How Finance Interviews Have Changed in the Past 5 Years (2009 – 2014) – and How to Prepare
Saying it over and over again might just get you elected President…
…and it might also sink your chances in finance interviews if you’re not properly prepared.
People like to claim that “interviews don’t change over time,” and that’s partially true.
But the recruiting process itself, interviewers’ expectations for you, and the way they evaluate you definitely change over time.
Of course, it’s not just the interviewer and the questions he/she asks that determine your fate – it’s also determined by the quality of other interviewees (your competition).
So to answer this question of how interviews have changed in the past 5 years, you need to look at how the recruiting process itself has changed, and how people themselves are changing and preparing differently.
What Is This Based On? How Do You Know This?
“But wait,” you say, “you’re not even working in the finance industry anymore, how could you possibly know how interviews have changed?”
The answer is that I get exposed to all things interview-related, 365 days per year, via:
- Our resume/CV editing and coaching services.
- The questions and answers on BIWS.
- Comments and emails submitted here.
We get a TON of questions about interviews, case studies, and the recruiting process through those.
I have a better sense for what’s required in interviews now than when I was still in the finance industry – and I have far more data to back up my observations:
- 16,104+ comments on BIWS and 40,182+ comments on M&I
- 31,290+ emails received since 2007 (~12 per day on average)
- 19,317+ customer emails on BIWS since 2009 (10-11 per day on average)
Your Competition: How Other Interviewees Have Changed
So let’s start with how other candidates have changed in the past 5 years. I would summarize this by stating:
“It’s easier at the top, but tougher in the middle.”
If you go back to 2005, investment banking and related exit opportunities were the “it” jobs.
That was less true in 2009 following the financial crisis, but there still weren’t many other attractive non-finance options.
Today, that’s no longer true – which is why banks have been scrambling to improve pay and working conditions for junior bankers.
But higher pay and reduced hours can only do so much: many students are simply less interested and are leaning more toward tech these days.
There’s still a lot of interest in finance – but many interviewees no longer have the best grades or the most impressive work experience of everyone in their class.
And I’m partially responsible: I will plead guilty to increasing the average difficulty level of questions in interviews.
I’ve heard many, many stories over the years of “everyone in the interview room using your guide(s)” and “everyone using your templates for case studies.”
To be fair, though, plenty of other books, websites, and YouTube videos have been published over time, and plenty of candidates use those resources as well. So even without this site, the level of technical rigor would have increased.
Whenever there’s a process with specific questions and well-defined answers, inevitably it will be “gamed” (see: the SAT, GMAT, and GRE prep markets).
Got Critical Thinking?
Ironically, though, all those prep materials have not necessarily made candidates better at answering questions or presenting case studies.
The problem is that many people go into it with a “quick fix” mentality:
“Today’s Wednesday, and I’m getting a case study presentation on Tuesday next week… OK, I’ll sign up for this course, get some templates, work on my case study, and submit it without actually understanding what I’m doing.”
I’ve seen this firsthand because we’ve been getting an increasing number of questions that indicate a lack of conceptual understanding.
Here are a few examples from recent comments and emails:
- “Why do companies list D&A on their Cash Flow Statements, but not their Income Statements? It doesn’t make sense!” (It does if you actually understand the financial statements)
- “Wait, for a forward EV / EBITDA multiple, shouldn’t you project Enterprise Value? How do you project it?” (You don’t, because time travel does not exist)
- “I don’t understand why you multiply the previous year’s figure by (1 + Growth_Rate) to get the next year’s figure. Why do you need the ‘1 +’ there?” (I hope I don’t need to explain this one…)
These questions indicate that you might understand, on the surface level, how to model or value companies, but that you would be lost if you had to do it yourself without a template.
My theory: “Back in the day,” it took a lot more time and effort to prepare for interviews because you had to learn models and the technical side yourself, with almost no resources or tutorials.
Today, the perception is that it’s “easier” because there are more resources available.
That may be true, but it still takes time to learn the fundamentals.
Got Communication Skills?
I’ve also noticed a substantial decline in many candidates’ communication skills.
Part of it is because of the point above: a lot of template re-purposing, but less conceptual understanding.
But part of it is also because fewer people take the time to practice effective writing / speaking.
And I hate to sound “racist,” but part of it is also because more and more candidates are non-native English speakers.
If English (or whatever language is used in the country where you’re applying) is not your first language, it takes far more effort to prepare for “fit” questions, your personal pitch, and so on (I found this out the hard way a long time ago).
You can absolutely compete with native speakers and win job offers, but you need to devote just as much time and energy to communication practice as you do to the technical side.
You might be tempted to “memorize” your story if you’re in this position, but that is a huge mistake.
Take that time and use it to practice telling your story naturally, based on a rough outline, rather than a word-for-word speech.
