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“Hi, I was wondering which class I should take to break into investment banking: Advanced Partial Differential Equations or Quantum Field Theory. Do you think it will ruin my future if I only learn up through Multivariable Calculus?”
No, I don’t make this stuff up: I get emails like this all the time.
Sometimes they’re from undergraduates, sometimes they’re from MBA students, and sometimes they’re from the occasional MD or PhD candidate.
But my answer is always the same:
It doesn’t matter.
You don’t do “real” math in investment banking, so stop worrying about it and spend your time more wisely.
Got Obsession?
So why is there such an obsession with learning advanced math / winning the Nobel Prize before you start working as an investment banking analyst or associate?
You’re Good at Math
If you’re interested in finance to begin with, there’s a good chance that you’re already good at math and have taken a lot of math classes. You’ve either:
- Been interested in finance for a long time and have taken a lot of finance/math classes; or
- You were an engineer or science-type who got bored of that and wanted to move into business.
Yes, there are bankers with liberal arts backgrounds as well but bankers in categories #1 and #2 outnumber them.
We Like to Blame Other People
It’s the same reason we believe so strongly in the myth of the “career path.”
If you can get into finance simply by calling hundreds of people and being very aggressive with networking, failure to break in would reflect poorly on you.
But if you couldn’t break in because you didn’t have that class on quantum physics, then you have the perfect alibi.
We Like to Stay In Our Comfort Zone
Getting out there, talking to people, and meeting them in-person is uncomfortable. It’s way easier just to sit at home watching TV…
…or to sit at home completing your math homework.
Going through dozens of advanced math classes also gives us the illusion of progress without actually requiring us to make any progress. It’s part of the 80% you should be eliminating.
The Truth About Math
There are 3 points you need to know about math in investment banking:
- You don’t use it that much.
- The math you do use is very simple. As in, arithmetic.
- Therefore, you don’t have to be a math genius – but you do have to be good with numbers.
Say What?
You don’t use math that much because you don’t do that much modeling work, even in “technical” groups like M&A.
Think “administrative work,” emailing people and updating lists of information.
And when you do use math, 90% of the time you’re working with existing templates or simple models rather than creating everything from scratch.
Yes, it’s cool to be able to say you can create a hyper-advanced LBO model from a blank spreadsheet, but in the real world no one has time for that – so you use templates.
But What About Modeling?!!
Even when you are working with financial models, none of the math is complex.
There’s addition, subtraction, multiplication, and division… and occasionally built-in Excel functions like IRR, Mean, and Median.
You never use calculus or differential equations or even geometry / trigonometry. Just arithmetic and sometimes algebra.
Think about all the basic formulas in accounting: Revenue – Expenses = Profit. Revenue – Cost of Goods Sold = Gross Profit… and so on.
Notice how there are no integrals anywhere in those equations.
So Why Do You Still Need to Be Good With Numbers?
If the math is so simple, why do you need to be good with numbers at all?
Although the individual mathematical operations are simple, you can end up working with huge spreadsheets where a lot of calculations are linked together.
1 + 1 = 2 is simple, but now let’s say you have 100 similar calculations, and the input of each one is linked to the output of another calculation.
That’s exactly what you run into in investment banking, and it gets tricky to trace everything – especially when it’s someone else’s model.
Exceptions & Other Fields
In other fields of finance the math can get more advanced.
The main example is trading, where some funds may use advanced algorithms and higher-level math to make trading decisions – so, if you’re making the sales & trading vs investment banking decision, and you’re leaning toward trading, advanced math classes might be helpful.
For hedge funds, it depends on what strategy the fund uses: long-term fundamental investing has less math than algorithmic trading.
Also in trading, mental math (17 * 35) is more important because you need to make quick decisions.
Outside of those, the math in other industries like private wealth management is as simple as it is banking.
So What Should You Do About It?
Stop taking advanced math classes – especially if they hurt your GPA.
Bankers look at the overall difficulty of your major but they don’t go in and analyze every single class – a 3.8 GPA with easier classes is much better than a 3.3 GPA with “tough” classes.
Plus, taking such advanced classes takes away from time you could be spending on internships, school-year internships, networking, and activities.
When reading your resume, bankers pay attention to the school you attended, your internships, and your GPA – not individual classes.
Beyond Undergraduate
Despite rumors to the contrary, sometimes you have to do work to get through business school.
At this level, taking “more advanced” classes is an even worse use of time because:
- At the MBA-level networking is even more important.
- Hardly any “math-intensive” finance positions hire directly from business schools – you don’t need an MBA to be a top trader. You just need to make a lot of money.
So if you’re at this stage and you’re serious about breaking into investment banking, forget about advanced statistics / financial math classes and do the bare minimum.
Summer School?
I also get a lot of questions on whether “finance summer school” or taking classes during the summer instead of an internship is worth it, and the answer is always “No, unless you have no better options.”
Bankers don’t like taking risks, and they always prefer to hire someone with investment banking internship experience over a newbie.
What About Your PhD / MD?
Bankers tend to look down on advanced degree holders.
They want people who can burn the midnight oil and who are aggressive enough to find ways to make or save money – and they don’t think that advanced degree holders fall into this category.
Getting these degrees is far more difficult than anything you do in banking, but most bankers don’t like to acknowledge this.
So if you’re already deep into one of these programs, cut your losses and get out early or take the path of least resistance if you’re too far in to drop out now.
Improve Your Communication Skills
If you really want to improve your skills before you start working, forget about math and focus on your writing and speaking skills.
There are tons of analysts who are good at math, but few can describe what they did and how it helped their bank make money in plain English.
And if you want to move up, you need to interact with senior bankers a lot – so getting to the point without rambling or stuttering is essential.
