by Brian DeChesare Comments (10)

Reader Q&A, 2020 Edition: Recruiting Trends, U.S. Elections, the Coronavirus, Bank Rankings, BIWS Changes, and More

Reader Q&A 2020

So, we haven’t done a reader Q&A in a long time – the last one was back in 2016.

I stopped writing them because they produced little long-term traffic, and I realized that creating content without a clear purpose had diminishing returns.

But occasionally, I like to take a break from detailed career/recruiting articles on singular topics, so here we are.

Although “2020” sounds quite futuristic, it has been disappointing so far: there are no flying cars or even self-driving cars, and a medieval-like virus may be about to kill 100 million people.

There have been big changes in the finance industry over the past decade, but more in areas like sales & trading that are not our core focus.

Comparatively little has changed on the “deals” side, which probably explains the types of questions that have been coming in:

Recruiting Trends: Super-Early Internships, Private Equity, Quants, and the Next Big Thing

Q: How is summer internship recruiting shaping up?

A: Banks seem to have reversed themselves a bit with summer 2021 internship recruiting.

Yes, RBC and Lazard both started early and opened their applications a week ago, and diversity recruiting is often earlier as well.

But many of the larger firms are opening their applications or starting interviews in the spring or summer… it’s still a year in advance, but at least it’s not a full 1.5 years in advance.

You still need to win at least one internship and network early on, but it’s not the end of the world if you start your 2nd year of undergrad not being 100% certain of your plans.

Q: What about private equity recruiting?

A: The on-cycle process at BB and EB banks has kicked off earlier each year for the past 5-10 years.

Last time around, it started in September 2019 for summer 2021 roles, giving Analysts a total of ~1 month of “deal experience” to discuss.

However, I think firms are approaching the limits of early start dates: what’s their next move, recruiting students who haven’t started working full-time yet?

If you miss the cycle or you’re unprepared, you may have to wait a year and recruit when you have more deal experience – or aim for smaller PE firms that use off-cycle recruiting.

Q: What about other hiring trends? Will you need to know programming to get hired for IB roles in the future?

A: Not anytime soon, no.

Most of these tech trends have made far more of an impact on sales & trading than they have on deal-based roles such as IB, PE, and corporate development.

I think there are some ways to apply AI, ML, and related technologies to deals, but more in terms of process/efficiency improvements.

A company CEO is not going to post their company online and let a computer contact potential buyers; it’s still a relationship business.

Q: What about quant funds? Won’t everything become quant in the future?

A: I think quant funds are somewhat overhyped currently.

Yes, they’ve attracted more funding than traditional long/short equity funds… but their performance in 2019 was quite poor, with only ~15% of U.S.-based quant funds beating the market (and 2018 was also bad).

Quant approaches do have some advantages over traditional stock-picking, but all types of hedge funds face the same problem: as long as central banks are heavily intervening in the markets, it’s difficult for any strategy to produce a lasting “advantage.”

Q: OK, so what’s the “next big thing” in finance?

A:  I don’t know, but my prediction is that most of the markets and asset classes that performed well in the 2010s won’t do so well in this decade.

Examples: The S&P 500, private equity, and venture capital.

We’ve already seen the Uber, Lyft, and WeWork debacles in VC land, and serious problems in PE are quickly becoming apparent as well.

All these categories benefited from record-low interest rates and a flood of easy money from central banks – and those aren’t going to continue forever.

Or if they do continue, there will be more serious consequences, such as a big devaluation of the USD or higher inflation.

This is why I’m over-weighting non-U.S. markets and gold in my current allocation.

Black Swans in Waiting: The U.S. Presidential Elections, the Coronavirus, and a Market Crash?

Now to everyone’s real favorite topic: predictions for the end of the world, whether it’s because crazed “Bernie Bros” murder everyone or the coronavirus does it for them…

Q: Who will win the 2020 U.S. Presidential election?

A: If there’s no economic disaster, market crash, or new war, my view is that Trump will probably win because the Democrats are running too far to the left.

But if there is a crisis between now and November, I wouldn’t be shocked if Bernie Sanders won.

Q: OK, so what happens if Bernie Sanders (or any other Democrat) wins?

A: All these candidates have announced plans to impose financial taxes, break up the banks, make regulations stricter, destroy private equity, and so on.

There’s just one problem: they’re not going to be able to get any of this legislation through Congress unless the Democrats win 60 seats in the Senate, which seems incredibly unlikely.

The last time either party held at least 60 seats for a full term was in the 1970s – it didn’t even happen after the “wave” election of 2008.

There are still ways to pass budget-related legislation using “reconciliation” with only 51 votes, but I doubt anyone could use that to break up the banks, pass Medicare for All, etc.

So, as with my predictions about Brexit and Trump in 2016, my answer is “not much.”

Q: Will the coronavirus be better, worse, or the same as expected?

