Investment Banking: Overview

Investment Banks help companies and governments issue securities, help investors purchase securities, manage
financial assets, trade securities and provide financial advice. The leading investment banks including Merrill Lynch,
Salomon Smith Barney, Morgan Stanley Dean Witter and Goldman Sachs are said to be in the bulge bracket.
Other investment banks are regionally oriented or situated in the middle market (e.g. Piper Jaffray). Others are
small, specialized firms called boutiques which might be oriented toward bond-trading, M&A advisory, technical
analysis or program trading. Firms have lots of different areas and groups within them. In most firms, there is sales
and trading which works with owners of securities, investment banking which works with issuers of securities (firms
and governments) and capital markets which goes in between the other two. To get an idea of how a firm is
organized, check out the products and services groups at Goldman Sachs.

Investment Banking: Skill and Talent Requirements

Investment banks want employees with a combination of strong analytical and interpersonal skills. Some jobs lean
more towards one skill set than another (e.g. brokers need to be mainly sales people). A typical job of an equities
analyst requires both analytic and interpersonal skills. The skills involved include:
Key Skill Area Requirement
People skills: High
Sales skills: Medium
Communication skills: High
Analytical skills: High
Ability to synthesize: High
Creative ability: High
Initiative: Medium
Work hours: 50-120/week
Hard Work Expected and Respected
Investment banking is a high work, high risk, high reward profession. When you start your
hours will typically be long but the work can be exciting. Be prepared for moments of
frustration where you are stretched too thin and moments of exhiliration where everything
clicks.
Tough to Break In
It's relatively hard to break into investment banking. You need to be prepared to pursue firms
on your own after you have thoroughly prepared yourself.
Believe it or Not, Bankers Have Social Value
Investment bankers are often the subject of social scorn in movies like Bonfire of the
Vanities. Are investment bankers really greedy narcissistic scum? Some probably are. But
keep in mind that they play a crucial social role of helping to direct capital to companies with
great ideas that make people better off.
Analyst Jobs Are the Best Entry Point
Many college graduates start in investment banking in an analyst position. To succeed in
these positions you need to be extremely dedicated, have good spreadsheet skills and be
analytically fluent. Your next step will be to become an associate. Same skills, just raise the
volume.
Communication and Completion Abilities Key
In mid-career, your success usually will depend on your ability to communicate with clients
and get deals done. At this level it is also important to have a good understanding of market
trends, the political and macroeconomic environment and deal mechanics.
Math Skills Can Help
Some jobs in investment banking call for very strong mathematical ability. If you are good at
math think about getting an advanced degree in a technical field (studying areas such as
stochastic calculus and differential equations), then take some advanced finance courses in
options pricing or bond valuation and apply to a research department on Wall Street
(Carnegie-Mellon's FAST program is a leading in training mathematicians and physicists for
Wall Street jobs).
Accounting Skills Valuable
The ability to analyze accounting numbers critically is important in most analyst positions.
Ultimately, you should aim for the CFA designation if you would like to be a securities
analyst. The CFA helps you become much more mobile over time. If you have ambitions too
"bail out" some day and become a corporate financial analyst you might also want to
consider the CMA (Certified Management Accountant) designation.
Traders are Multi-Talented
It's hard to define what makes a good trader. A good understanding of the market, quick
reactions, analytical skills and the ability to bluff help. Read Liars Poker by Michael Lewis
to learn more about sales and trading.
Get Used to New York
Most large firms operate out of New York. Even if you are interested in working in another
location, your general interviewing activities are likely to be centered there. Other places you
should look at include Hong Kong, Tokyo, London, Moscow and Singapore. If you go
looking for a job in investment banking using informational interviews in the U.S. it is
crucial that you make several trips to New York.
Teamwork Crucial
A crucial success factor in investment banking is teamwork. Being able to pull together
persons with large egos to get a presentation together for a client is a challenge and is likely
to be rewarded highly.
Scientists and Lawyers Wanted
There's definitely an interest in people with backgrounds in science and law. Scientist types
can work on everything from derivatives algorithms to biotech banking. Lawyers can help
design new securities, sell leasing business and use their analytical prowess to talk to clients.
This said, you have to sell yourself. It often doesn't hurt to go back and get an MBA from a
top school, and then try to repurpose your career into investment banking.
Contacts are Everything
The key to breaking into investment banking is a good network of contacts. You may already
be blessed with such a network, but if you don't have one, you can start to develop one by
going on informational interviews, attending industry conferences, finding alumni from your
school in the business etc. Keep in mind that your network might not really "pay off" for
some time. If you are young and haven't gone for an MBA degree, try to get into the best
possible school and then go for quantitative and analytical coursework.
Getting Things Done is Important
Starting off in an investment bank, you are usually responsible for getting projects done well
and on-time, whether it be writing reports, running spreadsheets, trading, doing research or
coding programs. Later, once you get involved with clients and ideas for generating revenue,
you will be rewarded greatly if you can bring in business. At higher levels (usually Director,
Managing Director and up) you are exposed to much greater risk. At this level, people are
often fired for non-performance, whereas at lower levels you may not be scrutinized as
closely.