And If You Really Want to Improve Your Math Skills…
If you’re still set on improving your skills, forget about classes and have a friend in the industry send you a complex model with many different tabs.
Then, try to “reverse engineer” it and figure out what the key drivers are and how they affect the output.
Creating a model yourself is relatively easy because you control everything – the real challenge is looking at someone else’s model and figuring out how it works in the first place and how to modify it.
So spend some time playing around with complex models and get used to the process of tracing individual formulas and outputs.
And please, no more partial differential equations.
About the Author
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.
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
Comments
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If you want a more quant role but still with the client/team working element (ie not only coding) what would you recommend (from studying engineering)? (trading / asset management / hedge fund?) Thank you
Probably trading or something like a “quantamental” hedge fund that uses both quant skills but also fundamental analysis and due diligence.
I completed my high school. I am not good at maths. Should i study about finance or not?
What do you want to do? Finance does not require much real math outside of quant finance roles. If you want to do sales or work with clients or work on deals, you can still study finance.
Right now im trying to transition towards the financial industry, particularly in the corporate investment banking side as a best case scenario involving junior banking (anywhere in USA). Keep in mind I’ve never done an internship and I’m still an undergraduate.
But retail banking is also okay as well. Not entirely sure if I should specialise in industry or product side.
After returning to university at 34 years of age, I’ve been getting full marks/As in all my classes so far in the eller college of business, and I’m overly passionate about finance and helping company’s grow to benefit society as a whole, and let’s face it make money.
Ive also been reading breaking into wall street religiously. So my question is: at 34 years of age, living in Hong Kong and self employed business owner, no prior finance or investment experience specifically, however I have experience using some of the analytical techniques involved in the job and visualisation/ presentation /pitches.
what are my chances of getting an entry level job as an investment banker nowadays in USA have studied “Breaking Into Wall Street” rigoursly? And also taking my accounting and finance classes at the moment. I’ve got experience analysing and forecasting biopharma Company’s, which I truly enjoyed as it’s so much different than regular companies.
I want to be an investment banker more than anything and will do anything to make it happen.
(Getting an investment banking job would be Considering I’ve got some form of connection as I’ve heard this is key to secure an interview)
I can’t really say based on that description because your background sounds different from ~99% of the candidates we work with. If you’re a BIWS customer (I could not find your name or email address), please contact us there and give more specifics about your story and what you’re trying to do.
My gut reaction is that it will be extremely difficult to get into IB as an Analyst when you’re 34 years old because you have far too much work experience already. But if you just started undergrad and appear to be a normal university student, who knows, it might work.
I doubt your very successful in investing if you don’t believe in math. Its pretty much the only thing based on facts in the entire universe!
Did you read what was stated in the article? Yes, you obviously need some mathematical ability to make investment decisions, but:
a) Fundamental analysis is fairly simple – arithmetic, algebra, and basic statistics. You don’t need to know PDEs to analyze a company’s financial statements. In quant roles this changes, and topics like linear algebra and calculus become more important, but this article was specifically about investment banking.
b) Investment bankers do not “invest” – they are agents, like real estate agents, that earn fees for completed transactions. They need to know how to market and sell and build relationships, but advanced math is unnecessary because it’s a relationship-based sales role.
I am in my final year of economics honours from University of Delhi and am not able to decide how to start my career in investment banking. Masters in finance or MBA are the options I am puzzled about. Or is there any other better way like working full time before pursuing masters, joining some other institution to enhance my skillset etc.
Help!
Please see: https://mergersandinquisitions.com/investment-banking-masters-programs/
hi I have done my engineering and looking to get into the field of investment banking, but I have no knowledge about if. so from where should I start.
https://mergersandinquisitions.com/get-started/
My professor said that asset management is highly mathematical. Is this true?
It depends on the role. Not necessarily if you’re in say sales. If you’re in an investment role then yes.
Hi I studied marketing in high school so now I want to study investment banking but I never did accounting and I only did mathematical literacy which is not so difficult do I have a good chance at pursuing this degree?
Yes, I don’t think accounting requires advanced mathematical skills.
Hi,
I have two Associates degrees. Communication Studies, Business, and was 4 classes shy of becoming a Paralegal. If, I decide to take calc 1 and calc 2, and graduate with a comm degree from a UC (target school), do I have a good shot at investment banking?
I think work experience matters most, but the classes you mentioned can be somewhat useful.
Hello,
Great article! I have been doing research for some time now and your article has the most comprehensive answer that I could find and help me decide to not worry about math – although I’m considering taking linear algebra post graduation if time allows.
However, I would like to ask for advice since I’m here. I am mid way through my junior year pursuing a degree in finance from a local state school. I have a background in retail management and I want to break into the finance industry as an analyst. I expect my gpa will be in the neighborhood of 3.5 – 3.6. My concern is that I am a full time employee (salary manager) and can not afford to quit my job to take on an internship. I have no idea how my retail management experience is going to help me or hinder me once I complete my undergrad degree. Do you have any advice or suggestions? Thank you for your time!
Perhaps you can look at research/buy-side roles that specialises in the retail industry. You can then use your retail experience as a stepping stone. Best to gain some sort of finance experience in school or at work too.
I will look into those options. Thank you and have a good day!
What are the chances of getting hired for an analyst position with no internship experience but an MBA degree? At this point, do you have any leverage over an undergraduate with an internship experience?
It is hard to say because it depends on various factors (1) Are you from a target school (your MBA)? (2) How do you present yourself? (3) What are your valuation skills/experience? etc So I’d say it’s a 50/50 chance depending on the above. And yes, having internship experience at a bulge bracket is always best, though you’re technically an Associate post-MBA so I am not sure if you’ll be competing with an undergraduate.
What would you recommend to improve my communications skills? I feel that’s a point I really need to improve
Thanks!!
http://www.forbes.com/sites/amyanderson/2013/05/28/successful-business-communication-it-starts-at-the-beginning/ maybe useful.