A: I’m betting that it will be worse than expected. I don’t think anyone believes China’s “official” numbers, and the cases and deaths have been growing exponentially.

When (if?) it’s over, I wouldn’t be surprised if the death toll is 50-100 million.

And yes, that would have a major effect on the global economy and markets.

Apple has already issued a “profit warning,” and many more firms will announce surprisingly bad Q1 and Q2 results.

The markets are denying the impact of this virus because everyone wants to “buy the dip,” but that will change if companies start reporting huge misses.

Q: Chances of a market crash and/or recession in the U.S. within the next year?

A: I’ve been bearish for a long time, which explains why I stayed out of the public markets for too long – so you probably shouldn’t listen to me.

But I’d say there’s at least a 50% chance of some downturn or correction within the next year (likely linked to the virus).

Corrections and downturns can take many forms, so that does not necessarily mean a repeat of 2008-2009.

“Ranking” and Categorizing the Banks, Part 153

We recently changed the coverage of banks on this site so that there are separate articles on boutiques, middle market banks, elite boutiques, and bulge brackets

…which meant having to discuss very specific firms within this hierarchy – always a fun task.

Q: You misclassified Valence Group, a boutique specializing in the chemicals and materials sectors!

It has great deal flow and advises on larger deals (often over $500 million), so it should be an industry-specific boutique, not a regional boutique.

A: Fixed.

Q: Is it possible to move from a regional boutique to a bulge bracket? Or do you need an MBA or something else first?

A: It would be very difficult to move directly from a 5- or 10-person boutique bank to Goldman Sachs.

You would need something in the middle, such as a move to a middle market firm or a well-known industry-specific boutique.

An MBA might not even help much in this situation because if you’re already in IB, it’s cheaper and easier to switch banks.

Q: If I have a full-time return offer at Citi or BAML, is it worth it to recruit full-time again at GS, JPM, MS, Evercore, or PJT?

A: I’d say no. The difference in “prestige” isn’t worth the time and effort, especially when you consider the long odds of switching banks before your full-time role begins.

Q: Do these “rankings” change in other areas, like wealth management or corporate banking?

A: Yes! The rankings/categories on this site are for investment banking roles where you advise companies on M&A deals and equity/debt issuances.

Outside of that, the rankings are quite different in other areas.

For example, many of the “In-Between-a-Banks” and BBs with large Balance Sheets are strong in corporate banking, while the EBs do nothing there.

Q: I already signed an offer at an Asian In-Between-a-Bank in NY.

An opportunity just came up at a bulge bracket bank – should I interview for that and possibly renege on the first offer?

A: I’d say yes because a BB would be a significant step up, and there probably isn’t too much risk of the first bank finding out.

Just make sure they know that you would be reneging on another offer to accept this one…

Q: What about one of the “lower” BBs vs. a stronger middle market firm?

For example, UBS vs. DB vs. Jefferies, all in the same location.

A: If it’s one of the top groups at Jefferies, such as Healthcare or Energy, vs. a weaker group at DB or UBS, you’re probably better off at Jefferies (same if it’s a non-capital-markets group there vs. capital markets at UBS or DB).

But if it’s a generalist assignment, or the groups are similar, DB is probably your best option… even with the weakened state of European banks.

BIWS Changes: Money-Back Guarantee, Installment Plans, Support, and More

Finally, if you’ve been paying close attention, you’ve probably noticed some changes to our financial modeling courses over the past ~6 months.

Specifically, we:

  • Changed the money-back guarantee from 12 months to 90 days.
  • Removed most installment plans except for one option on the Platinum package.
  • Changed the support period from undefined/“forever” to 24 months.

These mostly represent a return to the original plan from 2009 (we only started offering installment plans in 2015, and the guarantee period was 60 days up until 2014).

The short, simple explanation is that too many people were abusing these policies, so they had to change.

Also, I don’t care if sales fall a bit because my additional upside from this business is limited; I’d happily trade 5-10% of my income for one less hour of hassle each day.

Q: What happened to your 3-month and 6-month installment plans? I can’t afford $347 or $497 upfront for a course.

A: We eliminated these plans after a detailed review of the data, which showed:

  • Only a small percentage of customers (< 10%) even used installment plans.
  • And among those who did, (default + refund) rates were very high – in some cases, over 50%!
  • So, we were spending time and money chasing down missing payments, credit card updates, etc., and there was no evidence that these plans boosted total sales.

If you really cannot afford a $300-$500 product, my suggestion is to sign up for something cheaper first and then upgrade later on, if necessary.

Q: OK, what about the money-back guarantee?

A: Similar reasoning: there was too much abuse associated with a 365-day guarantee period, and there was even less evidence that it boosted sales.

People would sign up, ask dozens of questions, and then say, “Oh, actually, I don’t find your course useful anymore”… conveniently on Day 364, after they had already won a job offer.

