How to become an Investment Banker

Being an investment banker involves managing a client’s money, and maximising their profit. When corporations want to raise money they often turn to investment. Investment bankers work with companies to invest their client’s money in assets (be they shares, bonds, currencies or other commodities such as gold) with the aim to maximising the yield from these investments within the timescale that the company has.

Working as an investment banker, you will spend much of your time analysing financial data, managing investment risk, and working on financial models to ensure that any investment your bank makes is valuable to the client you are working with. As you move higher up in the industry, there is more focus on building relationships with clients and attracting new clients in order to broaden your bank’s portfolio of business.

Investment banking is a very lucrative industry to work in with lots of opportunities to travel and fairly quick career progression, but it is also very competitive and can involve extremely long hours. It is a challenging career path that is certainly not for the faint-hearted, but the rewards can be great.

What subjects do you need?

To become an investment banker you’ll need a bachelor’s degree. Whilst investment banks look for a diverse skill-base in their workforce, there is a particular focus on mathematical reasoning and ability. This means that at school level Maths (if not Further Maths) are almost always necessary. Other mathematical subjects such as Physics and Computer Science can also be helpful. Being an investment banker involves a good deal of economic principle so getting to grips with Economics early at school level can be a good starting point for your future career.

How do I get there?

The two starting positions at an investment bank are Analysts and Associates, with the latter being a more senior position than the former. In order to enter the bank at Associate level, you need a masters degree or higher. The most common master’s degree with investment bankers is a Master of Business Administration, although a graduate law degree or accountancy qualification can be equally desirable as these fields have a considerable crossover with the corporate banking world.

To enter at Analyst level, you must have at least a bachelor’s degree. While a finance degree can prove useful in the application process, banks tend to employ graduates from a wide variety of disciplines. Maths and the sciences are particularly common but you’re not unlikely to find graduates of anything from Music to English Literature working at an investment bank. As long as you have a secure mathematical understanding, either from school or from your degree, then you have a chance to become an investment banker. However, having the right skills and qualifications is only the first hurdle, and landing your first job in investment banking can be a big challenge. In a highly competitive industry, it is very difficult to stand out from the crowd.

Almost all large banks offer summer internships to students still at university and this can be an excellent way into a graduate role. If the banks are happy with your performance over the summer they will often offer you a conditional job offer before you begin your final year of study. Some banks have even gone a step further than this and offer so-called ‘Spring Weeks’ where a first or second-year university student can come and gain some work experience with them in the Easter vacation. This can then lead to a summer internship which, in turn, can lead to a graduate placement opportunity! As competition grows for internships, Spring Weeks are becoming increasingly popular as a way to stand out from the crowd and break into this highly competitive industry.

Investment Banking Majors: Assumptions and Constraints

In this article, I am making a few important assumptions:

1. You have to pay for your degree, either upfront or by borrowing money.
2. You are attending a relatively expensive school that will cost at least tens of thousands of dollars in total.
3. University degrees will continue to be required for jobs in finance, especially in the most competitive fields, such as investment banking and private equity.
4. You are interested in a finance career, but you also want a good “Plan B” in case you graduate during a market crash or recession, or you decide against finance.
5. You are a practical, logical person who wants to achieve a decent ROI on the time and money you spend on the degree.

Some of these assumptions may not be true for you.

For example, maybe you have wealthy parents who are paying for your degree, or you’re in a country where higher education is free or very cheap.

Or, you have a philosophical objection to this concept because you believe that a university education should offer “learning for the sake of learning.”

Or, you believe that the entire university system will collapse, so official degrees will no longer be required, and trade schools will take over, similar to what’s already happening in software.

If that’s you, please stop reading right here. You might be right, but this article is not for you.

Instead, we’re going to focus on the average person’s reality:

Why Does Your University Major Matter At All?

Back in 2005 or 2010, your university major mattered because:

1. undergraduate-level recruiting took place later, so more of your grades came from your major, and
2. there were fewer ways to learn accounting and financial modeling independently.

But as of today, both of those – and more! – have changed.

The IB recruiting timeline is now hyper-accelerated, there are far more self-study options, and careers in “high finance” have become less unique compared with ones in technology, sales, or even real estate.

And even if you start early and do everything right, the randomness and timing of the recruiting process mean that you might end up without an IB offer.

So, your major matters for three reasons in the short term:

1. You need to earn a good GPA – at least a 3.5, and ideally over 3.7 if you’re at a lesser-known school – to have the best shot at winning interviews. A low GPA is the most difficult weakness to overcome in interviews, so you don’t want to pick something that makes your grades plummet.
2. You want to signal that you’re competent and intelligent, and a major that’s at least moderately difficult will give this impression.
3. Your major is now more important for “Plan B” options in case you graduate into a market crash or recession, or you decide against finance.

A few other important points include:

• If you’re an international student studying in the U.S., you want a degree that qualifies as STEM so you can stay in the country and work for 36 months after graduation. Many degrees count as STEM (Google it), including some that are a bit of a stretch.
• Regardless of your official major, you should take classes where you learn practical skills that you can apply directly to high-paying jobs.
• Finally, you don’t want a major that crowds out your time for other activities, such as networking, internships, and student groups.

