Companies conduct due diligence when a new candidate is hired. They conduct background verification of the candidate by verifying their experience and education certificates. They also tend to collect their information from their previous employer. However, when companies are undertaking a new merger & or acquisition. They tend to check for total employees, the number of divisions, and their salaries. They also analyze the HR policies and health/medical benefits given to employees.

  3. Intellectual property due diligence

    The intellectual property of the business is the intangible asset of the business. If they are monetized, they can be found in the assets section of the balance sheet. They comprise trademarks, patents, copyrights, and goodwill of the business. Conducting due diligence on these intangible assets is most important. Checking whether there are any outstanding claims, copyright issues or violations of intellectual property is crucial.

Authored by: Gitika Chandra

 A career in investment banking can be extremely rewarding, adventurous, and lucrative but does require resilience, commitment, and working under pressure. Investment bankers facilitate corporate transactions such as M&As, IPOs, and LBOs, among others, for businesses. The convergence of emotional and rational aspects required for these tasks influences the types of skills bankers look for in candidates. 

In the midst of financial models and valuation techniques, soft skills are often overlooked. However, their importance can’t be overstated. Soft skills are non-technical, non-job-specific skills which are relevant in every profession. The good news is soft skills can be easily developed and improved upon with practice. In this article, we will explore the soft skills required in IB and how one can improve upon them. 

Communication 

One of the crucial aspects of investment banking is the ability to cater to clients, superiors, and corporates. Presenting an idea requires comprehensive communication and presentation skills, which include spreadsheets, documents, and slideshows. An investment banker must be able to distil the core points and effectively convey them to the management to close a deal.

There’s no better way to improve your communication than to talk regularly with industry professionals and people in business. You can also challenge yourself to step out of your comfort zone when it comes to speaking in public. Great communication comes with high self-confidence, hence, it’s important to ensure that you are up-to-date with the markets. You can refer to informative podcasts to be well acquainted with the environment of the financial markets.

Knowing how to sell

A big part of investment banking requires you to communicate and convenience different stakeholders involved in the deal. You will, in many ways, be like a salesperson. As part of the salesforce, you must bring in revenues and have an understanding of the service that you are delivering. 

Indeed, many people are naturally born with this skill, but you can develop and improve upon it by reading books on sales and practising it through shadowing others or early in your college or career. This will allow you to have first-hand experience in dealing with customers. You can also take up jobs in the broking industry (sell side) to learn about sales in the finance industry.

Relationship Building 

Investment banking is a people’s business, and humans are social beings. You can’t expect to do business with a firm without a healthy and trusted relationship. Skills such as being able to deal with management in difficult situations and a positive attitude that asserts power but is also understanding at the same time are valuable. Developing and maintaining client relationships are traits that an investment banker must have. 

To develop meaninful relationships and improve upon your skills, you should try pay attention to other people’s interests and problems and gradually become more personal with them. Furthermore, you can try talking with people you don’t usually speak up with or try to win more friends. You can observe other people, who are good at maintaining relationships or at least are known to be good around people. Over time, you’ll be able to observe hints or tricks on how you can be more efficient in building relationships with clients.

Open mindedness

Being open-minded paves the way to a deeper understanding of markets, cultures, and societies and ignites out-of-the-box thinking. It allows an individual to refer to multiple disciples to solve a problem or close a deal, leading to creative problem-solving. This expands their ability to work with international businesses and across sectors. Combining this understanding with an ability to communicate effectively is a sought-after skill in investment banking. The ability to do so in more than one language is an added bonus.

To accept new ideas, you must be aware of global events. This can be enhanced by reading and talking to people from different fields. Another way to improve is by participating in study abroad programs, which promote open-mindedness. 

Discipline

The salaries and bonuses of investment bankers are often discussed but little is said about the long working hours, hard work, and diligence that goes behind them. This requires strong self-discipline. Investment bankers, right from the beginning, work in a very high-pressure environment, because of which they must be able to perform under intense scrutiny and demands. 

Self-discipline is often an innate quality but it can be learned throughout life in multiple ways. Trying to finish tasks on time and consistently is a remarkable way to develop discipline as a habit. 

Conclusion 

A certain personality and skill set can help you succeed in investment banking, much of which can be taught and learned. Excellent communication, self-discipline, and open-mindedness, along with the ability to network and maintain relationships is extremely crucial for a career in investment banking. Additionally, the best way to develop and improve upon soft skills mentioned is by practising and incorporating them into your daily life.

Before you land your dream job in investment banking, you’ll have to get through the final round of interviews. These interviews consist of multiple rounds of behavioural, technical and company-specific questions. At times, you may not have the required bandwidth to prepare for a long time. Here is a quick guide for IB interview prep in a day: 

Understand the job role

A candidate who comes into an interview without any knowledge of the position is deemed unsuitable by the interviewer. You should be able to show that you are aware of the general practices of investment banking and know your specific duties. An entry-level analyst position, for example, involves creating presentations, news reports, tables, and pitch books. 

Dress appropriately

The clothes you wear make an impression, and what is unique about the finance field is the corporate culture, according to Marisa Mackey Palmer, a career blogger who spent 10 years on Wall Street. She says, “you must dress in a classic, formal way. Being the custodian of your clients’ capital, you must come across as genuine, friendly, and at the same time highly responsible.” 

Palmer suggests that men should wear classic-cut suits, preferably in darker colours, and avoid trendy styles. Women, on the other hand, should wear modest skirt suits, as they seem more traditional.