Hi, this is really for the “Traders and Brokers” article. However when I attempt to make a comment there I get a message saying “Invalid request signature”; I’m posting my query here instead.
So basically if I understood the article correctly, lets say you’re finding it hard to break into trading (in a big firm). One could plausibly work for a broker such as CQG/FXCM or a vendor like Reuters/Bloomberg and still break into the industry via the ONE of following routes:
– MSc in a target uni (I suggested this because unless you have work experience, doing a MSc RIGHT AFTER a BSc is worthless, at least in London)*
– Network while in those brokerage/vendor firms, as you need to understand trading dynamics to service the traders
– MBA to re-brand yourself*
*Includes networking.
Basically it should be plausible to transition from broker/vendor to trader?
Yes, these are common paths.
Does Calc 1 or 2 serve any purpose in banking? Why do undergraduate schools mandate those courses?
Not really. Perhaps because they want you to be a bit more well-rounded?
I am taken aback by this point of view that advanced math is unnecessary for a successful banking career. I, myself, and pretty much everyone else at my bank, even those in non-technical roles, value the math-inclined strategists very much– in fact, some would credit our firm’s vey success on having hired the world’s best mathematicians over the years.
First, a rigorous grounding in math is the single most useful liberal arts skill set you can have in ANY industry, let alone the number-rich field of banking. That’s because math teaches you a structure for how to THINK about ANY problem through the invaluable tools of definition, abstraction, logical interrogation, and proof.
Second, risk management is of paramount concern to every financial institution, whether it be a bank or insurance company or investment manger. Risk is one of the most complex mathematical notions ever conceived, and any conversation about it that is not grounded on probability and its dynamic processes (whose solutions, by the way, ARE partial differential equations) would not keep the attention of any serious professional for very long.
Bottom line is: math is hugely useful– no matter what level of study you’re at or aiming for– and regardless of where your career path is going to tack you. The only caveat I would make is: you will be in school for only so long, and every math course you take is basically one less computer science course you can take — which is an even more important skillset in today’s business world than pure or applied math (but itself is built off of rigorous mathematical structure).
Thanks for your input.
As an econ major, calculus 1&2 are mandatory but what’s the relevance of those two courses to banking?
I feel I’ll be better off networking and learning about banking-related technical skills e.g. accounting, modeling, Excel etc. than wasting time doing those calc problems. What’s your take?
Yes that’s true, as long as you can get your GPA above 3.6
I’m an English and Modern Languages grad with great communication and interpersonal skills. Was planning to go into law but have changed my mind. Do I stand any chance in Sales?
Yes I’ve had seen people with your background in sales
hi, this article is really informative. I have some doubts regarding my career plan. I got admission into IIM-Ahmedabad which is the number one business school in India , i want to be an investment banker but i am skeptical because of my mental math abilities . i really like mathematics but i am only good with a pen and paper in my hand but as far as other skills are concerned i am pretty good at them like communication skills,etc.. so give me a suggestion in this regard ..will slow mental math abilities destroy my dream of becoming an investment banker??
Not necessarily, but being a trader may not be your best bet
Dear M&I,
I read this article a few months ago.
Since then, I started working more on my communication and human skills; I read great books on how to influence people using different tactics. It already paid off a little bit. No, I am not yet in the IB.
However, I was able to network and will probably get SA internship at JP Morgan. It was not formal at all. People skills are always valued more than anything; I can firmly say about it. Only using it, I was able to impress local head of JP Morgan and some other professionals in finance industry in my home country including PE fims. A lot is going to depend if I will be able to pass CFA level 1.
Frankly, I would love see if I can get summer internship at GS, it is the only place I want to work. More importantly, I am going to try this first.
Thanks M&I.
Promise as soon as I get FT offer, I will share it with you guys :-)
LOL not offer. I will share my story :)
Congrats on your SA. Please do!
Do you think taking a future and option class will be more benificial for career in investment banking compare to a class that teaches you how to negotiate or pitch a new product?
I think knowing the key to sell is more important so I believe the latter is more useful, even though this is a soft skill. Futures and options is useful if you want to do sales & trading and exotic products (or you have a huge interest in it). You can use the knowledge in buy side roles too. However, it is not necessary.
In response to Walt’s question on organization above, don’t secretaries (or maybe analysts and interns) organize for their superiors?
Yes most do. Sometimes analysts and interns organize for their “bosses” but it is usually the case when the firm is small and there is no secretary.
Well then, if the secretary does it, why is it important for the investment banker?
If it is important for the IB person, is the organization mostly paper, binders etc., or are smaller accessories also important?
I’m not sure I understand your question. But yes bankers do administrative work and they have secretaries.
Is organization an important skill in IB? Because I lose stuff all the time.
Yes it is.
Thanks Nicole. So if I learn & practice financial modeling. I will be able to improve the required math skills required for IB ? Right?
Yes, you will.
First of all I love this website. It’s fun to read & very informative. My question is, how would you suggest one improve his math skills for IB ?. My math skills are pretty non existent. Thanks
You don’t need solid “Math” other than “plus, minus numbers” and ability to understand financial statements unless you’re going for quant related roles. To improve modeling skills, you can check out http://breakingintowallstreet.com/biws/
Thank you for this great article.
Speaking of technical skills, is there any IB related computer skill or just some technical stuff you can recommend learning despite Excel?
To put it into context, I am going to start my 1st year at a uni in the UK and I do not have advanced technical skills or certificates. Heaving read your previous articles, I am also a bit reluctant to just writing down “Proficent in Breathing” on my resume (everybody is going to write that down at least) and I cannot just leave Technical Skills empty.
