If You Don’t Get Into Investment Banking, Should You Become a Ski Bum Instead?
“I was speaking with a partner at a private equity firm recently and brought up how bad the market is. He sympathized with me and told me to take a year off and become a ski bum, then re-apply next year when hiring improves.
Do you think this is a good idea?”
-Anonymous Reader
With all that has happened over the past year and past few weeks, the thought of becoming a ski bum is quite tempting.
And there’s some truth to what the PE partner expressed here: it is worse to waste time with a dead-end job rather than taking a year off.
But should you become a ski bum?
The Gap Year
In many parts of the world it’s acceptable and even customary to take a year off in between graduation and the start of the “real world.”
This is known as the “gap year.” And if you backpack through Europe or Asia, you’ll find many students in the middle of their gap years.
Even in the US, it’s not uncommon to take a year off and travel after graduation. It’s just that you reduce your chances of getting into competitive fields like finance and consulting by doing so, which is why most prospective bankers rarely consider it.
Toys “R” Us or Tropical Beaches
If it comes down to working at Toys “R” Us or sitting on tropical beaches, the Caribbean is looking pretty good this time of year.
Taking a retail job will make it far more difficult to get into finance (or consulting/private equity/hedge funds) than a year of skiing in the Alps would.
But I suspect most people are not faced with this choice.
Most will choose between going into accounting (or IT consulting or customer support…) or taking a year off and trying for finance recruiting again next year.
So if you’re deciding between PricewaterhouseCoopers or Phuket, what should you choose?
Risk Tolerance
The risk you take by going to an accounting-esque job is that it becomes more difficult to tell a convincing story about how you really wanted to do investment banking all along.
And it’s definitely harder to break in when you’re a few years out and already working compared to when you’re still in school – whether that’s university or business school.
If you take a year off, the key risk is that the market does not improve at all – or gets worse – and you “waste” a year in the process (although how anyone could consider sitting on tropical beaches being spoon-fed chocolate-covered strawberries a “waste” is beyond me).
The other risk is that if you’re at a “target” school (whether for your MBA or undergraduate program), you lose your window of opportunity for on-campus recruiting.
Market Improvement
So will the market be better or worse in a year?
If I had to guess, I would say “the same or worse.” I don’t think we’ve hit the bottom yet, although it may be within sight.
Even if things do improve, we’re missing a few banks now… so bulge bracket recruiting won’t return to 2004-2006 levels anytime soon.
And while boutique and middle-market firms have been affected by the apocalypse, they are still hiring and even if the market “heats up” they’re not going to go on a recruiting spree and pick up hundreds of laid-off bankers.
Ski Bum or… Nothing?
I don’t think you should take year off unless you are faced with a “Toys “R” Us or Tropical Beaches” choice.
Taking a standard corporate job is not going to help you much, but if the hiring market does not improve, you’ll be in an even worse position a year from now.
But that brings up another question: are those the only options?
No, Of Course Not
The best alternative may be to think outside the box and do something different from either a vacation or a standard job.
One example: There are a lot of fellowships that look far better than spending a year as a ski bum.
Distressed with the credit crunch and prospects of lower bonuses?
Go apply for a Fulbright Scholarship to study “the impact of financial market turmoil on emerging economies.”
Sure, you still take the risk of the market not improving at all, but at least if you go down this path you could get an awesome experience that looks great on your resume.
And you improve your chances of getting into any industry – finance included.
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I highly recommend taking a year or two off and traveling around the world. I took off 2 years after finishing up an overseas assignment in Japan, traveled to 63 countries mostly by bus/train and daily living couldn’t be cheaper. The one key thing that I did was to send old colleagues postcards from far off corners of the world in order to keep in touch, which helped me land a job when I got back to the US.
What was it like? Read here:
http://bazaarplanet.com/
Thanks for sharing Rob, interesting story.
What do you think about taking a semester off, graduating a semester later and doing an internship that way? I mean it seems like the easiest way for a senior to break into banking with prior finance experience?
