How Hard is it to Get into Investment Banking?

Goldman Sachs is the premier investment bank in the world. With an acceptance rate of roughly 4%, it%E2%80%99s harder to get into Goldman than it is to get into Harvard or Yale I can tell you how to get a job at Goldman Sachs because I did it.

From 1999 to 2001, I was employed by Goldman Sachs in the Manhattan location’s International Equities department at 1 New York Plaza. My particular responsibility was Emerging Markets / Asian Equity Institutional Sales, a well-paying front-end, revenue-generating position.

Because GS was still a privately held company until the summer of 1999, it may have been the hardest time ever to find employment there in 1999. Additionally, there was little competition from major tech firms like Google and Facebook.

Across the industry, even at the firms which saw slight year-on-year falls, the norm seems to be that the crude percentage chance of getting accepted to an investment banking graduate program is a bit more than 1%, but significantly less than 2%.

More selective than Harvard

According to a person with knowledge of the business, JPMorgan, for example, received nearly 50,000 applications this year for about 400 internship positions at its investment banking program. (Interns typically return as first-year analysts after they graduate. ) The acceptance rate of less than 1% makes JPMorgans investment bank harder to get into than Harvard or Yale

That level of interest doesn’t seem to be limited to JPMorgan, a Wall Street powerhouse in the advisory and trading sectors.

Goldman Sachs, the worlds top mergers advisor, saw a 50% increase in applications for its investment banking analyst program this year compared with 2018, according to a person with knowledge of the bank It’s difficult to estimate how many people enter Wall Street straight out of college because banks rarely disclose specifics about their programs, but it’s likely that a few thousand people are hired at the top investment banks each year.

Meanwhile, the industrys best-known feeder schools say that demand for finance careers hasnt abated.Barbara Hewitt, UPennSource: Barbara Hewitt

At the University of Pennsylvania, for instance, finance has been the top destination for students for the past two decades, according to Barbara Hewitt, executive director of its career services group. The percentage of graduates with full-time jobs choosing Wall Street has stayed at roughly 30% since at least 2015, beating out consulting, technology and health care.

Since I can remember, it has been the most popular industry sector for our undergraduate students, according to Hewitt. “Theres been surprisingly little change. “.

To be fair, the industrys reputation has ebbed and flowed over the years. Earlier rounds of angst and self-examination were caused by banks role in the 2008 financial crisis and the 2013 death of London-based intern Moritz Erhardt. The rise of the technology sector over the past decade, as well as the growth in private equity and venture capital firms, have given young achievers other avenues for high-paying, rewarding positions.

But each time, despite headlines proclaiming that young people have soured on the industry, there is no shortage of volunteers willing to sign their lives away to a bank.

“I dont think investment banking has lost any of its appeal; its still a phenomenal job in a great industry,” David McCormack, an 18-year recruiting veteran, told CNBC. “Its just that youre asking people to work unprecedented levels without the support they wouldve had pre-pandemic.”

Analysts on Goldmans technology advisory team involved in the now-famous survey were caught in a “perfect storm” earlier this year, according to Alan Johnson of New York-based pay consultancy Johnson Associates. Investment banks reined in hiring at the start of the pandemic because they thought the impending recession would limit deals activity, he said.

Banks were understaffed when deal flow and the IPO market exploded as a result of the Federal Reserve’s response to the pandemic. Companies began looking for junior bankers in unusual places, such as consulting and accounting firms, and started offering perks like free Peloton bicycles in addition to raising base pay.

The JPMorgan analyst’s motivations bring to mind a phrase from a bygone era of Wall Street, demonstrating that some things never change.

In earlier decades — when investment banks were more likely to be staffed with the well-connected offspring of wealthy families — young, hungry outsiders were known as PSDs. The acronym stands for Poor, Smart, with a Deep desire to become wealthy. That phrase was born at Bear Stearns, the training ground for future industry titans including Citigroups former CEO Sandy Weill and Goldman Sachs CEO David Solomon.

If anything, rising levels of student debt owed by recent graduates have made them more risk-averse and less likely to gamble on careers that might not pay off financially, according to some of the bankers. More than 40% of U.S. adults who went to college took on debt, while outstanding student loans totaled $1.7 trillion by the end of 2020, according to the Federal Reserve.

First-year Citigroup banker: “I need to be paid for it if I have to essentially sell my soul to this bank for a few years.” There are a million deserving students, but there are simply not enough openings; they would kill for this chance. “.

