This is a question that always seems to pop up after people have secured their full-time investment banking jobs.
“I’m done with school a semester early and have nothing to do between now and when I start my full-time job at Goldman Sachs / Morgan Stanley / (Insert Other Prestigious Firm Here). Should I just start in January so I can get a leg-up on other Analysts and get an additional 6 months of work experience?”
No, you shouldn’t.
I always recommend starting at the same time as the other investment banking analysts in your “class,” and not just so you can spend those months sitting on the beach and drinking Piña Coladas.
It can hurt you both financially and in terms of work experience if you go outside the norm and start in January or February before everyone else.
Work Experience Issues
If you start early, you’re not going to be put on any live deals or good projects in your first few months.
When you apply for those investment banking exit opportunities, deal experience is critical. You can’t write a private equity resume, for example, without having substantial deal experience.
Instead of giving you real work, banks will just use you for gruntwork and menial tasks - the work that more experienced Analysts do not have time for.
So you’re not going to great experience if you start early. And by the time you’ve moved up the learning curve and can actually work on real transactions, you’ll be sent off for 1-2 months of training - which means you have to stop working on your deals.
Therefore, banks are no more likely to give you real work at the end than they are at the beginning of your early start.
But How Is It Different When I First Start In August?
In all fairness, you won’t get much “real” work when you first start with the rest of your Analyst class anyway. But there are 2 big differences:
- When you come in, a whole lot of Analysts have just left and projects are under-staffed. Which means you’ll be getting all the “real work” they are no longer doing.
- You’ve been through training. Although arguably worthless, it makes you more credible in the eyes of senior bankers and more likely to get good projects.
Market Conditions
Back when Blackstone was buying a new company every day, there were way too many deals and not nearly enough Analysts. But when the market goes downhill and deals dry up, the amount of good experience you get goes sharply downhill as well.
New Analysts, especially ones that start early, are hit hardest by this phenomenon. When the office has more Analysts than it does deals, the newbies don’t get to work on anything substantial.
Salary / Bonus Issues
If you start early, you do have a chance of not getting a pro-rated bonus for your first 6 months.
This means effectively you’re only getting paid less than half of what you should be earning.
This is relatively unimportant in the long term if you stay in finance and keep earning investment banker salaries through the years, but it is yet another good reason not to start early.
I’ve heard mixed reports on this; some people I know of started only 2-3 months early and were actually paid nothing, while others who started half a year early did get some kind of bonus.
Going back to the market conditions argument above, though, in today’s economy you’re less likely to be well-compensated for an early start, simply because there’s less money to go around.
Go Enjoy Life
Bottom line here is to go enjoy college rather than enter the real world 6 months early. Even if you’re done with classes, you can find other interests… take athletic classes, get more involved in activities, travel the world.
It doesn’t hit you while you’re still in school (I didn’t realize it either), but the spring semester of college is the last time you’ll have to do whatever you want with very few consequences.
When you’re working 80-100 hours a week, you’ll wish you could have gone back and not started early. And you’ve already worked hard enough getting your investment banking resume in shape and practicing for your investment banking interviews; it’s fine to relax for a bit.
The Fine Print (Exceptions Apply)
As with most everything else on the site, I like to point out that there are some exceptions to what I’ve written here.
One exception occurs when you’re not in college and are instead breaking into investment banking from other fields, like engineers going into finance, lawyers becoming investment bankers, going into finance from industry, or even getting into investment banking from academia.
In any of those cases, you may just have to start immediately. Aside from these, there aren’t too many reasons why you’d want to start early.
If you’re graduating early and the bank is making you start in January or February, I would make up a story as to why you can’t do this. Some other commitment, family issues, a study abroad program you’ve already committed to, anything really.
Or just don’t tell them you’re graduating early.
No one ever said investment banking was an honest profession.
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Tags: investment banker lifestyle, investment banker salaries, investment banking, investment banking jobs, investment banking training, understanding investment banking
Is there anything in the way of extracurricular qualifications that you’d recommend getting? In a perfect world, obviously you wouldn’t need a degree to do the CFA, but is there anything an undergraduate could get that would look good? I’m thinking of doing the Factset/Dealmaven “Certification in Advanced Financial Modeling”, primarily for the huge leg-up it’d give me in turning into an Excel monkey. Would it be worth putting on a resumé though?
Anything to say for a European studying economics and history and hoping to work in London in M&A, preferably Rothschild?
Barry,
I am personally not a big fan of any of those 3rd party certifications other than maybe the CFA, which is definitely legitimate.
I don’t think it’s super-valuable to learn all the obscure Excel tricks at this stage, but learning the basics of modeling would be helpful in interviews.
If you are trying to work in M&A and have studied econ and history, I would try to get some activities or other hobbies that show an interest in finance/business. Even part-time work experience could work for this.
Hope this helps!
Inquisitor,
I just started in Feb. at a prestigious advisory firm (very similar to Evercore or Allen and Co.) and while I agree with most of your analysis, I do have an advantage compared to the analysts starting in July.
I make pitch books quite frequently and occasionally sit an read dealbreaker for hours but I have also been given reals models to complete as well as executive summaries, which are not really grunt work.
I was hesitant about starting early as well but in my case it seemed to have worked out in my favor. I may only end up getting a stub bonus as you suggested but it would be better then nothing.
Barry,
I would recommend you do the Deal Maven cert. as that is part of most banking training. Having just completed it myself, I find it quite useful. I would suggest getting Bloomberg certified as well (I actually was beat out by another candidate for not having it). And finally, certainly put all of this on your resume. Its shows you are ambitious as well as competent in financial analysis.
Good luck
Hey there,
Glad that you have had a positive experience so far. Certainly exceptions always apply and it seems like you have gotten a lot out of it. I based most of this on friends who had started early and seemed to regret it later on, but to each their own.
Inquisitor:
Do most banks automatically hire new analysts to start in August, and only start early those who request it? I will be graduating this December, and I’m not sure what to say in an interview if asked why I want to start in summer rather than right after graduation.
Any advice?
GoGators: Yes, that’s correct. New analysts generally start in July/August unless they have special circumstances. I would tell them you have other plans from December to the summer, such as travel, study abroad programs, or other commitments that you’ve already been locked into.