Making the Leap: Do You Have What It Takes for Investment Banking?

by , Jan 3, 2011

Guest Post by Way Lum from ZoomInterviews. Learn more about ZoomInterviews by clicking here.

Investment banking hearing these two words cant help but evoke images of Wall Street, high profile deals, posh marble and wood offices, and sharp bankers in well-tailored suits (not to mention the potentially large bonuses that can come with all of the above). As long there as there are investment banks, there will be MBAs flocking to become the next high flying financiers in the worlds major financial hotspots - New York, London, Hong Kong, Tokyo and Singapore.

Business schools have long been the training grounds and feeders of talent for global investment banks and regional firms. Despite the setback that the industry suffered during the financial downturn, investment banking remains highly attractive to MBA students. The combination of rigorous financial training, an extremely demanding work environment and early exposure to CEOs and CFOs at client firms provides an irresistible combination of experiences and skill building that can fast-track ones post-MBA career.

Many MBA students will set their sites on investment banking starting in the fall of their first year of b-school. While firms recruit high caliber MBAs from a wide range of backgrounds, the question that runs through the mind of every aspiring banker, of course is can they make the leap?

Your Pre-MBA Work Experience and Passion for Banking

There is not a typical pre-MBA profile that investment banks seek in MBA candidates. Previous financial experience is valued, but not required. What banks are really looking for are strong athletes, those that have the raw mental horsepower and aptitude for finance, and that possess the stamina to work 100+ hours per week.

Some MBA students have made radical career switches into banking. For example, weve known of former chefs, high school teachers, engineers, and even fighter pilots and professional athletes successfully transitioning into investment banking. What are the common denominators for all these MBA students? financial acumen, the ability to fit in (read: social conformity), and a clear passion for banking.

For former investment banking analysts who are seeking to continue their post-MBA career in the field, there are advantages and disadvantages to being a career advancer within banking. The advantages include having the requisite modeling skills, understanding the demanding culture and pace of banking and being able to speak the language of deal flow, IPOs, PPMs and M&A. However, there are also disadvantages MBAs who were analysts in their past life will be held to a higher standard of analytical and technical competency, particularly during the interview. They will also be heavily probed by skeptical bankers as to why they want to continue in banking. If youre a former analyst, be ready to state a strong case for your candidacy.

Leverage Your B-school Experience for Banking

Banks are looking for newly minted MBAs who are eager to enter into the industry, and willing to sacrifice their personal lives to get ahead and make their mark. Firms will source this talent from top business schools globally, and for firms based in major Western financial centers such as New York or London, primarily from elite schools in the US and Europe.

The caliber of your school will either be an entre or barrier to entry into investment banking. Major bulge bracket banks such as Deutsche Bank, Credit Suisse, Morgan Stanley, J.P. Morgan Chase, and UBS have target schools, as do prominent middle market firms such as Houlihan Loki, Piper Jaffray, Lazard, and Miller Buckfire. This means that leveraging your b-school experience starts with being planful about which school you apply to (i.e. those that have formal recruiting relationships with firms) and ultimately decide to attend. If your school is not a target school for investment banks, it makes it much more difficult to break into the industry.

The Sharpening Process

What allows MBA students to make dramatic career switches is what we term The Sharpening Process, that occurs during both the first and second year of a full-time program. Through carefully chosen academic work, formal and informal networking opportunities and a steady acquisition of industry knowledge you can hone your candidacy for investment banking during the first year. Much of this will occur during the fall of the first year, when banks do heavy recruiting on campus ahead of actual internship interviews in January and February. The key elements of this sharpening process are below:

• Classes Financial course work can be beneficial in preparing you for banking, although you will likely find that courses dont have as much actual utility in the fall recruiting process. While the knowledge you gain in accounting, finance and modeling will be valuable in the technical portion of your internship interviews with banks, networking conversations you have leading up to those interviews will probably not require you to flex this knowledge too much. In general, the core breadth requirements that you take the first quarter or semester of your first year are acceptable for investment banking.

• Student Clubs Joining your schools investment banking club will be an integral part of your preparation for a career in banking. The club provides students will access to recruiting activities and events, as well as guidance through programs such as resume reviews, networking practice, technical reviews and mock interviews. Through the investment banking club, first years can receive either formal or informal mentoring from second years, who will be instrumental in showing their more junior classmates the ropes of networking, preparing for interviews and how to be successful during the internship. The investment banking club can also provide discounts on technical training sessions through vendors such as Training the Street. If youre serious about banking, count on joining and being an active member of this student club.

• Experiential Learning Banking recruiting starts early in the fall of your first year, and continues fast and furious straight through internship interviews in January and February. This doesnt give you too much opportunity to bolster your candidacy through additional banking-related learning activities. That being said, certain b-schools will offer IPO and M&A case competitions that you can participate in with classmates, which simulate working on deal teams. This will give you the opportunity to hone your financial and deal-making skills, as well as provide you with a great talking point on your resume. Your schools bank week trek, usually to New York, London or Hong Kong, depending on your geographic focus, is also another form of experiential learning; theres nothing like stepping into a firms offices (read: their home turf) to get a gut-level feel of a firms culture and work environment.

• Networking The single most important activity you can do to increase your chances of getting selected for an interview is networking. In fact, youll spend most of your fall attending formal networking events arranged through your school and/or by the banks, and the rest of your time developing individual relationships with bankers through informational interviews. This is a process, and you will be constantly evaluating how your networking is going, with whom you have made connections with, and your perceived likelihood of getting invited to interview. All this effort culminates into a banking trek, which, if your school offers such a trek, will usually happen in December of your first year. The banking trek is essentially your final opportunity to solidify your relationships with bankers in hopes of being selected for interview.

• The Internship If you are a career changer, doing a banking internship is absolutely required to have any hopes of transitioning successfully into the field post-MBA. While banks are very open to taking students from different backgrounds for the summer, they are much more stringent in requiring that any full-time hires have had a summer in banking resulting in a full-time offer, and preferably at a well-known competitor firm, if not their own. In addition, banks (particularly bulge bracket banks) are attracted to students who receive multiple offers from other banks, and will even ask candidates if theyve received any other offers as a measure of candidates desirability. Net-net, what this means is that you should count on securing a summer associate position if you are serious about having a career in banking.

The career leap to investment banking is an attainable one by many aspiring MBAs. What is critical for success is, first, understanding the very nuanced networking that is required to build relationships with bankers and be successful in the recruiting process, and second, being prepared for the investment banking interviews, which requires a strong performance in both the fit and technical portions of the interview. Any MBA first year can do well in both, but this does require understanding the process and executing well every step of the way.

Best of in making the leap!

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Read other "Making the Leap" articles:

• Making the Leap: Do You Have What It Takes for Private Equity?
• Making the Leap: Do You Have What It Takes for Brand Management?
• Making the Leap: Do You Have What It Takes for Investment Banking?