by Brian DeChesare Comments (161)

Positioning Yourself for Business School, Part 1: The Financier

Positioning Yourself for Business School, Part 1: The FinancierIt’s a question on everyone’s minds these days:

“How can I get into the Harvard, Stanford, or Wharton MBA programs?”

“If I don’t get into finance or consulting right now, should I go back to business school instead?”

“How can I stand out from everyone else who’s applying?”

With the markets still in turmoil, more and more people are thinking of heading to business school. Even those who actually have jobs are thinking of going back to school to insulate themselves from layoffs and get a 2-year vacation while they’re at it.

Regardless of your background, though, you’ll face a unique challenge getting into business school and then using it to get into finance:

The criteria to get into business school is different than the criteria to get into finance coming from business school, and the two often contradict each other.

So here’s how you solve that problem…

The False Promise of Re-Branding?

Here’s the paradox that crops up when you apply to business school and then try to leverage it to get into finance:

  1. Top schools like a diverse student body – they don’t want everyone to have done two years of banking followed by two years of private equity. Especially in recent years, these schools have become biased against students with pure finance backgrounds.
  2. Banks and financial firms, on the other hand, don’t care nearly as much about diversity and would love to recruit only students with previous finance experience. Someone with previous experience represents reduced risk, and is more likely to stick around past their first all-nighter creating a pitch book.

In late 2007, recruiters were still trying to convince me that two years of banking followed by two years of private equity was a “guaranteed” ticket into top MBA programs. It’s funny how quickly things can change.

One of the key selling points of MBA programs is a chance to “re-brand” yourself. And when banks desperately need people (see: 2004-2006), they’ll open up to your story of personal transformation from traveling bard to the next Gordon Gekko.

But when they’re not so desperate (now), they start to consider only those who have done finance before.

So this selling point is highly dependent on market conditions and often turns into disappointment for MBA-level applicants without some type of finance experience.

Curious Conclusion

This past recruiting season, I spoke with many talented business school students who had started companies, nonprofits, and had all sorts of other impressive accomplishments. But even with those credentials, each one faced an uphill battle getting interviews and job offers if he or she had not done finance previously.

This brings us to a curious conclusion when looking at both of these points together:

If you’re already in finance, you need to find a way to stand out from the crowd and tell an interesting story if you want to get into business school. And if you’re from a different background, you still need to worry about that – but more importantly, you need to find a way to show banks that you can do the work.

In this article, we’ll address anyone in the first category: anyone from a finance background thinking of business school.

Standing Out From a Finance Background: Got Prestige?

I received an email from a reader the other day asking, “I thought it was basically the prestige of your firm that set you apart in MBA admissions?”

My response: While brand-name recognition matters, admissions committees don’t view you dramatically differently based on where you worked within a specific industry. They’re not going to look at someone and say, “Aha! He worked at Morgan Stanley so he should definitely get in, but that guy only worked at Houlihan Lokey so he is obviously unqualified to join us!”

You do gain an advantage by working somewhere well-known, but keep in mind that people from all sorts of different backgrounds apply to business school – so the “prestige” arguments people often get in on message boards become even more pointless in this context.

After reading thousands of applications, anyone in admissions starts to view most banker types as… pretty much the same.

So basing your entire application on the “prestige” of wherever you worked is a losing proposition, especially these days when tons of laid-off financiers are applying to business school.

The Real Way to Stand Out

Alex from MBA Apply hits the nail on the head with the real way to stand out in admissions:

“Build a life, not a resume.”

This is not a new concept for anyone who’s been reading this site over the past year. Regardless of whether you’re applying for business school, university, or even going through investment banking interviews, your chances of success depend largely on your “story.”

One small problem: if you work full-time in finance, it may be almost impossible to find the time to do anything outside work.

How to Develop an Interesting Story Even If You Have No Time

You don’t need to spend 20-40 hours per week on something to make yourself stand out.