Investment Banking: Salaries

Starting salaries in investment banking positions with a bachelors degree after bonus (assistant or junior analyst
position) range from $25,000 to $50,000. Starting salaries with an MBA degree range after bonus (associate
position) range from $60,000 to $135,000. These salaries vary with firms and with the region of the country you are
in. Bonuses typically would be 10 to 50% of salary to start and can move to one to three times salary later. Lately,
salaries have increasingly included an equity component which may not be liquid for up to three years, although as
an analyst you would typically be sheltered from this. This is good for the banks because it makes it much harder for
people to move around.
Some Interesting Documents (from an undercover agent)
 DLJ Comp improves after mass defections and Monkey Business
 A recent compensation study
 1999 Comp survey of analyst and associate pay at top i-banks
Generic salary advice: Some firms tend to pay less than others because they can get away with it. You might
actually be better off taking less. Obviously don't give yourself away but at the entry level, the quality of experience
you get and the strength of the people you will work with are far more important than how much you get paid. You
are trying to maximize the present value of your future earnings and enjoyment. This may involve taking lower pay
now. Or, if you're lucky, it might not.
Forecast salary ranges in the 1999 to 2001 period are as follows:
Prerequisite
Job Level Bulge Bracket Regional Player
(degree/yrs experience)
First Year Analyst $60K - 110K $30K - 70K Bachelor's
Third Year Analyst $80K - 200K $70K - 150K Bachelor's
First Year Associate $125K - 235K $70K - 150K MBA
Third Year Associate $150 - 450K $120 - 250K MBA
Assistant Vice President $200K - 600K $75K - 120K 2-4 years
Vice President $250K - 800K $100K - 400K 3-6 years
Associate Director $250K - 1MM $150K - 500K 3-8 years
Director / Principal $300K - 1.2MM $200K - 600K 5-10 years
 Managing Director / Partner $400K - 20MM $200K and up 7-10 years
Department head $750K - 70MM $300K and up 10+ years
Note: This table is based upon conversations with banking insiders in mid-1999. MM denotes millions. K denotes thousands of
US dollars.

