In this edition of New Year’s Q&A, we cover everything from the ever-persistent questions on pay and fashion to banking in different regions, business school, different strategies for breaking in, and even some more questions on the new interview guide.
Some of the interviews and other content planned for 2009 will address these questions in more detail, but hey, why not get started early and kick off the New Year with a bang?
Pay & Fashion
I’ve already said I don’t have a crystal ball, but that doesn’t stop readers from thinking I can predict the future when it comes to bonuses… and somehow I’m a fashion expert now?
1. I just graduated from my college. I would like to own my own mansion in downtown Manhattan, and have a net worth of at least 8 figures by the time I am 30. Is it better to join an existing finance firm to do this, or should I start a fund or business on my own?
You stand to make a lot more money when you own an equity stake in something, whether it’s an investment or your own business. Just be aware that if you want to start a hedge fund or other investment firm one day, you’ll need a track record so that you can actually raise capital.
I would work somewhere for a year or two, use that to build a track record and develop relationships, and take it from there.
It’s very difficult to be worth $10 million+ within 8 years if you work for someone else so keep that in mind as well.
2. What do you think bonuses will be this year? Some people are speculating it will be $0 across all levels – could that happen?
Without having done any of the necessary research yet as I did for 2008, I would say that’s unlikely.
This is all based on intuition, but I think 2001-2003 levels are the more likely scenario – so maybe $10K-$20K range for 1st Year Analysts?
It might actually be a bit higher than that, but a steep drop from 2008 bonuses seems likely.
3. I have a summer internship lined up at a bulge bracket bank – should I spend $500+ on shoes?
I think that’s a bit too much to spend on shoes, especially these days with lots of sales and clearance events. You can find good shoes for way cheaper than that at outlets.
4. What do you think of brown suits? Can I wear them or should I stick to traditional colors?
Personally I’m not a fan – I would stick with charcoal, grey, and navy blue instead. But if they look fine on you, go ahead I suppose.
5. Do you think it’s better to wear white shirts with conservative colored ties, or should I go for more creative combinations, like red shirts with maroon ties?
I would never wear a red shirt with a maroon tie. I mostly wore white and blue shirts of different shades, and if I had to wear a suit the tie was also be conservative.
Note: I addressed many common fashion questions a long time ago in an article on the basics of men’s wardrobe. You may want to consult that before asking your fashion-related questions.
Investment Banking in Different Regions
As I mentioned, this is one question we’ll be addressing in more detail in 2009. With the way the market is these days, going elsewhere to work is something everyone has to think about.
6. What do you think about going to the Middle East / Dubai vs. Asia for banking? I’m trying to decide which region to focus on right now.
Although Dubai is traditionally thought of as a “hot region,” keep in mind that it has been hurting lately with oil and real estate prices falling. Everywhere in the world has been affected by the crisis, but Asia is a bit better diversified so I would definitely think about that as well.
7. What are the differences between working in Hong Kong and New York?
I’ll address this one in more detail in the coming weeks, but the basic difference is that HK is more about mainland Chinese companies while New York is more general. Also, HK is more focused on capital raises (IPOs and debt) since M&A is not as developed in the region.
For more on pay, culture, and other differences, stay tuned…
To MBA or Not to MBA
With the current state of the economy, going to business school may be on your mind. The best reason to go is if you need to re-brand yourself because you’re changing careers – so make sure you’re not going just to time the market.
8. I’ve been in retail banking for the past 5 years, went to a non-target school, had poor grades, and have missed recruiting for this year – should I go back to business school?
Yes, and make sure you get into a top program or else it will be a waste.
9. I’ve been a professional athlete off and on for the past 2 years, in between doing a few finance internships – do I need to go to business school to have a shot at getting in?
If you’ve been out of school for 2 years or less, not necessarily – especially if you’ve had finance internships in the meantime. I would continue to network your way in.
Breaking Into the Industry
With today’s market, some aspiring financiers are using some unconventional methods for getting in – from jumping into PE “early” to delaying graduation dates.
10. If I didn’t get a full-time offer this time around, should I delay my graduation by a semester or a year and go for summer recruiting again?
You could do this, but you need to have a good story about why you’re doing it – “to improve my chances of getting a job” will not work well.
11. Should I apply to multiple groups at a bank to maximize my chances?
In general this is a bad idea because you seem unfocused. Applying to banking, sales & trading, and wealth management, for example, makes it seem like you don’t know what you want.
It might be ok to apply to 2 different industry groups within banking, for example, but I would try to focus in on one.
12. How can I get a private equity internship as an undergraduate? Would that give me an advantage over anyone?
You’ll have to do a lot of networking and get lucky, because most firms (a few exceptions aside) do not do on-campus recruiting.
It’s definitely an advantage, but wouldn’t help you much more than doing a banking internship.
13. Help! I only have an offer at a local boutique, but I’m afraid to take it because it will hurt me in the long-run. What should I do?
Would you rather be unemployed and watching CNBC all day? Take the offer, be glad you have it, and stop complaining.
Interviews & Interview Guide
With summer recruiting coming up, questions continue to come in both on interviews in general and the recently released guide.
14. For the “biggest weakness” question, can I say “lack of banking experience?”
This is not the best answer, but it’s better than saying, “I WORK TOO HARD!” or something else that’s really stupid. I would still try to find more of a “real” weakness that isn’t too serious and show how you’ve improved on it.
15. Do I need to know what LIBOR and the different market indices are at before my interviews? Is that something they’ll ask me?
I think these types of questions are stupid, but some interviewers like to ask them. I’d have at least a general idea of what LIBOR and major indices in your region (for the US, S&P 500, Nasdaq, and Dow Jones) are at.
16. You say in your guide that you can’t have negative equity, but someone told me you can have negative equity in an LBO – how does that work?
There is a difference between equity value and shareholders’ equity. Equity value means market capitalization – share price * shares outstanding – and cannot be negative because you can’t have negative shares and you can’t have negative share prices.
Shareholders’ equity, however, is a paper value and can turn negative following net losses or a dividend recap, for example.