But if you’re in banking or at a large PE firm, you probably don’t even have five hours per week to spend on other activities.

If you’re still thinking about business school and have absolutely no time for outside interests currently (Wait, how are you reading this article then? Hmm…), here’s what I’d recommend:

  1. First, decide if you’re actually interested for the right reasons. If you’re planning to stay in finance for the long-term and you’re already in it, an MBA usually doesn’t make a big difference (exceptions apply). Being “interesting” therefore matters far less.
  2. If you are interest is sincere, reduce your work commitment by moving into a different firm, group, or industry. A word of caution: in most cases the only move that “guarantees” a better schedule is leaving finance and moving into “industry” in a business development or corporate finance role.
  3. Once you have the time, develop some of those forgotten interests and hobbies… or find new ones. Even something that only takes up a few hours per week can be spun into a good story on your applications.

Before exiting or entering different industries, you really need to weigh why you want to go to business school in the first place. My own personal view is that the “2-year vacation” plan is a bit silly given the expense, opportunity cost, and the fact that you’ll actually be quite busy (programs have become more rigorous).

That’s especially true these days, when everyone has the exact same plan and admissions are more competitive than ever before – you need better motivation than just wanting to take a break.

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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by Brian DeChesare Comments (48)

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking Apocalypse

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking ApocalypseFor those who weren’t paying attention over the weekend, top government officials in China and the US reached an agreement whereby China has agreed to acquire all outstanding stock of the United States at $1.00 per share, with an implied valuation of $1 trillion.

Although the US GDP is close to $14 trillion on paper, analysts have said that extreme exposure to subprime mortgages and a failing financial system pushed its value down to only $500 billion.  China made a last-minute rescue, acquiring the country at a 100% premium.

(This is a joke, but I wouldn’t be surprised to see a headline like this soon.)

Ok, so in case you were on vacation, Lehman and Merrill both failed over the weekend, and the US financial system continues its descent into bankruptcy as banks and hedge funds spiral into a bottomless abyss.

So what can you do about it?

The Effects Of The Apocalypse

The collapse of 2 bulge bracket banks will have a big effect on you, but probably not in the way you’re thinking.  Most commentary has focused on how the absence of 2 huge banks will reduce job openings and summer internship opportunities.

While this is true, the larger problem is that you’ll now be competing with everyone who will be laid off from Lehman and Merrill (and BoA, of course) – thousands of newly unemployed bankers in the system, also looking for work.

What The Unemployed Will Do

From what we’ve seen earlier this year, my guess is that a good portion of the unemployed – especially at the junior levels – will simply forget about finance altogether and just “move into industry.”

But the truth is a lot of them will also stick around and go for positions at middle-market and boutique firms.

Especially at the VP-level and up, anyone working at one of the failed banks is in a “limbo” where it’s too late to make a career switch altogether, but where it’s tough to find anything within banking – unless they get really lucky.

Bottom-line, though, is that you will be competing with a sizable pool of newly unemployed bankers.

Wait, But Won’t The Boutiques Get Bigger And Take Over?

No, I don’t think so.

I’ve seen some questions around whether the smaller banks will grow and take over the spots once occupied by Merrill, Lehman and Bear.

I think this is unlikely for 2 reasons:

  1. Deal-making is slow.  It’s tough to grow a major business in a terrible market, and investment banking revenue is down over 50% from last year.
  2. This crisis proved that the pure-play investment banking model doesn’t work so well.  So I doubt that these boutiques have any ambition to grow and replace the failed bulge brackets.

What You Should Do

So, what should you do in the face of apocalypse?

Sadly, there’s not a whole lot you can do – a broken financial system in the world’s largest economy is a big problem and one that’s well beyond your control.

Earlier I wrote an article on how to boost your recruiting chances in a tough market, and I would reiterate that advice here.

By now, if you’re seriously looking at bulge bracket banks (well, the ones that are left…) and have no previous finance experience, you’re basically crazy.  Focus all your time and energy on smaller places.