Investment Banking: Facts and Advice

A good time to send your resume to an investment bank is in November and December.
Hires are usually made around January and February. But don't stop in Feb. just because you
haven't hit your target. According to an analyst at Salomon Smith Barney "it's really crucial
to be persistent. It's basically a numbers game. Contact lots of people. But at the same time,
customize your approach to each person and bank. That means it's going to be pretty much a
full-time job."
Don't forget to check back.
Traditional recruiting is done by April. Lots of people also change jobs in the March to July
period. This means that many banks are scrambling for personnel in July, long after the
resumes have been thrown away. Somewhat surprisingly, the best time to find a full-time job
is by screening your contacts in late Spring and Summer.
Investment banking is one of the most global businesses on earth.
Investment bankers spend plenty of time tracking down corporations in Peoria and Seattle.
But they are just as likely to be working with investors and issuers on the other side of the
world--perhaps Hong Kong, Bulgaria or even Africa.
Electronic investment banking is emerging in a serious way.
Companies like E-Trade offer online stock trading. Other organizations like DLJ and
Deutsche Bank are offering electronic trading of stocks and bonds. Electronic origination of
securities is being led by W.R. Hambrecht and Wit Capital. There are tremendous
opportunities for growth in this area.
Investment banking is seeing massive consolidation.
Today,firms merge at unprecedented speed. The mid-1990s have seen mergers of Citibank,
Smith Barney and Salomon, Bankers Trust, Dean Witter and Morgan Stanley, Bank of
America and Montgomery Securities and SBC, UBS, Warburg and Dillon Read. Expect this
to continue. The big players, particularly, Merrill and Goldman, are not done yet.
Investment banks had a great year in 1999 with a strong market.
Unfortunately, problems in the emerging markets have crimped hiring lately. Areas that are
worth looking into in tough environments include investment grade debt, firm risk control
and certain types of M&A. Also keep in mind that if you can't find a job due to the lousy
environment, investment banks often hire from corporate treasuries when times improve.
Thus, pursuing a corporate finance job isn't such a bad alternative. It beats driving a taxi.
Investment banks have experienced rapid salary escalation as firms fight to try to keep
good people.
According to a recent McKinsey study, the average salary at a top ten US investment bank in
1980 was a little over $50,000. By 1998 it had more than tripled.
The investment banking business is notoriusly competitive.
A recent Goldman Sachs research report finds that five large European investment banks
(headed by commercial bank parents) have committed almost $17 billion in capital to the
industry. Firms like CSFB, Warburg Dillon Read, Santander and ING are attempting to
expand rapidly in the US and are putting salary pressure on other firms as they go after talent
and business. In Fall 1998 a lot hiring was coming from Dresdner Kleinwort Benson. A
recent McKinsey study argued that many firms in the business will not be able to survive
long-term (overcapacity situation). This argues that you should try to get on with one of the
stronger players in the industry if you have a choice.
The Asia crisis has put the dampers on much investment banking activity in places like
Indonesia, Hong Kong, China and Thailand.
Yet hiring is happening because so many have quit in 1997 and 1998. The market declines
and losses on emerging market bonds that book place in late 1998 will continue to drive
personnel changes.
Investment banks are facing declining margins on bread and butter business.
Margins are falling in underwriting of investment grade debt, vanilla foreign exchange and
many areas of OTC derivatives. Treasury bond trading is fast becoming one of Wall Street's
least profitable areas. This is putting downward pressure on salaries in places. Expect more
pressure on salaries in time for traders as electronic trading becomes more prevalent.
Sometimes you will find yourself working for an egotistical jerk.
What do you do? First, don't take the job in the first place. If someone mistreats you in an
interview, get up and walk out (funny... you may actually get offered the job). Second, be
sure to communicate your needs very clearly when it matters when dealing with an ego-
creep. It might just be that someone is so busy and overwhelmed that they get abusive.
Laying it out in a nice way may help. Finally, if you find yourself in a truly pathological
environment working with dysfunctional people, bail out. Life is too short and the money
isn't worth it.
Pick the first firm you work for carefully.
People who jump from firm to firm too much are less likely to get hired into a great job
because your loyalty will be in doubt. One leading global investment bank has a practice of
minimizing hiring from outside to avoid "career jumpers."
Investment banking is seeing entry from traditional banks.
 The Glass-Steagall Act which restricts commercial bank activity in underwriting equity and
debt is being relaxed. The following U.S. banks, for example, have entered securities
underwriting in a serious way:

 BankAmerica

 JP Morgan

 Chase
The 1998 merger of Travelers, Citibank and Salomon into Citigroup will only accelerate this.
Investment banking is generally transaction driven.
In this environment a single individual with good client contact can make an enormous
difference for a firm. This is part of the reason that star investment bankers ("rainmakers")
take home high bonuses.

Investment Banking: Life as an Analyst

Analysts are typically recent undergraduates who work long hours and do a fair bit of grunt work. A good analyst
helps his or her boss get their job done and done well. Analysts are not normally expected to contribute in meetings
but often can. Many analysts return to the business. Others choose to try other opportunities. During recruiting out of
an MBA program, former analysts will be at a significant advantage over others without experience. A good pay
number after bonus is $38,000 for the first year. Expect to go up roughly $5,000 a year until you hit associate.
Key analyst skills include:
 the ability to work with Excel spreadsheets,
 write macros in VBA,
 track and generate weekly newsletters (weeklies),
 keep schedules,
 generate prospectuses,
 get burgers
 put in and retrieve pitch books from the copy center
 and answer client phone calls.
Success Factors
Key success factors include (i) getting your job done well and without friction, (ii) getting things done on time, (iii)
asking for help when you need it, (iv) dressing neatly, (v) not complaining, gossiping or whining, (vi) learning to use
the library and the web to do research, (vii) become a whiz-kid with Bloomberg, Excel, Word and Powerpoint, (viii)
always give your boss credit, (ix) know when to cheer up your boss and (x) know when to stay out of the way.
A good analyst also networks, observes and thinks. You want to be genuine yet make it clear that you like your boss.
Excessive posterior kissing is a negative. It's always good to have a little hobby as well like following stocks,
playing Liars Poker or following currencies. You can do this when things get quiet in August.
Assessment
It's a tiring life but gives you a good chance to learn the investment banking field and bond with people whom you
will work with later. Being an analyst is one of the best ways to break into a very good field. The return on
investment from being a good analyst can be over 50 times what they actually pay you.
After two years, most analysts leave to get their MBA or pursue other positions. It all depends on the firm. Some
places have a pretty strict policy of getting rid of you. Others are more mellow. It makes sense, after all, to try to
keep very good people who can get a job done. If you don't go back and get an MBA you might benefit from going
out and getting a CFA.