(CNBC omitted her name and the names of the other junior bankers from this article because they are not permitted to speak to the press by their employers.) ).

Top analysts at major firms can anticipate total compensation approaching $200,000 in their first year out of college, according to McCormack. In addition to starting pay that is higher than virtually every other industry, junior bankers frequently cited “exit opportunities” as a reason for joining a bank. David McCormack, head of recruitment firm DMC PartnersSource: David McCormack.

That is Wall Street jargon for the different professions that are available after a successful career in investment banking, including venture capital, private equity, hedge funds, fintech, consulting, and hedge funds.

The Citigroup analyst said that although graduate school and venture capital firms were options, she ultimately decided to pursue a career in investment banking because it provides the greatest exit opportunities.

When it came down to it, she explained, “I felt strongly that after I do two good years of investment banking, I can pretty much go anywhere.” “People think that if you can handle anything and survive investment banking at a top firm,” “.

Another first year, this one at Goldman, reiterated that sentiment. According to her, many of her peers are inspired by the firm’s reputation and the opportunities it presents.

“Its very simple: Goldman picks the best people,” she said. “Its like a boot camp for being the best professional. “.

Young workers like her join Goldman not necessarily because they have an innate interest in finance, she claimed, but rather for the assurance that, after completing her two-year program, she will have opportunities. People are greatly motivated by what they can accomplish after Goldman, she claimed. “Its the launching pad into whatever you want. “.

Others, however, were drawn to banking because of its connections to influential people. Those who advance past the analyst and associate levels can start doing more meaningful work, and managing directors are frequently charged with bringing in multi-billion dollar deals, taking pride in a merger’s successful completion.

Glory of the deal

Male Citigroup analyst: “If you demonstrate that you’re a really strong player at a younger age, you get more responsibility and more autonomy, and then, boom, you’re sourcing your own deals.” It’s tantalizing, he said, “to be a trusted advisor to these really powerful, really influential, really smart people who put their trust in you to lead them through a process.”

He and others claimed that although tech jobs like coding pay well, they frequently have lower career ceilings than banking.

The University of Pennsylvania’s Hewitt affirmed that most analysts acknowledged the industry’s reputation for demanding work, saying, “They know its going to be a lot of work for a couple of years.” “Theyre pretty open-eyed about that. “.

Due to competition for the best students from big tech and other companies, banks have recently started recruiting as early as freshman year. In order to support the industry’s drive for diversity, they have also started relying on software platforms for testing and interviews. Emma Rasiel, Duke UniversitySource: Emma Rasiel.

Many students prefer the security of knowing where they will land after finishing their expensive educations, according to Emma Rasiel, an economics professor at Duke University who mentors finance students. The two-year analyst program often leads to interest for two- to three-year stints in private equity, she said.

There is a very defined, lengthy career path, especially in investment banking, according to Rasiel. “My students are saying that until I’m 27 I won’t have to think about getting a job for myself. “.

For the majority of the last ten years, Duke students’ demand for investment banking has remained largely unchanged, according to Rasiel. Further, about 70% of students headed to Wall Street decide to go into banking over trading roles, compared to a 50-50 split before the financial crisis, she said

However, according to a different Goldman analyst, being courted by banks so early during their college careers can exclude other options and increase peer pressure to pursue a career in finance.

The analyst said, “I had never really heard of banking before, but freshman year there was just this whole wave of everyone saying banking, banking.” “I was like Wow, that sounds awful. But then it’s almost like a herd mentality, why would anyone want to work those hours? “.

Following the results of the Goldman junior bankers survey, banks declared a renewed push to establish guidelines, improve analyst training programs, and create technology to automate the less interesting parts of the job.

However, few junior bankers believe that the fundamentals of their jobs will have changed. One of the junior bankers said the industry has little incentive to fundamentally alter a system fed by overworked 22-year-olds glued to Excel spreadsheets as long as graduates compete to join investment banks.

She said, “They need the best people, and they want the best people.” “Once those people are no longer available, they’ll begin to change. “.

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Investment Banking Acceptance Rate

Actual Acceptance Rate at Various Top 20 Investment Banks


Is it hard to get into investment banking?

That said, investment banking is a highly competitive field. Every year, there are far more applicants than available positions because the pay is so high and the position is so prestigious, especially in big cities like New York.

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