However, even that strategy is problematic because everyone knows about it – so you have to consider some alternatives.

I think one of the best options is going abroad to find work – especially in the Asia Pacific region.

Yeah, everyone says you should start out in New York, but these days you’re more likely to run into laid off bankers jumping out windows than you are to run into a job.

Final Thoughts

One of the questions I’ve been getting lately goes something like this:

“Hi, I want to make a lot of money, not work a lot, have no risk and be able to do whatever I want all the time.  How can I get into investment banking?”

I hate to shatter your dreams, but nothing’s perfect – every profession has a downside.  Just refer to the graph below for the downside of working in finance:

Damn, It Does NOT Feel Good To Be A Banker: Investment Banking Apocalypse

Source: Bureau of Labor Statistics

It’s incredibly cyclical – and therefore far riskier than other industries.  Over 100,000 will probably lose their jobs in this downturn.

So if you can’t get exactly what you’re looking for, you have two choices: either wait it out or compromise.

And with the state of the economy and all the news over the weekend, compromise is the better option.

Update: It’s not all doom-and-gloom just yet, guys.  Looks like Credit Suisse and Moelis & Co. are both “on the prowl for bankers” – which just goes to prove what I wrote above about opportunities still existing at smaller firms and outside the US, especially in the AsiaPac region.

Update 2: Looks like Barclays is buying Lehman’s investment banking and capital markets divisions, saving between 9,000 and 10,000 jobs – so it’s not the end of the world quite yet.

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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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by Brian DeChesare Comments (63)

Finance Headhunters: Friend Or Foe?

Finance Headhunters: Friend Or Foe?

“My name is Rebecca Nicholson. I’m a recruitment consultant at Assbury Moron.” This HR chick has obviously mis-dialed and has no idea that this is not Assbury Moron, or wherever else she’s looking for.

“A recruitment consultant.  A headhunter.  Are you free to speak for a few moments?”

The Kruelberg Kretin Saga – Episode VI: The Headhunter Call, The All-Nighter

Ah, the infamous headhunter: you can’t hate them even though you really, really want to. You could try to love them, but do that at your own peril.

There are lots of misconceptions about what headhunters actually do, how they get paid, and who they work for.

So let’s fix all that right now.

What Headhunters Do

Back when I explained what investment bankers actually do, I likened them to Ari Gold. Bankers don’t create; they’re not there for the long-term; they just sell.

But if there’s anyone more deserving of the “Ari Gold” title than investment bankers, it’s headhunters.

What investment bankers actually do: Ari Gold

Recruiters are hired by investment banks, private equity firms and hedge funds to find potential candidates for hire. The recruiter does NOT work for you – he works for the firms that hire people.

When you get hired via a headhunter, he/she might receive around 30-33% of your base salary in compensation – from the firm that hires you.

So if you see any “Should I get a headhunter on retainer?” questions, please ignore them or find the person in real life and beat him/her into submission.

The fact that headhunters are paid on commission isn’t a bad thing, but you need to take it into account when making decisions: all else being equal, the headhunter is motivated to place you and get paid.

The Recruiting Process

The headhunter contacts you directly by phone or email and introduces himself/herself, and then sees whether or not you’re a fit for the opportunities he/she has available.

For private equity recruiting, this happens in the March/April time frame for the mega-funds and later on if you’re aiming for smaller places or you’re not at a bulge bracket bank; they may even contact you in January, midway through your first year, to introduce themselves.

Sometimes recruiters won’t contact you at all, especially if you’re not at a brand-name firm – in which case you need to be aggressive, get referrals from your friends at other banks, and do some cold-calling yourself.

Headhunters are not looking to “take a chance” on you if you’re from a non-traditional background – 99% of the time they want people whose qualifications match the job requirements exactly.

First Contact

You need to meet in-person so you can tell your “story” and so they can do a better job introducing you to the right firms. Meeting in person can also help you overcome a weaker finance background or a non-brand-name bank.