The Interviews Themselves
When we looked at this question at the end of 2009, there were a few big changes:
- More difficult technical questions
- Heavy focus on transaction experience
- More knowledge of restructuring / distressed M&A required
- More case studies
Some of those are still true: technical questions seem to get more difficult each year, to the point where I wouldn’t be surprised if interviewers start asking you to prove the Gordon Growth formula.
Others are less true: distressed M&A and restructuring were appealing in 2009, but somewhat less so in 2014.
But the increasing prevalence of case studies is, by far, the biggest change I’ve noticed across all seniority levels, all regions, and all types of finance roles.
The Rise of the Case Study
A long time ago, case studies were rare in entry-level investment banking interviews.
You might get them in regions such as EMEA that use assessment centers, but otherwise they were more common in private equity and hedge fund interviews.
That began to change in the past few years, and case studies are now increasingly common, even for 2nd year students completing unpaid internships at boutique banks.
To illustrate, here’s a case study that a BIWS client (a 2nd year student going for boutique bank internships) received earlier this year (I’ve changed the deal to protect privacy, but the questions are the same):
- Please consider the recently announced $7.7 billion deal between Tyson Foods and Hillshire Brands.
- Write a 1-page summary of your thoughts on the deal, the motivation for the buyer and seller, and the price per share.
- Does that price value the seller appropriately?
- What form of consideration should the buyer use to acquire the seller? How accretive or dilutive would the deal be with this consideration?
To answer these questions, he had to build a simple merger model, screen for public comps and run the numbers, and read through press releases on the deal.
So the questions don’t involve hyper-advanced modeling, but you do need to understand the fundamentals to perform well.
From a bank’s perspective, case studies are the perfect way to respond to changes in candidates themselves:
- Just memorizing interview questions? Easy, give them a case study on a recent deal that requires critical thinking.
- Using templates from modeling courses without understanding the models? Easy, just ask for an analysis of companies with strange financial statements that don’t line up with standard templates.
- Poor communication skills? Easy, ask for a 1-page written document to test their writing ability.
On the buy-side, case studies have been widespread for at least 10-15+ years, so there’s nothing new there.
What is new is that even very young candidates are now getting case studies, even when applying to informal/unpaid positions.
So, How Do You Set Yourself Apart?
You shouldn’t overestimate the competition, but you do need to be aware of what’s going on… so here are my top 3 tips:
Tip #1: Start Learning Accounting/Finance EARLY
In previous articles, we mentioned that you can do a reasonable job preparing for recruiting on a 6-month timeline.
But I’m starting to doubt that advice.
As I’ve been creating the new Financial Modeling Fundamentals course (just posted a new valuation/DCF case study!), for example, I’ve realized that it is very, very difficult to explain certain concepts precisely… and that proper explanations require significantly more time than you might expect.
So if you currently have no background in accounting/finance, I recommend starting your studies at least 1 year in advance.
And don’t just stick to university or business school classes.
You want exposure to case studies and practice exercises given by finance firms – otherwise, you may not develop the critical thinking that’s required in interviews these days.
Tip #2: Start Writing, Communicating, and Building Your Social Skills EARLY
If there’s one easy way you can beat the “Ivy League” crowd (maybe I should write a separate article on that topic), this is it.
Universities offer classes on these topics, but you might be better off with something taught by specialists (e.g., professional writers or public speakers).
You can improve your social skills by attending networking events, even when you’re not feeling sociable, but you also need to get feedback on your performance and your overall presentation.
In addition to this feedback, you also need to go outside your comfort zone to improve – so try going to a completely random event once in a while, or try writing about something you have no interest in and making it interesting.
Tip #3: Start Writing About Deals and/or Making Investment Recommendations On Your Own
This combines tips #1 and #2 above, so I’m listing it last.
If you do not enjoy analyzing deals or investing in stocks or other assets, you are unlikely to succeed in the finance industry in the long-term.
If you read about people who have won case competitions and then gone onto success in the industry, you’ll see one common theme: they all started early.
Here’s a quote from an interview with Ryan Fusaro, winner of the stock pitch competition at the Value Investing Congress a few years ago:
“I really enjoy it. On weekends I’ll spend my entire weekend for a month putting together a PowerPoint when the idea strikes. That’s always been my passion.”
Doing this not only gives you practice, but also helps you figure out if you actually want to be in the industry to begin with – and makes you look like more of a line and less of a dot.
Finance interviews haven’t necessarily gotten “harder” or “easier” in the past 5 years, but they have changed.
If you are in the middle-of-the-pack in terms of grades, activities, work experience, and technical knowledge, it’s definitely more of a challenge to break in.
But if you’re one of the top candidates, it’s actually easier today than it was in 2009-2010.
And that’s a change you should welcome – if you put in the work to get there.
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