I did a search for this but did not find anything. I’ve been posting a lot lately about looking for a job and interviews are finally starting to roll in. In one case, I am on the shortlist for a 3rd year ibanking analyst position. I currently have two years of sell-side research experience. Banking is not exactly my first choice, but the position is on a great team at a top firm, so it would be hard to pass up in the current job market environment. My question is, what’s the best way to answer the “Why do you want to move from research to investment banking” question? I am 100% sure that question will come up during the interview. True answers include: - The firm I work for sucks - Sell side research is a dubious value proposition, imo - I live in a small market finance city and want to move to a big-time finance city where this job is located - The money is a lot better - The exit opps are a lot better None of these answers sound particularly compelling since most of them have a negative slant. Thanks!
I had once thought about switching from research to banking, and my thoughts were as follows – (1) I want to better understand the transactional side of finance (2) I believe I’m more excited in working on transactions rather than following the markets - I’m intrigued whenever transactions happen to the companies we cover, but rather than playing a purely reactive role by analyzing deals once they’ve already happened, I want to play a proactive role in helping to get those deals done (3) I want to develop more rigorous modeling skills (4) Rather than constantly tracking a fixed basket of stocks, banking lets you look at a much broader variety of businesses and different tyeps of transactions which would make your financial skill set more versatile (5) I’d like the opportunity to work with different deal teams so I could broaden my exposure to finance All the reasons you mentioned would be true too, but I guess the points I mentioned might be more “interview-safe”. Hope this helps.
numi’s with it. When answering this question i usually go with something like: “while i enjoyed research, i realized that the never ending treadmill of quarterly reporting wasn’t what i found exciting. After two years I am now aware that its the transaction side that will be more fufilling for me and with all my complimentary skills learned in research i believe banking is a logical shift for my goals”. 2 next question: “why is it more fufilling” and “what are your goals”…and now you have the interview pre-planned except the interviewer doesn’t know it.
I’d agree with strikershank as well – it’s definitely a good idea to point out how transferable your research skills are, namely writing, building operating models, and ultimately being able to look at numbers on a financial statement and translate them into useful investment ideas. In addition to the points that we’ve already mentioned, one other thing you might want to point out is that in banking, you get to learn about the challenges of raising capital as well as what drives companies to make certain financial and strategic decisions. Why is this relevant? Well, in research, you’re advising the investor, but in banking, you’re advising a company – and if you have any real aspirations for starting your own company or being in a situation where you need to raise capital for a particular business venture, banking teaches you the types of things that drive financial decisions in a way that research doesn’t, since on the research side, you’re on teh outside looking in since you’re not actually the dealmaker.
research is “ibanking,” as an extention of the capital markets function. ibanking has many,many different areas. better figure that out before you seek a change.
I think he was specifically referring to investment banking, namely the transacting side (as opposed to ECM, research, or any other functions that fall under the “investment bank” umbrella)
never, ever say you want into ibanking for the money or exit ops. these are things that everyone in the business KNOWS you are getting into it for, cause it sure isnt for the work-life balance. its one of those unwritten rules. thought shall not talk $ in the banking interview.
numi Wrote: ------------------------------------------------------- > I think he was specifically referring to > investment banking, namely the transacting side > (as opposed to ECM, research, or any other > functions that fall under the “investment bank” > umbrella) Yes, I am going into investment banking, not just an investment bank. I think anyone who has taken the CFA exams and worked in the industry knows the difference.
Thanks for the excellent replies numi and strikershank. The interview went well except for one point. The firm wants me to come in as a first year analyst. I have two years of sell-side experience and one year of relevant industry experience. In terms of education, I have a BA and have cleared at least 2/3rds of the CFA, with the results from the 3rd exam coming in a month. Why would the firm ask me to come in as a first year analyst? Basically, that translates to the same money I am making now, but twice as many hours and a demotion (3rd year analyst would be more or less parallel). Is this standard for someone transitioning from research to banking? It seems like a good deal for the firm and a bad deal for me. Thanks again for the guidance.