Spring Internships are huge in the UK and I want to appear well-rounded on my CV. The lack in technical skills seems to be the only point for recruiters to drop me. (I am on a Target)
Besides that, I intend to take Series 79, however, this will be at the earliest next summer. I have some very basic C++ and Java knowledge and I am committed to invest time in technical stuff. I know you are going to say that it’s a matter of practise and I will not be able to make up for that in 2 months and you are absolutely right. But I am commited to invest time so that I can write down at intermediate and actually say 2-3 sentences when asked about it.
In addition, would you mind giving your opinion on SQL and ways to develop Bloomberg skils without having to pay a small fortune? (please don’t get me wrong, I do definetely intend to keep things legal, but maybe you know of a discount for students? )
As a last note, I asspire to work in M&A.
Regards,
Michael
These technical skills can add to your resume though they are terribly relevant to M&A. I’d suggest you to gain deal experience first. Deal/work experience is most relevant. Even deal experience at student competitions & clubs count.
On your CV I don’t think you’d need to list proficient in Excel https://mergersandinquisitions.com/free-investment-banking-resume-template/ You may want to list your Series 79 certification once you’ve passed it, C++ & Java there. I’m not 100% sure where you can learn SQL or Bloomberg for free. I think Bloomberg offers free courses to some professionals at banks that use their services so if you are friends with such contacts that may help you
Thanks for your response Nicole.
Do you think I could write down something like “modelled X with Excel” (replace X with some present value stuff) which I did in a society in High School (founded and led by myself) ?
Also, is it acceptable to state “currently studying for Series 79” or in the instance of language certificates “ABC Level B2 Exam on 12.34.5678” / “ABC Level C1 Results on 12.34.5678” ? – In the latter instance I would state it in brackets after classifying my actual profiency in the language in question.
The point is that I learned a language for nearly 2 years at a specific language school on weekends and I am now learning privately. However, I have not taken acknowledged language tests, therefore I have to start with test taking on the lowest level. Having learned it for 2 years, writing down the lowest language level (as higher level test will have been marked only after deadline) would make me look inept. To illustrate this, the lowest level can mastered in 3 months and that is why I am keen to state “Level 2 X on ..”.
Let me say that I truly appreciate your efforts and time commitment in answering our questions. You are making a positve impact, keep it up!
Best Regards,
Michael
Re. your first question, I don’t think its necessary.
Second question – yes you can say that you’re studying for Series 79
I’d just list your language level (beginner, intermediate, fluent, native)
Your response is appreciated Nicole.
Anytime!
if I may suggest, you guys should talk about how to use the hp12c like a pro. I definitely would like to learn how to use it better and you guys could add that course to Breaking into Wallstreet site.
hp12c, the financial calculator.
Thanks for your input!
After reading some of the posts here about maths I am definitely puzzled and reconsidering what I am studying… why?
I’m currently doing Commerce/Economics dual degree majoring in Finance for Commerce and I WAS thinking about majoring in Quant. Methods for Economics. I had initially thought having this major would be beneficial in terms of being able to model etc. (not that it would be the most interesting economics major & it is very hard)
Two things come to mind
1- doing something hard and that I’m not that in to will most likely result in lower grades (Higher grades from easier courses are better than lower grades from harder courses- I read that here)
2- I worry about the label quant and being doomed to doing people’s grunt work crunching numbers and being the geek who does that kind of thing
Whats your opinion?
Would this major be helpful if I wanted to change from IB to Hedge Funds etc (would that largely depend upon the nature of the Hedge Fund?
Perceiving to have an advantage by having a major such as Quant. Methods seems foolish as the more I read, the more I realise IB is about human relations {quant. methods doesn’t help you there haha}
1. Yes this is true. I’d major in it if you are pretty sure you can get a 3.5
2. I don’t think you should worry too much about that
Yes. IB is mainly about human relations because you need to bring in clients and maintain relationships at the senior level. Perhaps you can look at quant roles in HFs, or structuring roles in IB.
Hi there, at the moment i’m an Economics student and I always dreamed about working at a bank. Still, if i’m correct, there are departments in banks sometimes called Research. Do people in these departments use any advanced math? I was thinking of doing an Econometrics class but now that I read this, i’m not so sure if that’s a good idea. Is there any use of econometrics in banking?
Yes, there is. You may want to check out Economics or Strategy Research. http://www.goldmansachs.com/careers/why-goldman-sachs/our-divisions/global-investment-research/index.html
Very informative article. I find it very interesting that you were a CS major.
Do you still remember anything you learned from your CS program? And, hypothetically, would you be able to work at, say, Microsoft with a computer-related job right now if you so choose?
Thank you very much
I still use it sometimes, yes, especially when giving instructions to developers working on new features on this site and BIWS. I would not go back to being a programmer because I enjoy marketing more.
Math is something I worry about heavily. I’m glad to hear it’s not as big a deal for investment banking, but like the article says it’s still important in other fields I have interest in.
I’m so stubborn that things I’m interested in and not good at, like Calculus, are things I have vendettas on, and so will be learning them anyway.
Yeah you don’t need advanced math for IB, but you do need to be comfortable with math.
I wish I had read this article 2 years ago.
Is bachelor in math will help me alot if I want to become an investment banker or CFA?
https://mergersandinquisitions.com/low-gpa-investment-banking/
https://mergersandinquisitions.com/low-gpa-investment-banking/
Neither really.
Hello
Im from the UK and I was thinking about a roll in a bank and I am keen to one day try and work in the US. Are there many opportunities for overseas workers. Do they recognise english degrees other than Oxford and Cambridge, I could get the grades to get into oxford and cambridge but getting in is a whole other matter also i would have to do an extra year in my school/college doing maths. What are the best routes to get break into investment banking in the US and would they recognise a degree from a place like Birmingham university (you may not know it but its about 23rd in the country)
Cheers for the help, Much appreciated.