Investment Banking: Life as an Associate

An associate is typically a recently graduated MBA or an analyst who gets promoted after three or four years. You
will usually stay an associate for three years or so. An associate still has to do a lot of grunt work and may even have
an analyst to call on. Your hours will still be miserable and you haven't really become a human being yet. Like a
good analyst, your job is to make your boss look good and to understand what's going on. Your boss may abuse you
from time to time and you aren't supposed to complain really. This is a job where you can really start to shine. If you
add value to transactions or help get things done in some other meaningful way, you can expect to be paid a
reasonable bonus and have a shot a promotion to AVP.
Associate level pay in New York firms runs roughly $90,000 in your first year (including bonus). If you are good
and stay awhile, expect to go up to roughly $130,000 to $150,000 before you hop up another level. In London
expect a salary of roughly 60,000 to 80,000 Sterling (all-in). >
Key Skills
In investment banking / corporate finance / M&A, key associate skills include:
 the ability to do DCF valuations
 the ability to use Excel in your sleep
 the ability to arrange client meetings and get the logistics right
 the ability to deal with horrendous egos
 the ability to find comparable companies
 the ability to network within the firm and befriend key people like librarians, IT gurus, messengers,
lawyers, compliance etc.
In debt and equity capital markets positions, key associate skills include:
 the ability to massage league tables
 the ability to price up new deals (e.g. bonds, convertibles, preferreds)
 pretend that you know what's going when clients call in and the boss is not around
 the ability to track past deals and pricing to sense where the market is going
 check and generate weekly newsletters (weeklies)
 the ability to fill in silences in meetings with insightful comments (while making sure your boss controls
things)
 coordinate due diligence
 prepare document on debt and equity deals
 make sure analysts get burgers from the right place
 generate pitch books with your eyes closed while talking to clients and screaming at syndicate
In sales and trading positions, key associate skills include:
 the ability to watch your bosses blotter
 the ability to know where prices are
 the ability to work options pricing models
 the ability to bluff a little when needed
 the ability to eat endless fattening food without getting fat
 the ability to golf, play tennis, drink and joke around with clients
 the ability to make clients feel comfortable with you
Success Factors
Key success factors include (i) getting your job done well, (ii) getting many things done in a chaotic environment,
(iii) dressing well, (iv) having a beer and a good time every once in awhile, (v) always making your boss look good,
(vi) being a total whiz with computers, (vii) being able to spin bad news into ok news and (viii) network within the
firm. Other good things to do include figuring out when a job could be done better and going out and doing it. For
example, create a database to track the results of an equity tender offer. Initiative is key. Also, getting to know clients
is very important since you will be using those relationships later on.
Assessment
As an associate you are in. Your job now is to prove you have what it takes to make in investment banking. You may
not always like the environment and culture you are in, but your job is to survive and eventually excel. You are only
a few years away from getting your own clients, initiating your own deals and making some good money.
Play your cards right and you'll be happy you did the time. Big time.
n re-writing my original response to
how to become a security analyst, I
became aware of all the changes
impacting entry level analyst
positions. Therefore, I asked Eric
Stieglitz of Conspectus, Inc., a
search firm specializing in analysts,
to write a report, which is included
at the end of this article. Mr.
Stieglitz's report captures and
expresses many of the changes
would-be-analysts face, including
new markets that have opened.
Over the years that I have headed
the Career Development
Committee, I have often been
asked: "How do I become a security
analyst?" Many times it has been a
frustrating question because there is
no simple, clear answer. Oddly
enough, in many ways, this is a
non-entry field. Unlike law or
medicine, there is no government
licensing.
Compounding the problem, large
research departments in banks and
insurance companies that once had
training programs no longer offer
them. Employers now want pre-
trained people for immediate
productivity. MBAs and/or CFA®
Charterholders help to satisfy the
needs of employers but are not the
complete answer. Employers do not
want to spend time and money on
training, especially because those
trained often leave for better jobs.
The vastly increasing demands on
senior analysts means they have far
less time and desire to train juniors.
This pattern can lead to salaries for
junior analysts with two-to-three
years of experience that are
unexpectedly high because the
demand outweighs the limited
supply. With a few years of
experience, analysts can have a real
opportunity to move into senior
positions, but getting in is neither
easy nor simple.