Demonstrate technical skills and your willingness to work in teams

In every interview, the recruiter might ask an unexpected question. You may be asked about your successes and failures and how that motivated you to pursue investment banking as a career or select a particular role. As a response, you could prepare a few success stories and one or two failures. These stories can be used to illustrate your approach to finance, career choices, leadership, teamwork, and resilience. Additionally, you could highlight stories that show a high emotional quotient.

Former JP Morgan Chase employee Judy Panagakos, who has over three decades of experience in the industry, says you shouldn’t be shy about preparing answers. However, you don’t want to sound rehearsed. You should have a broad idea of what you want to convey. You can also practice with a friend, which helps build confidence and makes you sound less rehearsed. You can then select concise and effective responses that you can deliver fluidly, as a result. 

Moreover, it is vital to work through a broad range of interview questions, to have a solid grip on what you may be asked. You can expect case study questions related to valuation and leveraged buyouts (LBOs). An in-depth interview prep course will take you through the variety of questions and techniques on how to answer them. 

Why did you choose our bank? Or this role?

Before the final day, you need to structure your narrative on why you’ve chosen investment banking as a career and be able to explain this concisely. You also need to explain why you want to work for that particular bank you’re interviewing with and avoid being vague.

The interviewers are interested in knowing if you cared enough to spend time learning about their bank. You can do this by making your answers institution-specific. For instance, instead of saying you admire the culture, you can relate your answer to the bank’s mission and vision statement and values. You can also mention the experience of an employee of the bank who inspired you to choose the bank or the bank’s recent deals or simply their rich heritage.

Appreciate the recruiter and process

You need to be memorable and stand out in a fiercely competitive environment. When Palmer was asked about her experience, she shared that after the interview, she gave the recruiter a handwritten thank-you note expressing how much she wanted the job. You shouldn’t hesitate to show your passion and enthusiasm for the role or the company.

Finally, prepare for a long conversation

Given the intensity and broad range of topics covered in the interview, it can go on for few hours. It can be challenging for candidates to stay focused during this time. Therefore, career coaches advise candidates to eat well before their interviews and have water nearby. 

In addition, it is important to remember that some interviewers can be impassive on purpose. They may extend the interview for a longer duration just to test your sharpness, resilience and ability to adapt. 

Conclusion

Most candidates selected for an interview must research the particular bank. They must also familiarise themselves with the deals it has concluded in the recent past or is currently working on. Have a general awareness of the economy and financial markets. Although this may not always help you stand out, it does show that you know what is expected of you.  

Finally, don’t be afraid to share stories and your achievements as part of your answers. You might find some stories or examples that are relevant to multiple questions. It is important to communicate answers that show why you are a good fit for the team. Recruiters and senior bankers want to know if you have what it takes to do the job. 

Investment banking is one of the most coveted jobs in the financial industry. It is no surprise that an average day in an investment banker’s life can be long and bustling. The ones who are persistent and continue to stay in the industry often go on to have long-lasting and financially rewarding careers. An entry-level Investment banking analyst may work up to 80-100 hours per week. Lets unwrap a typical day in the life of an investment banker for an entry level analyst position:

Morning

A work day usually starts around 9:30am. The mornings are usually occupied with checking text messages, emails, presentations from clients, colleagues and mostly senior bankers who are looking for updates, status reports, final presentations, or asking you to review calculations.

From 9:30 am until lunch, associates and analysts work on company analyses and financial projections. This often includes factoring in adjustments requested by senior colleagues, who have spent the previous evening reviewing the day’s work. This becomes a more comprehensive task if a company has declared quarterly or annual results. 

If you are lucky, on a slow moving day, you may get an opportunity to chat with one of the senior bankers on their recent projects. Around the same time, you may have to attend a once-a-fortnight meeting hosted by your group, which includes all your colleagues, and immediate supervisor. During these meetings, the group discusses ongoing and future projects as well as deals that are about to come through, market trends, and client engagements that are planned for the week ahead. This gives you an opportunity to share and absorb knowledge about the current market trends, state of the economy and companies, in general.

Afternoon

On a regular day, lunch is a comfortable 45-minute or an hour-long stretch, generally spent with co-workers at a nearby restaurant or the company cafeteria.  Post lunch, analysts return to their desks to send updated financial models and presentations to the team’s associates. The associates evaluate these models, suggest corrections or alterations before sending them back to the analysts.

This is a demanding part of the day for an analyst as they need to make multiple revisions and get back to the associates. They also want to prove that they can handle responsibility and contribute towards the deal. 

Afternoons are reserved and keenly focused on active deals. Investment banking teams are assigned different deals – one deal at a time along with a senior banker who is diligent about details. These usually include corporate transactions such as initial public offerings (IPOs) and mergers and acquisitions (M&As). Short coffee breaks are common and spread out in between.

The Second Half

The second half of the day is divided into two segments: before and after dinner. More often than not, on most days you will have dinner at the office. Before dinner, the work is more structured and predictable. Associates finish their work by early evening and pass it on to the analysts to go through the presentations, financial models, projections, and reports again for a final review. 

Post-dinner work starts with reviewing the morning’s work. Major revisions are required to be made to the pitchbook in which senior bankers and associates have offered their comments. This may include minor changes in cost structures or the time period of cash flows, among others. During this period, associates and analysts also work with many other departments such as equity research analysts and sales professionals.

Wrap up

Depending on the frequency of comments, revisions and the correction cycle, which might repeat anywhere from one to four more times, the night ends. Although many might consider this a very hectic work schedule, for those who are passionate about finance and corporate deals, a morning is incomplete without financial presentations, or with the news of a new deal. An analyst’s afternoons get even more exciting when he or she works on live deals and interacts with experienced bankers. Evenings are intensely focused on hardcore finance and team work.