Best grades in US – GPA: above 3.5, ideally above 3.6 / 4.0
No, the university isn’t a target
Do I-bankers think PHD people are nerdy and geeky who are into doing complex math.I mean the type who wears glasses,keeps his hair uncombed and shys away from girls?
Is that unfair prejudice or lack of cultural fit?
No. I can’t say on behalf of all ibankers and honestly everyone has a different perspective. And I don’t think this question is irrelevant to you landing a role in IBD
Anyone give some quick advice here? I graduated with a masters in economics and I’m pretty darn good at it but don’t want to make it a career for it gets boring at times. I want something more exciting, faster paced, something that will reward me financially, and I am willing to take on more training in finance, math, or whatever is necessary. Is investment banking a good field? Or does anyone else recommend a different field?
What you want is very “general” I’d suggest you to read up on articles about what working in finance entails.
There are also various areas in IB (S&T, IBD etc) which I encourage you to explore
https://mergersandinquisitions.com/investment-banking/
https://mergersandinquisitions.com/equity-trading/
https://mergersandinquisitions.com/equity-research-careers/
https://mergersandinquisitions.com/structured-finance-careers/
https://mergersandinquisitions.com/leveraged-finance/
https://mergersandinquisitions.com/investment-banking-analyst-job/
https://mergersandinquisitions.com/investment-banking-analyst-job/
https://mergersandinquisitions.com/investment-banking-analyst-job/
https://mergersandinquisitions.com/investment-banking-analyst-job/
Thank you for this article. It is helping cope with the fact that, while I sit and waste away in calculus class, I most likely won’t ever use it in life. I get frustrated when the professor says that we will use all of this bs in finance and management, but seriously, I don’t think I will ever use ln.00375^2xe to calculate a company’s revenue..
Ha, I’d just make sure your GPA is above 3.6 if you want to break into IBD. The rest doesn’t really matter – aka if you don’t do well in your calculus class but your other classes make up for your shortfall in GPA don’t go to class! :)
“So Why Do You Still Need to Be Good With Numbers?
If the math is so simple, why do you need to be good with numbers at all?
Although the individual mathematical operations are simple, you can end up working with huge spreadsheets where a lot of calculations are linked together.
1 + 1 = 2 is simple, but now let’s say you have 100 similar calculations, and the input of each one is linked to the output of another calculation.
That’s exactly what you run into in investment banking, and it gets tricky to trace everything – especially when it’s someone else’s model.”
I’m a right in assuming that this means you simply check if all the calculations are correct?
Nothing taxing like the math needed for sales and trading or some of the other roles in finance?
Yes you do need to know some modelling in IB and you do need to check if calculations are correct
Math in S&T is different. Not much as much modelling involved – maybe trading models, but different type. You need to think on your feet (Math-wise) in trading
Oh I see. But for IB and trading, I need to be fairly good/comfortable with numbers as opposed to having to be a real maths wiz (for trading in particular)?
You don’t need to be a real maths wiz but you need to think on your feet for trading
So something like be able to do 528 times 429 fairly quickly?
Yes.
I’m fairly good at Math, but not ‘superb’ (only up to GCSE Maths, not A-Level), though does it mean this could work against me?
I’m a little confused because I’m told that you always have a calculator in rel life. (Granted I know mental math would be great in the day the calculator decides to go bust.)
On a separate note: you say that an PhD/MD on the CV/resume would be detrimental to one’s chances of getting into IB.
Surely this can be averted by leaving any degree beyond masters out of the CV?
And lastly, I remember reading on another site (Ask Ivy, I believe), that said PhDs can also be used to enter at associate level. How much truth is there to this?
Though would I have to make my mental math skill very sharp? Or will that only be a case if I decide to go into Sales and Trading?
I read in one of the above comments that a Bachelors’ in Maths is needed for trading.
Would I be right in assuming that I’d need more than high school level Maths to get into trading?
Yes, you need more than that most likely. A Ph.D. rarely works in your favor unless you are applying to quant-type roles. I’ve seen very few Ph.D.s enter at the associate level so not sure where this other site is getting their information from. Most trading desks don’t even recruit at the MBA-level, let alone the Ph.D.-level. You just need to show a strong interest and aptitude in math, specific courses are not as important.
Thanks.
Although in which case would leaving the PhD out of my resume when applying for IB positions, like analyst/associate, be beneficial?
My company, DB, has an phd associate programme. Quite a few banks will hire PhDs as associates / take them on summer associate programmes. Depends on the banks, regions and type of Phd they are studying though. Some banks will take them on as analysts.
Can’t agree with the comment on “S&T groups don’t even recruit at the MBA level”…we’ve hired a significant number of people at the MBA level in sales. Less common in trading though.
Hmmm…I agree with Ask Ivy…BAML also explicitly states that they have a MBA/PhD associate programme
http://campus.bankofamerica.com/emea-associate-programmes
Ok, so you have to leave your PhD on your resume otherwise it will come in background checks.
Yes, some companies do recruit PhDs but it is definitely not common.
S&T: I was mostly referring to traders, and let’s be honest, it’s very rare to recruit traders out of business school… sales, maybe, but trading not so much.
You have to keep in mind that banks “say” they do a lot of crap, but in reality a lot of it is just for political / image purposes… in practice, they’re less diverse than they say and not quite as open as you would expect.
If banks’ websites were honest, after all, they would also admit to making poor decisions and taking taxpayer money to cover up their mistakes…
Hi
I have a query .
I am a Chartered Accountant with 1 year of work ex.in a CA firm. I am planning to do masters course in finance from a top university in UK. I have a Bachelor Degree in Commerce as well.
My question is :-
1. is it possible to break into IB job with such a profile.