That lengthy a guarantee period also created problems with payment processors because credit-card data is not stored beyond 4 months, so we had to use wire transfers and more “creative” methods to process refunds.

Q: And support?

A: If you purchased something on the site 5-10 years ago, we cannot provide detailed answers to your questions and fix your Excel files indefinitely into the future.

The math doesn’t work if you look at the rates freelancers charge ($50-$100+ per hour, so 5-10 hours of questions could result in a loss).

We expect that you’ll consume the content, ask your questions, and get what you need within a few years, as you go through an undergrad or MBA program and interview around.

Beyond that, you’ll still have access to the content and future updates.

Q: OK. What about new updates, features, and other changes?

A: Read my announcement emails!

We just launched a new version of the members’ area and a new external version of the site last year, and a new Excel & VBA course that fixes many of the issues in the older one.

I plan to finish revising the Fundamentals course this year, and then I’ll start and finish the new Advanced course (which will be short and very different from the Fundamentals course).

Beyond that, I do want to create 1-2 completely new courses, probably in infrastructure or project finance (we get the most requests there, by far).

I’m not going to give a time frame because my top priority is still fixing/improving/updating what’s already there – things change a bit as you move from 300 customers to 43,000…

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi Brian, top-notch work as usual. Much has happened since you posted this and I feel like your readers would benefit from an updated version of this article – especially on coronavirus and the implications it will have for the economy, markets, the upcoming presidential election, etc. Please keep up the great work.

    1. Thanks. Coming in a few days!

  2. Brian,

    What happened to the IB fashion article on this website? Was it deleted? I’m an incoming SA in IBD and wasn’t sure what to buy for the summer… I hear it’s business professional everyday at some banks but causal at others.. also are loafers popular or normal dress shoes? Black vs brown belt & shoes? Ties? Do you have any recommended websites for this issue?

    Thanks for your help!

    1. I deleted the fashion articles because too many people complained about them or said they were wrong. But we may publish new versions in the future.

      Your safest best for a summer internship is something like:

      -1 or 2 suits (gray or charcoal, not black) – you won’t need to wear them each day, but just in case something comes up, it helps to have one in your cubicle.

      -5-10 white/blue dress shirts.

      -2-3 dress slacks (black or grey).

      -Probably just 1 pair of black dress shoes and 1 matching black dress belt, but you could get another pair in brown just to be safe. I would avoid loafers.

      -10 pairs of dress socks.

      -2-3 ties, just for those times when you need the suit.

      I would not spend more than $2,000 on all of this (and keep in mind these should be useful for many years if you plan to stay in finance roles after graduating). Maybe you can go a bit higher if you’re able to, but, for example, I would not spend $1,000 on a single suit – it’s pointless and overkill for an internship.

      There are some good options here:

      https://us.suitsupply.com/en_US/home

  3. Hi Brian,

    as always, your posts are highly enlightening. I can’t disagree with anything you’ve said.

    It has also been my impression that quants are particularly commoditized. If you have not been exposed to clients so that your name is linked to a strategy, you are at risk. The likelihood of getting fired goes up with your compensation. But as you said, It seems like there are some significant misconceptions about the potential of careers (sell-side and buy-side) within quantitative finance.

    If HF’s were dying, as well as quant funds- if that’s so, what careers are best to start to pursue? What strategies in the hedge fund world do you see succeeding in the future?

    Do you think IB is still the best career in Finance?

    1. Thanks! Yes, I agree there are many downsides to quant roles that people tend to overlook. Probably the biggest one is that they don’t lead to too many other roles outside quant/programming work if you decide it’s not for you.

      I don’t necessarily think HFs are “dying,” but it has become a much tougher business. Strategies that are more similar to PE, like activist investing with long lock-up periods, could do well. I’m also bullish on infrastructure investing because I think there’s huge unmet demand worldwide.

      I don’t necessarily think IB is “the best career in finance,” but it’s still the best starting point. Other starting points, such as sales & trading, have declined significantly.

      1. I’m a math major, and the quantitative aspects of quantitative finance have been grossly overstated.

        It’s mostly second year undergraduate, I don’t understand why a PhD is a requirement these days…

        1. I agree with you there. I think most “quant funds” are not really that quantitative at all; it’s a lot of smoke and mirrors. It’s not like you need to understand the proof of Fermat’s Last Theorem to come up with a trading algorithm…

      2. Thanks for your reply.

        Which is the best career within the realm of Finance (banks, HF, PE)? If the private equity industry is starting to look like a spent force what careers are best to pursue for IBs?

        1. I can’t answer this because it depends completely on your goals in terms of salary, lifestyle, etc., and what you’re willing to sacrifice to get there. I don’t think anything is “dying,” necessarily, just that some of these fields will be less lucrative in the future. I may write an updated version of this article to answer these types of questions:

          https://www.mergersandinquisitions.com/finance-investment-banking-jobs-tradeoffs/

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