he research assistant job is the

classic entry level job and training
opportunity. Over the years, I have
asked a number of analysts how
they got their first job. The answers
have been diverse - being in the
right place at the right time, finding
a sponsor within a firm, personal
chemistry, and a lot of aggressive
searching are some of the answers I
have received.
A generation ago, having an MBA
and/or a CFA® Charter was the
easiest way to get an analyst's
position. As is true in other
industries, candidates must now
bring something extra to the table.
One foreign MBA whom I worked
with did a research report on
biotechnology while still in school.
I suggested that he attach the report
to his resume, and he ended up
getting a job as a leading
technology analyst with a brokerage
firm. Eric Stieglitz, in his attached
report, suggests that candidates
"present a fully researched
investment idea, not a retooled
school paper" to potential
employers.
One note of caution to candidates:
The type of research report and/or
experience that will be of interest to
employers is most likely to be one
that covers a current "hot" area on
Wall Street. As I write this article,
the "hot" area is the Internet.
However, Wall Street's fads today
can become tomorrow's dead ends.
To offset this, candidates should
have a classic, broadly based
education (MBA, CFA®, CPA,
Economics or International
Relations degrees), and, if hired,
should look for ways to broaden
their research coverage. Candidates
should be prepared to "recreate"
themselves and the specialized
image they project.
Industrial experience can be a plus,
if combined with an MBA or CFA,
as well as strong financial analysis
experience. To have real
significance, the experience should
show knowledge of top level
strategic exposure that would
immediately transfer into
creditability with clients.
Additionally, with the growth of
international investing in recent
years, foreign languages have
become a plus on a candidate's
resume. This first became evident
when interest in Latin America took
off, and Spanish became a job
requirement on some of NYSSA's
job listings.
Another requirement, often
unstated, is computer skills. This is
not a problem for younger
candidates who have grown up in
the computer age; but it could be a
problem for older candidates, and
they should obtain computer
experience and list it on resumes.
Although finding a securities
analyst position can be a daunting
challenge, one offset is the growth
of new areas of expertise and
demand. One such area of growth is
quantitative analysis, which is
heavily oriented toward advanced
math and computer expertise. The
main driving force behind this
growth is the enormous demand for
derivative products, such as futures
contracts and interest rate swaps.

t NYSSA, we are finding that more

and more of our new CFA®
members can be characterized as
"product creators," coming out of
the derivatives area. This is a
radical change from our historic
roots of equity and fixed income
analysts. The "product creators"
mirror the convergence of research
and trading, historically two very
separate professions and cultures.
Those with math and computer
skills should actually investigate
derivatives-based product creation.
The advice I offer is to look for the
emerging trends, keep an open
mind, think beyond traditional
specialties (stock, bonds), and
actively investigate. Originally,
security analysis was almost
completely based on equities. Then
fixed income (bonds) research
emerged rapidly, spreading to the
whole array of fixed income and
variable income securities and to
credit research (commercial paper,
certificates of deposit). Today, asset
securitization is a large, rapidly
growing area of credit and
securities research converging with
trading.
Within traditional equity research,
the analysis of bankrupt and
financially troubled companies has
grown rapidly. Some aspects of
equity analysis moved over into
fixed income research in the "junk"
bond sector, creating a whole new
market for analysts.
Another noteworthy trend is the
convergence of security analysis
and corporate finance. This is a high
"value added" part of security
analysis for brokerage firms. The
ability of analysts to spot and bring
in corporate finance business
provides the finances for research
departments in stock brokerage
firms. Clearly some corporate
finance experience is a plus for
candidates.
Inherent in the trend to create
derivative products and assist with
 corporate finance, there is the need
for aspiring analysts to study the
economic structure of the entire
financial services industry. Simply
mailing resumes has a low success
rate. Along with the need to
research the financial services
industry, aspiring analysts should
actively network. Despite the
increasing sophistication and
corporatization taking place, the
financial world retains some of its
historic "old school tie" qualities.
Being "introduced" is still
important. Employers want to hire
known quantities, those who will fit
in and have an MBA and/or CFA®
Charter.
To get "introduced," aspiring
analysts should use family friends,
alumni groups, church
organizations, community
organizations or any other group to
network. An increasingly popular
tactic used by astute students is
finding a summer internship. They
may be hired by the firm for which
they intern, can obtain
recommendations and
introductions, and be able to list
some experience on their resumes.