2. If not, what are alternatives?
Sorry if I am deviating from the core topic but I really your help.
Thanks in advance.
1. Depends on how you pitch yourself
2. Equity Research, buy side, private banking, corporate banking… depends on what you want to do and how you network
Hmm. Thanks.
The issue is that I have a good knowledge in finance as it was one of my subjects and I want to excel in this field, IBD being my first choice, but I read in some posts that being a MBA from Ivy league colleges is a must to become a front office Investment Banker.
After reading those posts, I was worried .
Thanks for the reply.
i’m a math major considering ib internships. Yes, i realize ibanking isn’t that math heavy. What positions are more math-heavy, but don’t need more than a bachelor’s degree in math?
Trading is the best fit in that case, especially derivatives or exotics
I took math up through ODE in high school, then studied econ in college. They are not on my college transcript. Will it look bad that I don’t have any math courses on my transcript?
Not really, actual courses don’t matter much as long as you have the skills
I understand that a place for a person with good MSc or PhD in math would be in:
1. trading (especially algo)
2. Risk Management
3. Equity
How would you describe the job prospects in those areas for math majors/phds ?
I’m not quite sure to be honest.
I’d say quant funds and quant trading desks are interested in people with your background (assuming you also know how to trade). Risk m’gmt is also another option. I’d say you shd focus on 1. 2.
3. Equity – there’s equity sales, trading, ECM, etc. I don’t think your major in math wld give you an edge over others for the aforementioned categories. However, you can look at Debt, CB, derivatives, structuring – these roles are more quant focused.
ok, how about having two Masters (math + finance, both with high gpa) ? would it give me an edge in either trading or IB ?
Yes to trading, assuming you know how to trade and the different strategies employed by funds. IB – perhaps, but IB doesn’t require people with too much quant experience; it does require people with deal experience/modeling knowledge.
and would a math degree give me an edge at Hegde Funds ?
thank you a lot ;)
Yes to roles that are more quant focused.
What are your thoughts on the Dale Carnegie course?
No idea what you’re referring to, but if it’s his book then that is a really good read
No not the book (though course is based on several of his books), its basically a public speaking / leadership course. How to develop rapport more quickly / build relationships / induce cooperation. I know Warren Buffett holds it in high esteem.
Have not been through it yet tied up with other projects at the moment but will take a look
Great post!!
I have a genuine question…I’m not bad with math per se, but mental math of 15*37 is something that does not happen in my brain. Does that mean trading is not for me? Can’t I use the calculator on my desk – or would I just end up looking like a fool in a group of mental-mathemagician-traders?
Alternatively, if there’s some way I could improve my mental calculations…
Trading is not for you unless you can practice/improve
A tip:
Tricks are very handy to do these sorts of calculations in your head with practice. In this case 15*37 can move the decimal place over one to 1.5*40 (moved the decimal place). This can be broken up in to 1*40 + .5*40, or 40+20=60. But remember we moved the decimal one place so its actually 600.
But the question 15*37, not 15*40, so we need to subtract 3*15. Hopefully you can figure out 15*3 = 45, but if not you can also use the same trick of moving the decimal place (e.g. 3*1 + .5*3 = 3+1.5=4.5)
So 600-45 = 555, which is our answer. All very simple math that can be done in your head, provided you can keep track of multiple simple equations at the same time.
This can be an invaluable tool in general life. For example, want to figure out what is a 15% tip on $55? Move over the decimal, halve it, and add it back. E.g. $5.50 + $2.75 = $8.25. If you wanted 17% you could figure out the 15% answer and make a fine adjustment by adding in 2%, which would get you a ballpark quickly and give you time to hone in on the absolute answer.
Thanks for those tips.
Hi Anon,
Awesome tips – I knew there were some secret tricks !
Do you mind explaining that 2nd example? I couldn’t quite follow why you “halve it, and add it back” ?
1) Move over decimal point = 15% of $5.50
2) ???
Isn’t there something to be said for treating your college years as a time for intellectual growth rather than a 4-year job training program? Learning mathematics, physics, and/or chemistry should be viewed just like studying Shakespeare or Bach — necessary for any well-rounded, educated person.
I realize this site is about “Breaking into Finance” and not “Becoming a Well-Rounded Person,” but the thought of hundreds (thousands?) of very smart target-school students avoiding anything rigorous in their education lest their chances of joining a Bulge Bracket drops by 3% troubles me.
Sure. And as a CS major in a top program I took plenty of classes where I learned a lot but which didn’t help at with getting into finance.
But the distinction is that I get many questions saying, “So, should I take Advanced Math Class ABC specifically *to break into finance*?” And so the answer is no, because of everything above. Take a class if you like it, not because you think super-difficult ones will get you into a bank.
I didn’t know you were a CS major–that’s awesome! I’m doubling-up in CS (a solid math foundation is prerequisite) and Finance at Tulane; do you think that makes a compelling argument for entering a tech. group in IBD? Also, do you think the algorithmic sort of mindset you learned in CS helped at all (even peripherally) as a banker? Much appreciated.
Hi Brian,
Firstly, this is a great site! Thanks a lot for offering all the help! I had a question regarding brain-teasers. Last day, I was going through a bunch on a wesbite and could barely answer 1 or 2 out of 30. Should I be concerned about it since I plan to attend a couple of interviews for an internship at a BB next summer?
For IBD brain teasers don’t matter that much so I would not worry, they are more important for sales & trading.
Brian,
First off I want to thank you for all the information you have posted on this website. I must say that it has definitely been an invaluable source.
I’m starting MIT in the fall, and I wanted your input on something: would investment banks prefer only engineering majors from MIT, given its science/math/technology label, or are they open to other majors at MIT too? I am interested in their management major, but am worried that banks only see value in MIT’s engineering department.
Thanks for your time.
