Bank on Banking

This question is one that I am asked, in some form or another, very often. In general, I get this question in one of two ways: either “how do I answer ‘why banking’ in an interview” or “why do people actually pursue investment banking?” While the responses to these two questions share some common phrasing and can be summarized in similar ways, there are many differences as well. So, without further delay, let’s get into the “interview” response.

How to Respond in an Interview

In an interview, I recommend sticking with what is normally expected of this question. You should highlight the skill set gained, the exposure to the markets, senior bankers and companies, and extensive deal/project experience both in terms of live deals and potential opportunities (since not every group will close 20 deals while you are serving your 2-3 years).

Depending on your background, you could touch on the fast-paced nature of banking (NOT compared to trading, but compared to, say, accounting or engineering – although banking often isn’t terribly “fast-paced”) or the ability to work on large transactions/advisory opportunities that impact companies and industries. Additionally, try to avoid answers that sound contrived or hokey such as “it has been my lifelong goal to break into banking,” or “I love working 90 hours per week” – even if you it is or if you do, don’t say it – keep that as your little secret.

One other issue I want to bring up is whether it is a good idea to answer this question by stating that it will allow you to break into private equity, your long-term goal. The answer is: usually not. I say this not because it is a bad goal, or an inaccurate statement, but rather, because you are telling the interviewer that as soon as possible, you will jump ship and pursue private equity – you see banking purely as a stepping stone, not an opportunity. Therefore, while I don’t recommend answering the question in this way, you can absolutely use a blend of the typical answers and a simpler version of this response. For example: instead of pointing purely to P/E, state how you will gain a wealth of opportunities and a tremendous skill set and valuable transaction experience, which will help you in the future whether you remain in banking, go back to school, pursue P/E or something else entirely. This point is mostly aimed at those people pursuing analyst-level opportunities. Those MBAs, for example, who are pursuing associate-level opportunities, should not be pointing to other avenues of interest – in short, associates should have a stated goal of moving up the ranks and making banking their career(whether they really do or not).

Why Bankers Really Become…Bankers – Some “Actual” Reasons

This really depends on who you are and your future interests. Right off the bat, people often pursue banking not necessarily for anything tangible, but rather because of what they hear about banking – not the horror stories, but, you know, the other stuff. While much of what people hear is true, let’s take a closer look at what is being said and its merit.

One of the first things that pops into people’s heads when they hear IB is money – good base salary and fantastic bonuses. While the base salary is certainly strong, the bonuses aren’t always fantastic as most people in the business a few years ago would tell you (and even now, although bonuses have started coming back – especially for stronger shops). Additionally, keep in mind that many smaller shops, especially boutiques, don’t have outstanding bonuses, or sometimes even the same starting salaries as BBs – that said, those boutiques often don’t work the same hours as bigger shops either, which brings me to my other point: hours. While analysts can certainly make big dollars, they can also end up working enough hours to cover 2 full-time jobs (and not just the 35-hour per week jobs, I mean a standard 55-hour or so work week job at times). No, you won’t always be working 100+ hours per week, but there will be some weeks like that and many for some groups.

Next on the list is prestige. If enough people in your class and friends tell you that banking is awesome – “models and bottles baby” – and that the money flows, doors open, etc, it starts to sound appealing and interesting. While I agree that banking is a good profession if the work is of interest to you, you are not going to suddenly be a high-roller or a big “playa” just because you are a 1st year analyst with BB X.

Beyond the money and presumed prestige, there are definitely other reasons to pursue IB – most important of all is the career opportunities. Banking definitely offers outstanding opportunities to those interested in finance whether in terms of breaking into P/E, VC or staying in banking and moving to a smaller shop to gain a better work/life balance. IB offers the skill set, transaction experience and, “prestige” to break into these competitive fields often without business school. If breaking into these fields is a next step or goal for you, then banking, especially if you are placed in one of the right groups, will definitely help you along your path.

Finally, at the end of the day, all else aside, there are many people who honestly enjoy investment banking – the transactions, stress, experience, modeling, client interaction, and corporate environment. Although many people ask whether anyone actually enjoys banking, surprising or not, many people do enjoy it and break into the business intending to move up the ranks. Banking can be a high-energy environment with deals moving and business happening – as an analyst, you might not be making the decisions, but you are certainly playing a valuable role in the process (whether exhausting or not) and, if you are a strong analyst, can begin picking up more responsibilities, then a promotion and so forth.

Stay tuned for a fresh product coming very soon and much more!