nother important tactic is to broaden

the search for analyst positions
from the historic route of the large
brokerage firms and major
institutions. As Eric Stieglitz's
report outlines, the market for
starting analysts has shifted, with an
important shift being to money
management firms. The popularity
of mutual funds has created a broad
spectrum of potential employers as
well as escalated the demand for
professional talent.
Within the investment management
business, there has been enormous
fragmentation, with many talented
people starting firms. During this
extended bull market, these talented
people have seen their firms go
from managing a few million
dollars to managing billions of
dollars. Few of these people are
household names. Aspiring analysts
should do market research on the
investment management business.
In addition, there is potential
demand for analysts from places
most would not look - wealthy
family business offices, rich
entrepreneurs looking for help with
their portfolios, business investor
start up people who need research
input, and foreign banks expanding
into U.S. corporate finance. Some
intensive market research will be
needed to locate these potential
employers.
In conclusion, getting a first job as a
security analyst is difficult. Once
hired, the potential rewards can well
outstrip many other fields, and the
number of potential employers is
increasing rapidly.
 How To Become A Security Analyst
Entry Points and Migration
Eric L. Stieglitz, Managing Director - Conspectus, Inc.

"Wall Street" is a unique industry, especially when assessing entry points for security analysts, who can arrive from
an eclectic array of backgrounds and experiences from industry or government.
Fewer analysts are migrating from service type organizations, such as Value Line and Standard & Poor's, to senior
analyst positions at major brokerage or buyside firms. Stronger entry channels to these firms instead are coming
from three general directions:
 MBA graduates with prior work experience are filling the junior and entry level positions at major fund
management firms.
 MBAs and individuals with work experience within a specific industry or non-investment related field are
being hired by regional boutiques, broker/dealers, and various money management firms.
 Those with backgrounds in technology, electronics, or international experience have an advantage in
obtaining entry level positions over MBAs who do not have this background.
At one time an undergraduate degree was sufficient, later an MBA degree was needed. Now for an entry level
position, an individual will most likely need an MBA coupled with specific knowledge, not just standard analytical
work experience. Also the Chartered Financial Analyst (CFA®) designation is becoming more and more important.
Sitting and passing the three exams for certification shows a distinctive level of skill and competence recognized by
the investment community.
The demand for security analysts has been increased by: 1) The formation of sub and micro industry specialties such
as semi capital/fabricating/testing equipment for the semiconductor sector; 2) Senior sellside analysts leaving their
positions for jobs in money management; 3) The growth in investment banking; 4) Foreign markets; and 5) The
phenomenal growth in mutual funds.
Fewer and fewer research departments are recruiting on college campuses, and assistant or junior analyst positions
are becoming fewer in number. Banks used to have training programs for analysts, but these programs have
stagnated. Individuals often land ancillary or back office positions scattered throughout the whole financial services
industry and hope to eventually find an equity-oriented position.
To obtain a security analyst position, candidates with an MBA are urged to sit for the CFA® examination.
Additonally, one should constantly revisit firms, network within the analyst community, and prepare a fully
researched investment idea, not a retooled school paper. The research report, either written or oral, affords the
individual an opportunity to present his or her capabilities. The report may also be used as a marketing piece and be
used to pre-empt the "who, what, when, where, and why " type of questions that can cloud an interview.