If you make a strong first impression – solid deal experience, a social/confident personality, and you can explain how you’ve made money for your firms in the past – then you get past the first round and will interview with the bank(s) / private equity firm(s) / hedge fund(s) directly.

The headhunter might stay involved past that, or they might back away and focus more on other opportunities – just remember that they are incentivized to make a “deal” happen because that’s how they get paid.

Good recruiters won’t tell you to take a horrible offer just so they can get paid – but if you’re on the fence and they think it’s a good fit, they will encourage you to go for it.

Why They’re So Prevalent In Financial Services

Recruiters exist in every field, but they’re most prevalent and most influential in financial services for 2 reasons:

  1. The highest pay  of any industry out there. Even junior-level employees make over $100,000, and mid-level hires will get between $500,000 and $1,000,000.  Try finding that in manufacturing.
  2. Incredibly high turnover at all levels. Some analysts switch firms multiple times per year, and some senior bankers have worked at pretty much every major bank. People get burned out quickly and lust after new opportunities equally as quickly.

Headhunters get paid around 1/3 of these six-figure salaries and everyone in the industry is hopping around a lot – that translates into nice cash money.

The other factor is that the finance industry – and especially the private equity firms and hedge funds on the buy-side – is very small, and even the largest firms in the world such as Blackstone have fewer than 500 employees.

As a result, it’s easy for a few recruiting firms to “own” all the relationships and have a monopoly (or oligopoly, to be precise) on the market.

That’s much harder to pull off in an industry like technology, where brand-name firms have tens of thousands of employees – no 2-3 recruiting firms can dominate the entire hiring process.

So, Should You Look for a Job Through Headhunters?

You pretty much have to if you’re ever interested in working at a private equity firm or hedge fund: almost everyone uses them.

Investment banks, by contrast, don’t rely on headhunters as much because they are much larger and have dedicated HR teams. So you have to think about headhunters more once you’re already working in the industry and you’re looking to make a move elsewhere.

I stress the importance of investment banking networking, and it’s no different here: headhunters can get you introductions, but you have a much higher chance of success if you have already spoken with people at the firm.

Networking for exit opportunities can be more difficult because the firms are so much smaller than banks – but it always helps, and if your resume doesn’t match the job qualifications 100% you need to network your butt off anyway.

Buyer Beware

But watch out for a few points when going through headhunters:

Introductions, Not Decisions

Never rely on a recruiter to make a decision on whether or not to accept an offer.

It’s not that they’ll try to lead you astray or force you into something you don’t want – it’s just that the decision needs to be yours.

So don’t just stop at the recruiter’s opinion – ask around, see what others have said about the company, and get a feel for its reputation. As bankers would say, do your own due diligence.

The Tough Market

Besides financial institutions, guess who else suffers when the market tanks?

When hiring slows down and the number of people being laid off exceeds the number hopping between firms, headhunters lose their main source of revenue.

So in a recession, you need to be even more careful and persistent in how you approach the recruiting process – headhunters can still help, but you need to consider all angles and network on your own when you’re “in the market.”

Coming From Non-Bulge-Bracket Banks

Some headhunters will ignore you if you’re not from a bulge bracket bank. It’s just a matter of return on time for them – they are more likely to place candidates who come from “better” names, so that’s where they spend most of their time and energy.

Don’t just give up if you’re not at a top bank, but diversify your recruiting, network on your own and get referrals from friends.

Some recruiters also focus on middle-market firms, so seek those out rather than just going through the 3 biggest firms.

Closing Thoughts

If you want to work in finance for the long-term, you’ll have to work with headhunters – regardless of whether you’re hopping between firms or you’re starting your own firm and need to hire employees.

So get to know them, and speak with as many as you can to get introductions – they are very well-connected.

But keep in mind that you also need to do some work on your own, and that you shouldn’t rely on headhunters for everything.

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.

Break Into Investment Banking

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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