Based on all of that…

Here’s my recommendation for the Best Investment Banking Major” (or “Study Plan”):

• Major: Accounting/finance (or, if your university doesn’t have these specific majors, something that has coursework in these areas).
• Minor: Computer science, math, or statistics.
• You should also consider taking at least 1-2 writing or communication-intensive classes because plenty of students are good with numbers, but many of them cannot communicate with other humans.
• If you’re an international student, you may have to flip the order so your major qualifies as “STEM.”

Why This Major/Minor Combination?

This combination is special because it:

• gives you the skills required for finance careers
• makes you seem competent/intelligent, and
• gives you good “Plan B” options in case you decide against finance.

It should not be overly difficult to earn a decent GPA, and if you run low on free time, you can drop the official minor and make it a few extra classes instead.

Also, you can front-load the easier classes in your first 1-2 years to boost your GPA by the time you apply for internships.

If you want to be a quant, you can flip the order and pick math or CS for your major and accounting/finance for your minor.

Here’s why each specific component in this plan matters:

• Significant Accounting Coursework: Accounting is, by far, the most important “technical skill” for investment banking, private equity, and many hedge funds. And a lot of mid-level and senior bankers don’t understand it that well!
• One or Two Corporate Finance Classes: Most universities do not offer courses that delve into the real “corporate finance” work done in IB/PE roles (i.e., valuation and modeling transactions), so you should stop with the basics of corporate finance before getting into the weeds.
• Math/Statistics/Computer Science Background: You don’t need to be an expert, but these skills will be applicable in almost any field. You should understand basic programming concepts (control structures, data structures, recursion, memory, etc.) and math through calculus and linear algebra.
• One or Two Writing/Communication-Intensive Classes: You spend a lot of time reading and writing documents, calling people, and conducting meetings in finance and also in sales, product management, and real estate.

Finally, if you decide against finance after completing a sequence of internships or an official IB internship, this plan will give you other options:

• Tech Companies: Product management, sales, data science, or potentially even programming (but you may need a deeper background for the latter two).
• Finance-Related Areas: Fintech and real estate are always solid options. Maybe even consulting, if you feel like earning less and living in hotels. Then there are Big 4 firms and others in “professional services” that look for similar skills.
• Non-Finance, Non-Tech Companies: You could also join a normal company in a corporate finance, corporate strategy, or project management role.

You won’t be the ideal candidate to win the most technical jobs with this combination (e.g., working on Google’s search algorithm), and you also won’t be in the best position to win the most sales-y jobs (e.g., enterprise sales at Oracle).

But you will have a lot of flexibility for roles in between those two extremes.

“But Wait! I Want to Study Literature! Or History! Or Gender Studies!”

I hear you.

Even though I was a Computer Science major, I almost picked History or Literature, and I’ve been rereading all of Shakespeare’s plays this year (for fun).

But I don’t think it’s a great idea to pick something in the liberal arts or social sciences if your goal is a high-paying job immediately after graduation, and you don’t want to be “forced” into law school or another degree.

If you’re at an elite university (the Ivy League and similar schools in the U.S.; Oxbridge in the U.K., etc.), you might be able to pull this off because your university’s reputation is far more important than your major.

But if you’re at even a moderately-lesser-known school, whether a “semi-target” or a complete non-target for banks, it’s a bad idea.

Bankers might be able to vouch for an English Literature major from Harvard, but they’d be a lot more skeptical about a similar candidate from Podunk U.

Other Investment Banking Major Mistakes to Avoid

Double and triple majors are bad ideas because they will drag down your GPA and reduce your free time.

Bankers will not be impressed if you earned a 3.1 cumulative GPA and had lower grades because of a triple major – they’d rather hire someone who earned a 3.7 with one major and who also had good internships.

Finally, Economics is not a good choice unless your school offers absolutely nothing else related to Accounting or Finance.

Not only is it questionable to call macroeconomics a “science,” but it has very little to do with the daily work in IB, PE, or tech careers.

Maybe if you are interested in asset management or portfolio management or something broader, Economics could be more applicable…

…but it’s still more useful to know accounting and the financial statements like the back of your hand.

How To Combine Your Major With Activities And Internships

We have a few examples of how to combine your major with activities and internships in the article on how to prepare for investment banking summer internship recruiting.

In short, you need to win finance-related internships early (Year 1 and Year 2) so you can set yourself up for IB and related roles – or rule them out quickly.

You don’t need to commit to a specific major in the beginning; you just need something by the time recruiting for Year 3 internships begins.

Investment Banking Majors: What Next?

Questions about the “best” major never go away, but most advice about this topic is somewhat off.

Banks indeed hire from all majors, and some majors are more relevant to finance than others.

But those points ignore the true importance of your major: allowing you to earn good grades while appearing competent and intelligent and gaining a useful skill set that gives you alternate career options.