How do I become an investment banker?

Since I left investment banking almost 15 years ago, I think I’ve been asked this question about a million times. It always reminds me of that hilarious I need an iPhone YouTube parody, as the question is usually asked with absolute certainty that a role in investment banking is the answer to all career problems.

So, putting aside a discussion of the pros and cons of investment banking, I wanted to provide some insights on this question.

My Experience

I finished my Commerce/Law degree in 1999, when the economy was flying high and the world was entering the dot-com boom. My grades were good but not great. I applied for around 100 jobs in management consulting, corporate finance and investment banking, interviewed with about ten of them, and ended up with 2 job offers.

The first of these job offers was from a Big 4 accounting firm, and the second was from the Infrastructure M&A team at Salomon Smith Barney (now Citi). Having seen the movie Wall Street, I naturally accepted the investment banking job.

Between 2000 and mid-2002 I worked on large international energy sector M&A deals, traveling around the world and loving every minute of it. By mid-2002, I had become convinced that the financial modeling component of investment banking could be dramatically improved using standards and technology, so I quit my M&A job to found BPM, and more recently Modano.

Investment banking is an exclusive club

The first thing you need to appreciate about investment banking is that it’s a very exclusive club. Millions of people around the world are fighting to get into this club, and there just aren’t that many positions available.

In my second year at Citi, the other analyst in my team and I were asked to filter over 1,000 graduate applications. I found it quite amusing, because most of the applicants had achieved better grades than I had, yet their fate had come to rest in my hands. I was also pulling 15 hour days on a deal, so I didn’t exactly have time to undertake a detailed analysis of every application.

I recall sitting in a meeting room with my colleague, skimming though the CVs searching for anything that we thought might work well in our team. Most had fantastic grades, so I found myself looking for indications of life experience, initiative and social skills, having worked with many smart people that I felt lacked these character traits. I also looked for experience enduring hardship, something I believe often sets people apart.

The important thing to note here is that, until you’ve made it into investment banking, you’re one of a huge number of candidates vying for the same thing. So don’t be disconcerted by rejection, play the numbers game, and work hard to differentiate yourself in any way you can. Persistence is the key.

Timing is everything

When I finished university, almost everyone received multiple high-quality job offers. The world was in a great place, and in hindsight we didn’t even know how lucky we were.

In today’s world, things are much less certain. The GFC knocked the wind out of everyone, and many of my investment banking friends have been working just as hard over the past 8 years without deals closing or big bonuses being paid.

Investment banking is extremely cyclical, so timing is everything. There are still opportunities around for those with the right skills, but you may need to be patient and accept the fact that the timing might not currently be right for you to make your move. The key is not wasting time in the interim.

Over time skills become key

Obtaining a graduate position within an investment bank is heavily dependent on your university degree and your grades. Over time, these credentials become almost irrelevant as the focus shifts to skills and experience.

The chicken-and-egg challenge with investment banking is that it’s relatively easy to get an investment banking job once you’ve got solid deal experience, but to get that deal experience you need to get an investment banking job. But there are ways to turn the tables in your favour.

I recently caught up with a colleague who is now a managing director of Credit Suisse, and she told me that they’re always struggling to find good people. I asked her what she meant by a ‘good person’, and she said, “Someone who knows their way around the numbers, shows initiative, and is comfortable building relationships with clients.”

In one of my prior posts, I discussed how financial modeling is a career game-changer, and this is a perfect example of this dynamic. Investment bankers must have strong financial analysis skills, and financial modeling is the core financial analysis skill in investment banking. So, if you’re serious about getting into investment banking, you need to get serious about developing real-world skills like financial modeling.

Contacts, contacts, contacts

Life’s not fair. Go to any exclusive club and you’ll find that most people inside knew someone that got them in. Investment banking is a high-stakes, competitive and intense sector, and its participants are always worried about hiring people that don’t work out. So having a well-respected contact who’s already in the club is your greatest possible advantage.

My first ever finance job was a summer internship at stockbroking firm, which I got almost completely as a result of my best mate’s father being one of their favourite clients. I still recall my mate’s father picking up the phone and calling his friend at the firm in front of me, securing me a position independently of their formal internship program. And having that job on my CV landed me a job the following year at UBS.

There’s no single, most effective way to make contacts that will help you get an investment banking job, but if you’re smart you’ll find that they are everywhere. Attend events, ask friends whether they have friends or parents with contacts, go to bars known to be frequented by investment bankers, just do something.

What if I don’t get an investment banking job?

Investment banking may well become your impossible career dream, but this shouldn’t be the end of your world. Investment banking isn’t for everybody. It’s an intense, time-consuming career that only suits a certain type of personality, and I’ve watched many friends over the years go in and out after realising that it’s not their ideal career choice.

There are also many similar roles that are equally rewarding and still pay very well, often with more work-life balance – which is something I took for granted until after I left investment banking. The corporate finance divisions within the Big 4 accounting firms are a great example of this, often doing very similar, exciting projects with the only real difference often being the size of the deals. And in some ways this experience is more relevant to entrepreneurs with ambitions of starting their own business.

So these are my thoughts whenever someone asks me how they can become an investment banker. I hope they’ve provided you with some food for thought as you pursue your Moby Dick investment banking career ambitions on Wall Street. And here's one last one courtesy of Warren Buffett: Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.

Onwards.

Michael Hutchens