What’s the Big Deal About Financial Modeling?

What's the Big Deal About Financial Modeling?“So, which course is right for me?”

It’s one of the most common questions we’ve gotten since launching Breaking Into Wall Street.

And it’s an even more common question on the industry-specific courses.

Do you really need to learn bank modeling?

Or learn how a REIT’s financial statements differ from those of a retail company’s?

Better yet, does learning any of that actually help you in interviews? Do you become more employable as a result of your advanced skills?

Or is it just a waste of time?

The Value of Specialization

To answer these questions, it’s helpful to think about specialization in another industry you probably know something about: medicine.

Chances are that you’ve at least thought about medicine – or been forced to think about it by your parents – if you’re also interested in business and finance.

You need to be ambitious, driven, and willing to burn the midnight oil in both industries, and a lot of people switch their minds from one to the other early on.

And even if you’ve never entertained dreams of becoming a doctor yourself, you probably have some friends in the industry.

And that means that you may be familiar with the rough pay structure there.

A general surgeon might make around $300K USD per year, which makes sense given the years of medical school, residency, and real-world practice required (Source: Allied Physicians, Salary Survey).

$300K is pretty impressive, but consider what a cardiac surgeon makes: the average might be in the $500K – $600K USD range because it’s more specialized (Source: Allied Physicians, Salary Survey).

But then there are specialty areas like neurosurgery where you can earn even more: some neurosurgeons earn nearly $1 million USD per year, and the average pay is often reported to be over $500K (Source: Allied Physicians, Salary Survey).

Specialization makes you more valuable because it’s harder to replace you with someone else if you have advanced knowledge and experience in a certain area.

And clients – or patients – are willing to pay a lot more if you’re known as a top “practitioner” in an area rather than a generalist.

OK, But Do You Really Get Paid More in Finance?

To be clear: the pay differences by specialty are far more pronounced in medicine than they are in finance.

So no, you won’t make twice as much if you’re a specialist in FIG (Financial Institutions Group) at a bank rather than an M&A or capital markets person.

But specializing does make you more valuable and more appealing to groups at banks, PE firms, and hedge funds that are looking for people with your background.

And the ease of getting hired and lasting through downturns is equally important.

Story Time

A few years ago a headhunter at a well-known firm approached me and asked a simple question:

“Do you know anyone who’s qualified to be a FIG analyst? I can’t find anyone who has the knowledge or skills this bank is looking for.”

He places candidates for a bulge bracket bank, and he was having a ridiculously difficult time finding someone who knew a lot about banks & financial institutions.

Commercial banks and insurance firms – and anything else that makes money with money – are fundamentally different from normal companies and you need a different skill set and frame of mind when you work with them.

And it’s not easy to acquire that knowledge on your own, unless your brother happens to work in the industry, can send over all his models, and then spend weeks or months teaching you how they work.

But here’s the interesting part about this headhunter and the bulge bracket firm he was recruiting for: they weren’t even being that picky.

It wasn’t a matter of finding tons of people to interview but no one being a 100% match – they couldn’t even find anyone to interview.

If you had completed the Bank & Financial Institution Modeling course offered here and spun it appropriately on your resume, you probably would have landed an interview just because no one else even attempted to demonstrate the experience they were looking for.

How Well Does Specializing Work?

“Sure, Brian,” you say, “Great – but that was just one headhunter who was searching for candidates in one group at one bank. What about everyone else? Do students who go through your courses actually land offers afterward?”

The answer is yes, absolutely. A perfect example of this is a long-time BIWS student who recently made the move to an elite boutique’s energy group in London:

What's the Big Deal About Financial Modeling?

He hits the nail on the head with the part about “challenging times.”

When the economy goes to crap, specialization is how you stand out and gain that much-needed edge over the competition.

Or you can take a look at the story from one student below who went through the core modeling courses plus an industry-specific one to land an offer at JP Morgan:

What's the Big Deal About Financial Modeling?

And when I posted an announcement about this special offer and the industry-specific courses the other day, the exact same question came up on the WallStreetOasis message board (you can read the whole thread right here):

What's the Big Deal About Financial Modeling?

The first response came pretty quickly:

What's the Big Deal About Financial Modeling?

And you can check out the whole thread yourself to read other peoples’ views there.

One of the posters at the end raised a good question: do you actually need the industry-specific courses? Isn’t there some risk in specializing too much and learning more advanced material?

Specialization = Risky?

Here’s my take on it: yes, if you specialize in one area over many years it will be more difficult to move elsewhere.

So if you’ve spent 10 years working with banks, you’ll probably continue working with banks since FIG requires so much specialized knowledge.

But, a few points to consider there:

  1. While it’s more difficult to move to a completely different area, it’s also easier to advance in the industry you’ve chosen and to move around to other opportunities there. For example, you see people move from real estate groups at banks to REITs to real estate investment funds and back and forth all the time.
  2. There’s little risk that any of these areas will “disappear” because they’re all based on fundamental needs in society: places to deposit money (banks), places to live and work in (real estate), and a source of energy (oil & gas). Yes, they may change over time but we’re not talking about industries that will disappear when the next hot startup comes along.
  3. Simply completing a course will not make it more difficult for you to move elsewhere. Working full-time in one of these groups for years may have that effect, but completing a course actually expands your options by showing that you’ve taken the initiative to learn something completely new.

So yes, the bottom line is that there is some risk whenever you specialize that you’ll get “stuck” in a certain area.

But there’s far more risk in not gaining advanced knowledge at all, being easily replaceable, and having someone with less experience take your place.

Is It Right for You?

You could sign up to learn financial modeling out of intellectual curiosity, but let’s be real here: you’re interested in learning it so you can land job offers in investment banking, private equity, hedge funds, and related industries.

And I don’t want to mislead you about signing up if there’s no way you can put these courses to use.

The Platinum package offered here is most helpful if have a solid path for getting into finance and winning the attention of recruiters – you’ve networked a lot already, you go to or went to a top undergrad or business school, or you have relevant full-time work experience (something business-related).

The other day someone wrote in and asked if he could use the courses here to break into finance even though he didn’t have an undergraduate degree.

I told him that banks would not hire him no matter what courses he took, because that’s just how the system works – banks are traditional and conservative, and he would be wasting his time and money here.

So while the Platinum package we’re offering can help you a lot if you’re in the right position, I don’t want to go out and start making ridiculous claims (a competitor actually told this reader that he could get in by taking their $10,000 course) just to “convince” you to sign up.

Take a look at what’s offered, go through the free tutorials, and then just hit “Reply” to ask me any questions you have on the courses.

What Next?

First, make sure you check the email you received with this link because I listed 6 more financial modeling tutorials there on how to build a revenue model and merger model.

Those are very helpful if you want to sample the material that’s included in the Excel, Fundamentals, and Advanced Modeling courses on the site.

Once you’ve been through those, here’s what you can expect to receive next:

  • Thursday, January 5: Banks & Insurance Tutorial
  • Monday, January 9: Oil & Gas Tutorial
  • Wednesday, January 11: Real Estate Tutorial
  • Friday, January 13: Final Reminder About the Special Offer and Industry-Specific Courses

I hope that clarifies what you’ll get over the next 1.5 weeks – let me know if you have any questions in the meantime, and see you again tomorrow.


P.S. And just as a quick reminder: the industry-specific modeling courses are going up in price on January 13, 2012 at 5 PM New York timeso make sure you sign up before then to lock in these introductory rates.