Questions to ask at Informational Interviews:

1. Tell me about your decision making process in deciding to work for XYZ firm. How has your experience been?
2. With increasing deregulation in the financial services industry, what kind of changes do you think will take place
in the investment banking arena over the next few years? How will your firm adjust to these changes?
3. Could you describe a recent project you've worked on? What does a typical day look like?
4. What types of people perform best at the firm?
5. How are associates evaluated?
6. How much client contact do first and second year associates have? How about summer associates? Are they given
direct client contact?
7. Could you describe the project staffing process at your firm?
8. How is the assignment made between industry and product groups? How much interaction is there among groups?
This list should get you started in the right direction. Keep in mind that the "informational" interview may
well turn into a full-fledged interview. Some questions to anticipate are:
1. Tell me about yourself - walk me through your resume.
2. Why are you interested in investment banking? How did you become interested in investment banking?
3. Why are you interested in our firm?
4. What other firms are you talking to?
5. Walk me through how you accomplished XYZ. What did you learn from it? What would you have done
differently?
6. What are your three greatest accomplishments?
7. Describe a failure. What did you learn from it?
8. What are your strengths / weaknesses?
9. How do your strengths apply to investment banking?
10. Why did you chose XYZ undergrad college?
11. Why the GSB? Why did you decide to return to business school at this point in your career?
12. What is your leadership style?
13. What kind of supervisor do you like working for - one who is very hands-on or one that lets you run the show?
14. How would your friends describe you? What would they say you could improve about yourself?
15. What is the last book you read? What did you like about it?
16. Tell me about your favorite movie. Why do you like it?
17. What do you do for fun?
18. What is our ticker symbol?
Again, this list is by no means exhaustive but it should give you an idea of what to expect. Do not walk into
any informational interview unless you feel confident in your ability to address all of these questions with a
degree of comfort!

New Entrants Reshape Wholesale Banking

Dawn of a New Era on Wall Street

The last thirty years have been punctuated by discussions about investment banking's imminent demise. But fifteen
years of rising revenues, capped by these last two years of bull market conditions and active M&A markets, would
appear to fly in the face of dour predictions. However, on closer examination, the economics of wholesale banking
have been declining pretty steadily, even in these heady times, in the form of decreasing average margins and returns
on equity (ROEs). In addition, pre-tax earnings have remained flat, despite the migration to higher-risk activities and
products (see Exhibit 1).

Traditionally, the industry grouped into three stable, profitable positions: Bulge Bracket/Full-Service Investment
Banks, "Niche" Players, and Wholesale Banks.
Bulge Bracket Investment Banks operate in multiple markets, sectors and geographies. They create value through
economies of scale and information advantages, and their infrastructure costs act as a barrier to entry to new
participants. Increasingly, a few major firms dominate activity in what has evolved into a natural oligopoly. Niche
Players are product, geography or sector focused and are generally highly profitable but, typically, small scale. Their
success is based on recognized excellence, dominant market position and/or personal reputation. Wholesale Banks
provide working capital, treasury and operating services and structured lending. They create value through product
excellence, scale and relationship skills.
In many industries, steadily declining returns would have precipitated significant industry restructuring. But
wholesale banking's industry structure has proved highly resilient over a long period of time. Further, competition to
achieve bulge bracket/full-service status has intensified, as most of the commercial banks entering investment
banking are focused on achieving bulge bracket status, even though the economics of retail financial services are
more attractive and a better use of investment dollars. This battle is a driving factor in bringing capital into the
industry, despite its declining returns.
We believe, however, that the industry structure is now threatened in more fundamental ways than it has been before
and that it is, therefore, likely to undergo some significant changes over the next five years.
How and Why the Industry Structure Will Change
Four factors have traditionally worked in concert to underpin the investment banking industry structure.
 The cost of providing the distribution channel—the market-making, sales, research and operating
infrastructure—is high, both to set up and to maintain, and features significant scope benefits, effectively
acting as a barrier to entry (see Exhibit 2).

 Customer buying behavior has concentrated deal flow on a limited number of preferred suppliers to
minimize transaction costs to the buyer as well as to provide leverage in negotiations for information and
distribution.
 Wall Street has been willing to cross-subsidize products and services, allowing large transaction fees to
cover the costs of smaller or "free" services. Larger, more complex transactions subsidize the processing of
simple transactions at most major firms.
 Regulation has restricted the entry of new competitors.
Each of these, however, is undergoing change.
Lower-cost distribution channels are emerging. Technology has allowed the development of alternative, low-cost
distribution channels. Today, both issuers and investors can reach for the terminal to execute transactions directly,
instead of having to call an intermediary. For example, lower-cost distribution channels include electronic equity,
fixed-income and FX trading networks, electronic-based research and analytics, IPOs for smaller companies through
the Internet and internal netting of transactions.
Marketplace interviews suggest that significant shifts in buying behavior by corporate and institutional investors are
afoot. Increasingly, large corporate and institutional investor clients recognize that the value of Wall Street
intermediation is limited to large and/or complex trades. For simple, liquid transactions, they allocate business on
price, albeit among a group of preferred suppliers, and they push the buying process down the organization. Further,
they tell us that they would be willing to use alternative channels for execution and for low-level information (see
Exhibit 3).