They would be open to other majors but most of your competition will have engineering degrees so you may just want to go that route as well.
Are there any courses you would recommend definitely taking?
Accounting and something writing/communications-related
Learning curve? Didn’t you *read* the article? Banking isn’t about learning!
(But M&I wrote:
“If you really want to improve your skills before you start working, forget about math and focus on your writing and speaking skills.”)
Thanks for the advice.
Typically how long is the learning curve for investment banking?
Which group usually have the longest learning curve?
What John said below. Maybe 6 months to learn the basics, beyond that it’s all the same.
Off Topic:
How can you find out what type of coverage or product group you will be good in and like to work in if you never worked in banking?
You talk to people in the industry, network, and do some research on your own. Most groups are more similar than people give them credit for, so it’s not that big a decision.
M&I, great article right here. I totally agree with you on this one.
Anyway, I am in one of the emerging countries, and I have received 2 offers:
Standard Chartered – Project Finance internship
Boutique IB – IB summer analyst
Which one is the better opportunity if I want to end up in IBD? Stanchart’s got the branding but IBD is IBD.
Tough call because Standard Chartered is better-known in those markets. I would say boutique if you want to be a generalist in the future, SC if you want to do project finance / infrastructure investment.
I’m into S&T and the level of math needed in trading is definitely a lot higher, but it does also depend on whether you’re trading cash products or something more technical like repo and futures.
I think the guys who disagreed with Brian missed the point – yes, it would be an advantage to have an advanced degree or done a lot of advanced math courses, but it’s not necessary for breaking in. Some people get so hung up on taking extra finance courses/learning financial modeling, they forget that banking’s essentially a people business. These people tend to end up stuck as someone else’s excel monkey.
Be prepared but don’t sweat the small stuff, focus on the bigger picture.
Yes, exactly.
Hi Brian,
would it be possible to elaborate a little bit on the quant route in finance. I looked around but could not find much information on the internet and most bankers I’ve talked to didn’t know much about it either.
Thank you for the very(!) informative site!
PS It would be nice if posters/readers would differentiate between opinions (math is good) and facts (not needed for IB)… happens a lot here, see CFA, Brasil, etc.
I don’t know much about it but I’ll see if we can do an interview on the subject.
As far as opinions vs. facts, please assume that everything on this site is an opinion.
Everything here is based on opinions and experiences of people, and the only real facts are bonus numbers and similar numerical information.
Should undergrad students consider taking financial modeling courses, like the one over at Wallstreetoasis ? Is finance degree enough to feel comfortable with all the tasks on the job ?
Well given that this site makes their own modelling course I don’t know why you would bother asking if the Wallstreetoasis course would be a good investment. Do a little bit of dilligence first instead of just hoping to have answers dropped in your lap.
As for you questions though I would hightly reccomend getting some sort of modelling course in your undergrad if you’ve got the time. As someone who has been in industry for a couple of years and is struggling to break into banking I can’t stress enough how important those fresh graduate intake programs are. The bank I’ve been working at for over 2 years won’t even consider me for those programs despite being fairly qualified (CFA level II, modelling course, Bachelor of Commerce etc) as I’m not a “recent graduate” and so if you can get a leg up on all of the other r fresh grads when you finish your senior year, by all means do it. Also work your ass off to get an internship as during recruiting, regardless of that skills you may/may not have learned, they like that previous stamp of approval in capital markets that an internship gives you. The want the company name on your resume as it makes you a safer pick.
Lastly, in regards to whether your degree will prepare you enough, if you took your finance degree seriously and took as many finance courses as possible you should be in a decent enough position for them to at least bring you in. Banking interviews aren’t typically exceptionally technical at the analyst level and so if you can discuss WACC, walkthrough a DCF model, and explain comparables etc you should be fine.
What Nick said. And the modeling course on WSO is actually my own, the one offered on this site.
Attention to detail…
Great article.
Is it just me, or does everyone just want to be able to SAY that they are trying to break into finance, without actually TRYING to break in. Is this the new cool thing to do?
M&I I guess you were right when you said never overestimate the competition.
Yup, nothing much changes. Bankers especially are creatures of habit.
M&I,
No disrespect to this site, I love it and have recommended it to everyone I know at school whose into IB (Love it when target school kids haven’t heard of M&I). But in the article the email you reference in the beginning leads me to believe the originator isn’t fully informed of all the options in finance. If he really knew $.02 about banking he’d know NONE of those advanced math classes would help him in IB, but in Quant Finance it would be a totally different story. Thus the question is moot, and misinformed at best.
I guess my concerns would have been assuaged had you mentioned some alternative careers in banking where those inclined towards math and the sciences could really direct their passion (quant).
And regarding your comment about mid-level VP. How many years of your life would it take for you to rise up from an analyst? The figure I gave is a starting point at some banks for the top quant jobs. The sky is the limit, especially when you’ve networked, amassed enough skill, and are comfortable taking risks… then start your own fund.
I don’t disagree with anything you say, but the purpose of this site is to teach people about finance. Many times they come in not knowing much about what you need to break in or about anything about the industry.
If we applied that same logic “Well, if this person just knew the first thing about banking…” then there would be no articles on:
-How to write a resume
-How to answer interview questions
-What investment bankers actually do
After all, if you know everything then all of those are obvious right?
But most people are not omniscient and therefore I write articles here to inform them.
And for better or worse, I do get many, many, many questions similar to the one at the beginning of the article.
I have no interest in starting a debate over what path or career is “best” because I don’t work in the industry anymore and have no plans to do so in the future.
For me, this site is business and it seeks to solve specific problems that those interested in finance may have. I stay detached personally and give advice to solve specific problems rather than reflecting my own views on what to do with your life / what career to choose.
I think there is a bit of misunderstandig about the role of a Phd degree.