That actually might be a good idea assuming you’re at a target school… otherwise not that useful.
I know that this is completely off topic, but for hedge funds and pe groups how does knowledge in 1)actuarial mathematics or 2)statistics or 3)regular mathematics (6 courses more than the calculus I requirement at my school for a minor) come into play? are they used at all?
i know that these skills are not needed in ib, but what about later down the road in exit opps? and even if the exit opps will be obtained solely based on the work done in the previous two years in ib, whats the use of having such a background.. is it really of no use AT ALL in ib: m&a, fixed income securites, etc? what about venture capital? recruiting and interviewing purposes?
i am truly interested in mathematics, but i am also truly interested in marketing, management, and real estate. i am not going to be taking mathematics for future job sake, but really for the interest of it. but the lack of time and energy will of course force me to choose between math and my other previously mentioned interests… if mathematics really is has no use at all, i think i want to dabble in other areas of business.
thanks for your time and response.
and i do go to wharton undergrad (if that makes a difference in your advice) and at this point in time I want to go into banking, although of course my outlook can always vary and change
Honestly advanced math is almost useless in finance. I have a friend at a quant hedge fund and he tells me it’s a joke… finance is not rocket science, they just like to think it is. It’s ok to know some math but I would not make it your focus – business/marketing are better to learn.
How about taking a gap year before bschool?
That could work, but I’d strongly recommend coming up with a good story explaining what you did or somehow making it seem like it was productive (e.g. fellowships, independent research, etc.).
In terms of total compensation, does a research associate (1st year researcher out of undergraduate) make a similar amount to a 1st year investment banking analyst? Salaries are probably similar, but how do the bonuses stack up?
Salaries are similarly but bonuses are probably 25-50% less than what i-banking analysts would get.
I’m amazed at how many recent grads can travel the world without a job. I’m worried about paying rent……
Cost of living in a lot of places is much lower than in the US, especially compared to major cities like NYC. What really adds to your costs is constantly flying between places – I don’t know how people afford that.
But yeah, I had no money when I graduated either…
You can take buses and trains from Greece to China, it’s really not that pricey. I met a Brit guy who had been traveling between India and China for 7 years straight. Budget $25 per day.
http://bazaarplanet.com/
i check your page frequently for updates and having looked at that skiing picture numerous times, I’m seriously considering graduating a semester early and being a ski bum for a few months.
I highly recommend it… being a bum after finishing up banking also feels great.
Can you go into a bit of detail about the differences and similarities between product and coverage bankers? I know it’s a bit down the road for me to begin worrying about which I’d prefer to do, but it’s never to early to learn. :)
That’s something I’ll go into in the future on my upcoming site and in future articles… kind of hard to cover everything in a comment.
I actually took a gap year in europe after I graduated and I highly recommend it. I did a work exchange and actually covered my costs for a year!
Here’s another idea: How about just going back to school and doing a MBA?
It’s almost impossible to do that if you are a university student wondering what to do. You need some level of work experience to get into post-MBA banking jobs, and even to get into b-school in the first place sometimes.
What are your thoughts on taking a corporate finance/financial analyst job with a Fortune 500-type company? How conceivable is it to start in a position like this and then transition to IB in a year?
It’s harder to transition over to IB than you’d think – it can be done but it’s much easier to go from IB to corp fin rather than the other way around.
I got my undergrad at a Cal. State University, and am currently in a small, respected but not well known outside of N. Cali private school getting my MBA.
Should I just forget about I-Banking completely, or do I still have a chance?
Nothing is impossible, but you’ll need to network like mad to have a shot – we’re talking an all-out effort that will consume at least 5-10 hours per week, and multiple trips to financial centers and such.