sounds reasonable. you have no transaction experience so it would be doubtful that a big firm would bring you in as a second year analyst. if you let me know what firm it is in particular, i can comment with greater specificity, but right now you will require the same amount of training for the books and almost as much training with the transactional modeling as a fresh college graduate.
btw if you get hired, just be grateful that you could make the switch from research to banking especially in the current job market. they would never bring you in as a third year IB analyst and probably not as a second. CFA makes no difference on the transaction side so HR will not look at it as value-add in any way. that said, if you get the offer even as a first year analyst in IB, it is a GOOD deal for you too any way you look at it.
numi Wrote: ------------------------------------------------------- > sounds reasonable. you have no transaction > experience so it would be doubtful that a big firm > would bring you in as a second year analyst. if > you let me know what firm it is in particular, i > can comment with greater specificity, but right > now you will require the same amount of training > for the books and almost as much training with the > transactional modeling as a fresh college > graduate. I disagree slightly here and advise Bromion to seek out a compromise of a second year analyst title. First year guys have no skill set whatsover, at this point he should least be able to navigate a model and have a sense what the drivers of the model are. Usually associates/experienced analysts are the ones who have to relate the model to a transaction. First year guys are typing numbers into a spreadsheet.
well, any analyst needs to know how to build basic transactional models, even if they don’t understand all the how’s and why’s of things. that being said, you’re right that he has nothing to lose by trying to negotiate, but i was just saying that there is not that much precedence for him to be brought in as a second year at least based on the bankers i’ve spoken to in recent months, and he should not be disappointed if he’s given an offer as a first year. first year IB analyst at a “top” firm (as the op claims) is MUCH better than his current research role at a firm in a “small market” that “sucks”
bromion Wrote: > - The firm I work for sucks > - Sell side research is a dubious value > proposition, imo > - I live in a small market finance city and want > to move to a big-time finance city where this job > is located > - The money is a lot better > - The exit opps are a lot better Neither is a good answer. You should think about your motivation to make a move to IB, and then explain how your experience in research would add to your tally. Obviously, you should not talk about immediate monetary gains of the move (this is clear for an interviewer regardless) - you’d rather elaborate on the opportunities to grow faster as a professional in IB environment. It is not a taboo to talk about money, but if you opt to, you will be better off focusing on your future earning power (which of course will grow faster in IB)
And as for a 1st year analyst - this is just laughable. 2 years of relevant experience, 2 levels of the CFA program passed - you are well positioned to be considered a candidate for more senior roles. Not knowing you better, hard to say whether you are good enough to pretend for a 3rd year role, but 2nd year analyst is an absolute minimum you should consider, even if it is Goldman Sachs.
Thanks for the replies everyone. numi, can you further explain your logic? I don’t see how this is a good deal for me. I have at least 2, and probably 3 years of relevant experience if you count the industry experience. Why would I come in as a first year? True, I do not have transaction experience, but I should be able to learn everything I need to know in a short period of time (maybe that is unrealistic, but based on the conversations I have had with the bankers I work with, it seems reasonable). True, the firm has a better name than the one I work with, but I don’t think that is so valuable that I would want to restart my career. I am trying to get away from the entry level, not stay here forever after all. Punching numbers into spread sheets and formatting pitchbooks does not seem like a very good use of the skills I have developed. Also, I am not clear that it would really be that much of a benefit to have transaction experience on my resume from a career perspective. I know that I am not going to be a career banker, and I don’t anticipate a move to PE at any time. I would eventually like to go the PM route, and I thought that understanding how bankers influence the market would be relevant and interesting, but not so much so that I want to start over. Anyway, I think I remember reading that you made the switch from research to PE with no banking experience in the middle – is that correct? Did you come in as a first year analyst or equivalent? Thanks again for your help, numi and others.
This is a tough call, but 1st year analyst is a poor entry point. On Aug. 19th, you could have all 3 levels of the CFA passed and 3 years relevant experience. Do you really want to be jumping through 1st year analyst hoops with monkeys that were attending frat parties 4 months prior? There is a huge difference in skill set from someone with your experience and someone just out of undergrad. If you take the position you need to make it clear that you need more frequent performance reviews (or something of that nature) that would allow you to jump quickly through the analyst ranks to a sr. analyst or even associate position (post-CFA). Just my 2 cents.
