If You Can’t Get Into Investment Banking the Real Way, Should You Buy Your Way In?
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The other day a reader wrote in with this question:
“I have the opportunity to pay [Large Sum of Money] to get an investment banking internship – should I do it? I don’t know how I can convince my parents.”
I’m not going to name names because there are multiple programs with a similar premise: pay us money, and we’ll get you an internship at a bank (or PE firm, or other financial institution). Sometimes the internships are paid (you might make some money on the deal), and sometimes they’re unpaid (your loss!).
So, how much is an internship at Goldman Sachs worth? $5,000? $10,000? More? And what should you do if you’re in this position?
Wait, How Much?
If someone walked up to you and said, “For only $100, I can get you into the Morgan Stanley M&A Group!” you’d probably say “yes” and hand over the cash immediately before wondering what the “catch” was.
But when $10,000 is on the table, the stakes are a bit different. Students and recent graduates need to think about this decision much differently from anyone who’s been working for awhile.
Students / Recent Graduates
If you’re a student, you’ll almost certainly have to involve your parents in this decision-making process – and they’ll wonder why you’d pay someone thousands of dollars to go work for them 80-100 hours each week for seemingly nothing in return.
So you’ll have an uphill battle convincing them to pay – assuming your parents are not CEO and CFO of a multinational steel conglomerate.
Ok, But Is It Really “Unpaid”?
Even if you don’t “make money” during the internship, your experience and being able to write “Investment Banking Summer Analyst” on your resume are easily worth more in future earnings than what you would have made.
Assuming the rest of your resume is at least passable, you won’t have too much trouble getting interviews elsewhere as you long as you can write “Investment Banking Summer Analyst/Associate.”
Once you get to the interview, of course, it’s all up to you – and if you don’t end up doing anything substantial during your internship, it may actually work against you. So do keep that in mind.
You gain that interview selection advantage regardless of what firm you work at, by the way – yes, Goldman Sachs or Morgan Stanley help more than No-Name Regional Bank, but even No-Name Regional Bank is way better than “Pool Boy.”
So, Should You Do It?
The short answer is, “If you have the money or can convince someone to give you the money, you have nothing lined up as the summer is starting, you’re moving into your final year of school, and you’re 100% certain you want to be in finance, then yes, it’s probably a good idea.”
Ok, that was actually a long answer – with a lot of qualifications.
Timing is important because it’s not worth signing up for this if it’s still February, March, April, or even May – these types of programs should only be last-minute measures you take when all your other plans have fallen through.
Why? Well, just look at one reader who got his full-time offer going into May – there’s rarely such a thing as “too late” until it’s July, you still don’t have an internship, and full-time recruiting is starting in 2 months.
And if you have more than 1 year left (and hence another summer recruiting season left), then it’s also not worth it because your internship just prior to full-time recruiting is more important than anything else on your resume.
Commitment is also important because you don’t want to give up the equivalent of a new (ok, maybe “used”) car only to find out that you don’t want to be an investment banker – but then, if you’re considering this type of program you’re probably serious in the first place.
So if you meet all the conditions above, it’s a good idea.
Professionals / Less-Than-Recent Graduates
If you’re not a university student or recent graduate, then you’re probably thinking about this decision much differently.
You’re not thinking about the investment as an absolute number, but rather in terms of how much time that amount of money costs you – is it 1 months’ salary? 2 months’? To me, time is money and if I would spend 1,000 hours doing it myself, then $5,000 or $10,000 is a pretty good deal.
Of course, not all these programs are open to more experienced candidates – it varies greatly by the program itself and what stage you’re at right now.
But if you’ve already been working for at least a few years and you really want to make the transition into investment banking (or private equity, or anything else in finance), then this type of program is your best bet – unless you have time to cold-call and network for 20 hours a week like a university student might.
It’s especially helpful if you’re thinking of going to business school but don’t have any finance experience – if you can make it happen right before you arrive, you’ll gain a big advantage over everyone else who’s trying to get into finance with no background.
If you want to transition into finance without going to business school, then this is more risky because you’d have to quit your current job (or whatever you’re doing right now) first.
