Monday, November 12, 2007

Choosing Career - Job in Investment Banking

Sales and trading versus M&A advisory

Within investment banking there are several opportunities you can choose to pursue. Probably the most well known is M&A advisory: advising clients on takeovers and mergers or on defence strategies when they receive a hostile bid. The other popular career is located in the bank’s dealing room: sales or trading. The latter means that you’re mostly trading securities of a certain type for the firm’s own account whereas salespeople buy and sell securities on behalf of clients.

Apart from the different scope of these activities there’s also a significant difference in the working hours between M&A bankers and people in sales and trading. Where M&A is well-known for long working hours, especially during nights and weekends, sales and trading is suitable for those who like to get up early in the morning. In sales and trading coming to the office around 06.00 a.m. is not uncommon, if you had a rough night working on an M&A deal you might just be leaving for a quick power-nap.

Amsterdam versus London
If you are a Dutch student aiming for a career in investment banking, there are two places you are likely to end up; either in Amsterdam or in London. Obviously banking in Amsterdam has more focus on the Benelux region whereas London covers the entire of Europe. Although some of the major bulge-bracket Wall Street firms have opened offices in Amsterdam as well, the majority of those still choose to cover the Benelux from London. So moving to London does not necessarily mean you will not be involved in any Dutch deals.

An important difference is of course the more international character of the business in London, since London has been one of the world’s most influential financial centres for decades. You will find that the approach to doing business is slightly more Anglo-Saksian in London and that also implies that the working hours are longer than in Amsterdam. However in London generally the larger deals are done and some international experience obviously never hurts your career.

Banking versus Consulting
When it comes to choosing a career path many students who consider investment banking to be an interesting choice are also appealed by (strategy) consulting. Both industries clearly require analytical skills and teamwork and both offer excellent career and learning opportunities. Furthermore both careers offer you the opportunity to gain a lot of experience early-on in your career.

The scope of your day-to-day activities, however, is quite different: in investment banking the work is primarily finance oriented with many financial analysis, deal structuring and financial modelling. Strategy consultancy looks at a company’s business model and strategy instead of analysing the business from a pure financial point of view. In general one could say that the job in investment banking is more ‘in-depth finance’ and strategy consulting has a broader, less in-depth, scope. Furthermore consultancy firms are usually paid by the hour whereas investment banks charge a fee upon completion of the deal. Therefore banking is even more deal-driven but that also means the revenues are less certain. Required skills
Although different banks look for slightly different personalities there are many characteristics that suitable candidates have in common.

-Analytical skills; being a banker means that you come across many different problems that need to be solved and problem solving analytical skills are an absolute prerequisite in this business. When recruiting candidates investment banks usually find analytical skills among the most important characteristics of a candidate. They find it far more important than thorough knowledge of finance and economics. Therefore you will find many people with a more technical background (e.g. Physics, Mathematics, etcetera) working at the different investment banks.

-Team players; although you might think that ‘just doing it yourself’ is usually a good solution when in college, that doesn’t get a billion Euro deal done. Especially in M&A advisory teamwork is essential and therefore it is likely that during the interviewing process they will go on and on about examples showing you are a team player.

-Communication skills; with teamwork comes communication. To function in a team you need to have good communication skills in order to communicate with your team members and, later on in you career, with clients.

-Meeting deadlines; in college you might get away with a good excuse when handing in your paper too late, the client however will already have hired someone else. Therefore it is important that you get things done in time. Sometimes that’s just impossible, so let people know in advance and they can help find a solution. The above-mentioned communication skills are quite handy then.

-Attention to detail; when proposing a billion Euro deal to a client the last thing your manager wants to be confronted with is that his numbers are inconsistent. Therefore attention to detail is critical. Spelling errors, numbers that don’t add-up and other silly mistakes can ruin the deal and even lead to legal consequences if investors decide to sue the bank. Therefore displaying attention to detail from the beginning helps you build your career (so check your CV for spelling errors).