One more thing for you to consider: HRs (which according to numi will not regard CFA as a value-add) have near zero influence on the decision to hire. Your future superiors decide - and these investment professionals do understand what it takes to get the charter and what skill set a charterholder have. With some direct IB experience in a smaller bank CFA may allow you to lateral as an associate without an MBA. With only research experience, associate level may be unrealistic, but 1st year analyst is absolutely out of question, either.
I understand that Associate is out of the question, but it seems to me that if I were to come in as a 3rd year analyst and work 100 hours a week, I would be ready for an Associate role in 1-2 years even without prior banking experience. Maybe that sounds arrogant, but I am confident in my ability to learn quickly and master any relevant material they throw at me. One thing is certain: At this point, I need to focus on progressing in my career and seeing the pay off to putting in a ridiculous number of hours studying and learning this business. The more I think about it, the more I am dead set against coming in as a first year analyst, because that effectively gives me zero credit for my experience and education to date. Obviously, I am open to the idea of banking, but I am not so interested that I would sell myself short to get my foot in the door. The real motivation for finding a new job in (banking or otherwise) is that I have outgrown my current role and would like to move to a larger finance city (prefer SF but would move to NYC for a good opportunity). I am up for promotion at my current company (again), so if I cannot find a job, it will not be the end of the world. To put this in context, if I do get promoted, it would be to coverage analyst (VP level at my firm). To me, the prospect of that sort of move underscores my value as an employee as well as my inability to restart my career at the bottom – the opportunity cost is just too high. I will talk with the firm and see if they are willing to negotiate, but I think it’s more likely that I will just walk away. Thanks everyone for the clarifying thoughts.
You may think first year analyst is out of the question, but I’m telling you that people that I know that did not have prior banking experience, even with two years in the workforce, sometimes get brought in as first-year IB analysts. I’ve seen them get hired as second-year analysts as well, but not IB third-years. The chances of him getting hired as a third-year analyst without any transactional experience is remote. Do you know how many experienced analysts are out of a job right now? There are IB analysts, first and second years, have been laid off at ALL the top investment banks year-to-date, and the available supply of junior transactors far outweighs the demand. Unfortunately, neither you nor I have any applicable skills in IB that any second-year analyst from a top BB can’t offer – and the difference is, they’re in the transactional loop every day, and you are not and I have only been for a few months. Neud, feel free to consider it “laughable” as you wish, but I prefer to speak of facts rather than hypotheticals. (and FYI, since you specifically mentioned Goldman Sachs, they would almost certainly not bring him in as a third-year and likely not a second-year either. How do I know…) bromion, as to why I consider it a good deal for you – well, you essentially stated that you think your current role is pretty much a dead-end job, and I think I would agree with your assessment. As to your question, I got hired in as an associate in PE, which is the same position as everyone else that had 2-3 years of sell-side experience. I was the only person in my class that didn’t come from a banking background. That being said, even though I got it done, I felt like I had to jump through hoops to get a good private equity gig. Keep in mind that at the time I was interviewing, I had two BB’s on my resume and had already made senior associate on the sell-side after just one year of equity research experience, and I still felt like I had to be essentially flawless in my interviews in order to convince people to give me a chance and have them get over their preconception that, “Well, he seems like a good candidate, but he hasn’t done banking…” Anyway, those are just my impressions, and I am pretty confident in them since I have personally been through the PE hiring process that you’re interested in, and also having dozens of friends in investment banking. I’m sure others here can speculate as to how much your two years in equity research are worth as well as your experience in the CFA program, but I am telling you what I’ve seen myself (having interviewed for banking jobs) and what I’ve heard (that any of the BB banking firms will not care about your CFA experience as you’re interviewing for an analyst role. As you said, it is a predominantly a “number crunching” job and if you are a good candidate in research already, your modeling skills should already be as good as they would have been without your participation in the CFA program) Hope this helps. By the way, let’s not forget the important point first – why don’t you get the offer first, and then we can continue to discuss?? What firm is this?