I would probably not do this if you’re in that situation – the risk is too high, and it’s really, really difficult for anyone with significant experience to move into the industry directly right now.
Other Categories
If you’re unemployed right now, whether or not this is “worth it” comes down to your own financial situation: if you have enough saved up and have a safety net, then it’s not a bad idea and it may be your best option if you’re serious about moving into finance.
Similarly, if you’re coming back from a study abroad program, teaching English in Asia, or any other sort of non-study / non-work situation, then this comes down to the question of time vs. money: would you rather spend weeks or months networking and cold-calling, or skip all those hoops and pay money?
As you’ve probably inferred, I prefer investing money rather than spending months of my own time doing something – but then I’m not a student anymore.
Other Considerations
Beyond the time vs. money question, you also need to find out what the program provides in terms of “alumni networking” and post-internship support.
It’s nice to say you had work experience in finance, but it’s much nicer to also say, “And I now have 50 people in the industry who I can ask for help and meet up with when I travel to New York.”
You should also figure out what kind of track record the program has in terms of sending people to work full-time in finance afterward. Some of these are new, but you should inquire as much as you can and not give up until you get a good answer.
Location may also concern you, but it’s less of an issue than the other factors. New York, London, or other financial centers are ideal, but it’s not the end of the world if you’re placed in a regional office – you’ll just have to travel more often to network.
To Pay or Not to Pay?
There’s no simple answer because it depends on what level you’re at, your own financial situation, and where you are in school or work – the best “simple tests” are the questions I listed above.
And as with networking itself, much of this comes down to how badly you want it.
It may sound a bit silly but that’s the truth – if you want to get into finance more than anything and this is your best option, then it’s worth it.
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Tags: Business School, investment banking, investment banking summer analyst, investment banking summer internship, Networking, paid internship programs, understanding investment banking, unpaid internships
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where can i get more info on these groups? Can anyone toss out a name?
Analyst Exchange has one, but I think all their summer spots are filled. They are the most well-known one, but there are others out there – with varying degrees of reputability.
Would anyone in the Investment Bank know that you “paid your way in”? How are these intern companies able to provide this service, they must have connections on the inside, right?
Thanks
They will know, but it’s not an issue because you typically go through a competitive interview process as well. The more relevant point is that no other companies will know what you did – it stays between you and the firm you interned at.
How would they know that you paid?
Because the bank arranges it with the program that offers this type of training – so at least someone there will know. It may not be everyone, but someone either in HR or one of the MDs will know.
I don’t get it. Why would any bank do this? Do they get some sort of commission for each paid internship? How pathetic would that be!
In a lot of cases these programs will offer something to the banks in return, like discounted training, access to more candidates, etc.
Also, for a bank it’s a good way to pick people who are “serious” because they’ve made it through interviews and also paid a large sum of money – so it’s just another way to pre-qualify people. And especially if it’s unpaid, it’s a win-win situation for them.
M&I,
I’m a rising senior working as a summer analyst at a regional boutique that claims to conduct “Investment Banking” services but from what I’ve seen is all they do is primarily straight up valuation work (mostly for tax purposes, sometimes for private equity funds). I’m getting to work on legitimately 15-20 different valuation engagements and was wondering if you were about to interview for full time IB positions would you:
A.) Be very open about it, say u really only did valuation work for tax purposes basic DCF modeling, Break Up values, ect.
or
B.) Stretch the truth (I know this is not ideal, but this was the best summer job I could get in a tough market)
Thanks
George
Neither one. Say that you “worked at a regional investment bank focused on clients in [xxx - private equity?] industry” and that your “primary role as an intern” was to “assist with valuations, using DCF modeling, break-up values, etc.”
Make it seem like a real bank, but claim that since you were an intern, you mostly did the valuation work and did not do too much “advanced” modeling / client work.
could you provide some color on public finance and its “respectability” within the i-banking world? i’ll be a summer analyst at a regional bank in public finance and am curious about whether it would be looked upon favorably by BBs for next year’s summer analyst positions.
It’s ok, but a considerable step down from normal investment banking / private equity etc. and most bankers do not view it favorably.
It helps more than some random unrelated internship, but not as much as a banking/consulting internship might.