You don’t do a Phd just to get a better job. Its not a BA. or MSc., you either have the talent and the motivation to do it and then its the obvious choice or you dont and then its worthless even try it.
If you choose everything in your life to improve your career then your career will drive your life and not the other way around. That might make you rich but everything come for a price.
BTW I think maths is less important, programming and algorithmic thinking are the key points.
I think math is great for leaving options open. That’s why I went for the degree — because I would have candidacy for quantitative jobs w/o eliminating candidacy for soft jobs like IB.
Thanks for the post. Just as a side note, how long are you going to stay at Korea? It would be cool if we can meet up.
I’m in and out – probably here until December 2010 but I usually travel somewhere else each month.
It is comforting to know this – though i have taken differential equations already… I love math and science and finance and economics :)
I had a question however – I really don’t want to be stuck in the back office checking someone’s calculations but I am not willing to get a PhD in physics to be a full on Quant.
Is there a position that combines a bit of both in the front office? Would it be trading more than investment banking?
I don’t care about the hours or anything like that. Is there a way to combine math and people skills in the front office?
:)
Trading?
Yeah trading would be the closest option. You may not necessarily work directly with clients (depends on the desk) but you do have to work with and talk to other traders
How would trading salaries compare to IBD for senior level and/or analysts?
Not that much different actually, you see more variance at hedge funds since it’s so unstructured
Good call. I stopped trying to improve my maths skills and focused strictly on networking for the past 6 months and I’m soooooooooo much further now than I was when technicals were my main focus.
Just talk to everyone. I was at the birthday party of an old friend from high school last weekend, and I ended up chatting with his older sister’s boyfriend, who happens to be a computer security consultant for several banks. He mentioned that several of his good friends work in front office positions, and he would be more than happy to set up some informal meetings.
I’ve got my first next week with a VP. Brian’s right, ninja networking tactics are the way to go. If I had been at home on Friday night studying stochastic processes this would not have happened.
Thanks for the advice.
There we go – everyone listen to him.
To look at it from a different perspective, let’s say I had gone out to this party anyways, but instead of networking for the past 6 months, I had only worked on math or some other kind of technical skill.
I would have been screwed.
I didn’t talk about math for one second with my contact. We talked about sports, girls, video games, music, etc. etc… Just general everyday things. Eventually we started talking about world events, and I expressed my interest in finance and how it affects the world.
No one in the real world cares that you can prove obscure mathematical theorems, and frankly if that’s all you can talk about no one will recommend you for an interview, let alone hire you for a front office role where you will be interacting with people on a daily basis. Back office banishment for you and yours.
Well, I think you are a little confused as to your actual point. I agree that if you want a sociable job such as many business jobs including finance you have to have some skills at communication skills. Those are a VERY important role in business, whether it is sales, marketing, finance, ect. However, if you want to be part of the big boys making substantial money and making real decisions then you need to be well practiced in the respective discipline. A true Mathematician is typically introverted and is well versed in a very Abstract field thus referencing someone with a PHD in Mathematics is truly a little unjust. However, if you look at true investors that run hedge funds and such many might have been PHD candidates in Mathematics or similar and you can be sure that they can communicate in a networking sense as well as do the higher level computations and risk assessment. Although the job title this particular article refers to is not such a position and it is obviously relative to personal interest.
Bankers tend to look down on advanced degree holders. (Who are applying for IBD jobs.. which I don’t know why any would)
They want people who can burn the midnight oil and who are aggressive enough to find ways to make or save money – and they don’t think that advanced degree holders fall into this category. (Of course not. Why would you get a PhD to work 14 hours a day? It’s supposed to simplify your life)
Getting these degrees is far more difficult than anything you do in banking, but most bankers don’t like to acknowledge this. (This is true)
So if you’re already deep into one of these programs, cut your losses and get out early or take the path of least resistance if you’re too far in to drop out now. (If you do this, say goodbye to millions of potential earnings. Bottom line is, work hard. If you love math & science even better. I don’t know why any quantitatively and scientifically inclined person would want to do IBD versis quant analysis, risk, algo trading etc.)
Again, think about the audience of this site. I write to the audience.
The message is not “Math is bad” but rather “Don’t go crazy with math if you’re interested in investment banking / private equity as future careers.”
I think you’re also simplifying and generalizing the PhD process… it doesn’t really simplify your life. People who work in labs still work silly hours except instead of getting paid money, you get paid with less guilt from your advisor and “prestige”.
Also, potential earnings aren’t the best – the average age of assistant professors is 42 (a number I heard from Francis Collins at a seminar). You make 30k as a grad student for 6 years, then 40 to 50k as a postdoc for another 10 years, then you get about 60 to 70 as an assistant professor for a while.
Industry you tend to start around 70 – 90k, then at most make in the mid 100ks.
You guys are deriding math like it’s the pariah of banking. This is untrue. Surely it is a waste if someone is set on being an Investment Banking Analyst, but I thought these people were in it for the money. Why not study your ass off in math, physics, computer science, and get a PhD in the subject and go into Quantitative Finance?
Quants make 4x,5x,6x, 10x or more money than IB analysts. Quants I know are working comfortable trading day hours making $750K+ / year. Really do you think slacking off in school is the answer to making more money? Surely not unless you can settle with yourself living a mediocre life working your ASS off 12+ hours a day for as little pay as a lawyer.
Note the title of this article: “Investment Banking.” Most readers of this site have no interest in getting a PhD and doing quantitative finance, because the end game is much more lucrative in banking.
Mid-level VPs in banking will make more than $750K and you go way over that the higher up you go / if you move to the buy-side.
Lawyers do make a lot: annual 200K
MBAs don’t make great traders.. MFEs do have an advantage when it comes to quantitative trading.. especially with complex products.