I just recently graduated and my full-time offer was deferred for a year. I always had a desire to do something completely different — liking teaching English in Asia for a year — but never considered it due to rigid career aspirations. Is it safe for me to do this now? Would it even be possible that doing something of this sort could be beneficial to my b-school application down the road? By that I mean, perhaps it demonstrates my ability to accomplish something productive and fulfilling when presented with a bad situation, etc. Or at the very least is shows I didn’t completely waste a year doing nothing.
I’m seriously the worst person to ask because I have a different life/goal than 99.99999999% of people on the planet, but sure go ahead. If you are concerned, just try to do something besides teach English… study/work there at a real company in the country, for example.
Wow what is your goal that only 1 in 10 billion people share?
World domination + becoming a pop star in Korea while investing in web series and film projects, of course…
I actually landed a Fulbright to S. America, and just fell upon this site today—it’s excellent by the way, please keep the info flowing. But now that I have the Fulbright (background: non-target school, high GPA, private banking summer internship), it seems almost impossible to get rehired because now I’m considered an off-cycle hire—suggestions?
Leverage the Fulbright connections and do a ton of networking with alumni, Fulbright alumni etc…. try to get a local, unpaid internship first and use that to position yourself for better things down the road.
See the recent podcasts for more information on networking… this article is from a year ago.
I ultimately would like to end up working as an analyst and then moving in to PE but am also considering education and obtaining a Masters in Finance. Since most analysts come straight from undergrad would I be at a disadvantage or would this generally not help me at all?
Thanks!
You could do a Master’s in Finance but it’s mostly helpful if you’ve gone to a lesser-known school for undergrad and want a brand-name on your resume… otherwise doesn’t help much.
Straight after graduation from a target school graduating in Economics, I went to a a foreign country (Japan) and undertook a 1 and a half intensive Japanese language study to which I was able to earn pass a Japanese standardized test (JLPT) showing that my language skills are at or above business level. Now does going to a language school in a foreign country straight after graduation equal to being a ski bum, and I’ve hurt my chances immensely for breaking in? Your response is appreciated, since my goal for learning Japanese was to make myself marketable to the Japanese market.
It’s better than doing nothing, but you’re still at a disadvantage next to people who have been working in finance or related fields.
Hello, I have been surfing you site for quite a while, and I did find some good advices.
However, the advices you gave are mainly US based.
Is there any advice you can give for UK undergraduates who can’t find ib jobs?
It’s the same: network, network, network, or consider further education / moving into a different industry. There will be a case study with a UK reader posted soon on this topic.
Hi Brian,
I graduated from school without any job lined up for now.Recently I moved a bigger city and started networking but people just forwarded my resume to the HR person. As I am not from this place and couldn’t use the University’s career center, how can I be considered for this campus recruitment?
You’ll have to get the name cards of the IB contacts from the banks and send them your details. Or you’ll just have to apply online at the banks’ respective websites.
Hi Brian,
I got a junior internship this summer in a Bulge Bracket thanks to your IB interview guide. However, I didn’t get a return offer (mainly due to bad politics in the group). I’m very passionate about the job and still want to stay in this industry. But I go to a semi-target liberal arts college and banks only come to campus for internship recruiting. This year’s market is probably the worst so far and many alums I contacted said there was no open spot in their banks. I’m now thinking about taking next semester gap, going back to Asia working in a PE/VC firm and then applying to junior internship again. Do you know generally if banks accept this case? I’d greatly appreciate your advice!
As long as you can present your pitch well I think your case is fine.
I am in my first year of university and decided to apply to some banks even if I know my chances are slim. I was wondering if you think that applying this year and my application would hurt me at all for my applications next year.
I don’t think applying this year will hurt your applications next year. If you get rejected and apply for the same position next year, please make sure you talk about how you will have improved.
From your experience, can my application at one bank effect my chances at another bank at all. For example if I mess up my numerical test at one bank but do well at another do they have any way of finding out?
I don’t think so!
If I make a sub par application at DB but put a lot of time into my application at GS and JPM. Is there any chance they could effect one another?
No, I don’t believe so