Applying to an investment bank
So when you’ve decided that a career in investment banking is totally something for you, the next step is to land an internship or job at one of the major players. By far the easiest way in is to do an internship first. Many banks primarily recruit there first year analyst class from the internship the year before. Furthermore you get a chance to find out whether the job really suits you and get to know some people who have some more experience in this field.

Step 1: online application
Most banks use an online application process for graduate recruitment. For internships as well as fulltime positions you need to fill in extensive forms (it will take you approximately 2.5 hours per bank to fill them in, maybe even more). Basically these forms are a combination of personal details and stuff that you would normally put on your CV or mention in your cover letter. Typical questions are ‘give us an example that shows you are a team player’ or ‘give us an example of something you have achieved in the last twelve months that you are really proud of’. When answering such questions it is not essential that you come with superior achievements such as climbing the mount Everest or saving the wildlife in Kenya. It’s just about the way you write your experiences down: you can be invited for interviews with examples of you flipping burgers, as long as you properly describe what you learned from it and what kind of teamwork was involved.

Apart from a good answer on these questions the best advice is that you should never lie on you application form. Investment banks employ people just to do your background check so every work experience that you lied about will be discovered. And obviously, that doesn’t land you a job in a highly regulated business!

Step 2: interviews
If you did a good job filling in the forms you will get an invitation to come for interviews. Usually they won’t notify you that many days in advance, just to check whether you can arrange all your other appointments to be rescheduled.

The interview process can be tough: many interviewers like to test your analytical skills and ability to work under pressure on the spot by giving you trick questions and so-called ‘brainteasers’. The best way to prepare for this is to read the ‘Vault guide to Finance Interviews’ which gives you numerous examples of brainteasers and other interview questions.

Another important part of the interviewing process is to check the candidate’s motivation. Therefore the other major topic during your interviews will be your motivation to be an investment banker. Do you really understand what it means to be in this business? Do you really want to make the required sacrifices (working weekends and late nights)? These are all questions you can prepare in advance and that will definitely help you. In this context it is also wise to do a little background check on the bank itself; it looks really silly if you just told them this is the only bank you ever want to work for and then you don’t know what the CEO is called. Enthusiasm is key here.

If you have a background in economics you can expect them to ask you more in-depth finance and economics questions whereas people with a technical background usually get more questions that are based on understanding and analysis.

Step 3: the assessment centre
Although not every bank organises assessment centres (or super Saturdays as they are sometimes referred to) but many banks do. Basically this is a ‘second-round’ interview that consists of various activities that help people assess your skills. This often involves short, unprepared, presentations, group discussions, more interviews and a case study. Again enthusiasm is the key!It is also wise to socialise with your fellow candidates, although you might see them as your competitors now, they can be your colleagues tomorrow.

Deadlines for application
If you have decided that you are going to apply, be advised that there are only certain periods during the year in which you can apply. Although deadlines vary from bank to bank most banks require you to submit your application for an internship by the end of December or beginning of January and you application for a fulltime position by the end of October or beginning of November. Check the website of the bank for the exact date, sending in an application form after the deadline is virtually impossible. Some banks also offer the opportunity for second year students to do a week’s length internship with them in the Easter period. This is to get acquainted with the business of investment banking and gives you good insight of what is expected from an

The household names in investment banking
Barclays Capital
Credit Suisse
Dresdner Kleinwort
Deutsche Bank
Goldman Sachs
Lehman Brothers
Merrill Lynch
Morgan Stanley

Must reads:
If you want to find out more about investment banking, the following books are a great start.

For interview preparation:
- The Vault guide to Finance Interviews
- The Vault guide to Investment Banking
- Wetfeet Guide to investment Banking

For background knowledge and investment banking ‘war stories’:
- Barbarians at the gate, Bryan Burrough & John Helyar
- Den of Thieves, James B. Stewart
- Liar's poker, Michael Lewis
- Monkey Business, John Rolfe
- Rogue Trader, Nick Leeson
- The Predators' Ball, Connie Bruck
- When genius failed, Roger Lowenstein

For more info about investment banking and an excellent opportunity to see the most prominent investment banks in London, visit:

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