These changes in buying behavior reduce the revenue base that allows Wall Street to cross-subsidize. Further, the
new emerging players focus on delivering heretofore "bundled" services like research or processing. Conceivably,
this allows corporates and institutions to more freely allocate transactions without considering the carrot of bundled
services. The vast majority of transactions executed for clients are small in size given today's market liquidity and
require little, if any, special expertise.
Finally, the relaxation of Glass-Steagall has allowed the entry of new players by effectively removing any regulatory
barrier to acquisition. The recent announcement by Bankers Trust of their interest to acquire Alex. Brown tests the
expanded Section 20 privileges and has the potential to unleash other deals by big banks looking to grow their
securities businesses.
From a structural standpoint, entry of banks into the business has the potential to cause capital imbalances and
further exacerbate the problem of subpar returns.
These challenges to industry underpinnings make it more vulnerable to significant restructuring than ever before. In
the extreme, the industry could regroup into four types of firms, each type focused on one of the key value
components of the industry: Information/Research Houses, Knowledge/Capital Providers, Processors, and
Proprietary Traders/Investors. Each type of player would have unique capabilities and economics derived from their
focus. This is not idle speculation—players have already emerged in each category:
 Information/Research Houses. These firms achieve scale in information coverage and collection, and
excel at data classification clearing and consistency. In addition, they are aggressive marketers and
merchandisers. Early examples of these types of firms are Reuters, Bloomberg, Dow Jones, Multex and
First Call.
 Knowledge and Capital Providers. Companies in this arena focus on problem solving, especially
complex problems. They deliver knowledge, and they have access to capital. Finally, they are excellent
relationship managers. Companies already operating as focused knowledge and capital providers are
Greenwich Capital, Allen & Company, Lazard Freres and JP Morgan.
 Processors. These firms are transaction processing engines. They achieve scale in transaction processing
and excellence in technology management and customer service. Instinet, EBS/Dealing 2000-2 and
Globex/OTB/SOFFEX are examples of "processor" firms.
  Proprietary Traders/Investors. These firms trade for the house and principal investors. They excel,
obviously, at risk/portfolio management and outsource all non-core activities. Examples today are Tiger
Management, Soros Management and KKR.
Not only are firms already operating against this new paradigm, but, as a group, many are outperforming Wall Street
firms in terms of ROE, often by a significant margin (see Exhibit 4).

Strategic Options
Today's industry structure is not sustainable—structural costs exceed customer value-added for the majority of
transactions intermediated.
But does all this mean that larger, global, full-service firms are likely to disappear completely? Probably not. Rather,
our work suggests that two distinct restructuring paths will evolve on Wall Street. There are likely to be pure plays
around both paths, as well as combinations that cross the two options.
Some part of the industry will retain the traditional structure, where very few firms will survive as large, global, full-
service players focused around clients—and the competition will be intense as firms buy each other out to reduce
capital. By our calculations, based on capital available and required returns, twelve to fifteen banks now compete for
a dominant global position that can sustain only six to seven.
Along the other path, the industry structure will fragment and then regroup around capabilities (see Exhibit 5). These
players will build position by driving toward a focused economic model. It will include a combination of existing
players, probably those whose current position is sub-scale, as well as new entrants.

Current institutions will choose their path based on market position and investment in the traditional order. Market
leaders will seek to reinforce today's economic structure and pursue acquisition as the means of driving out excess
capital. Aspiring commercial banks will inevitably collude to share infrastructure and operations, perhaps run as
joint utilities. Together they will pursue a series of actions designed to expand and solidify their position in the
traditional order:
 Invest to grow product and customer portfolios
 Drive industry consolidation
 Build back office utilities to increase scale
 Streamline business system to ensure efficiency
 Reinforce client bundled buying.
Sub-scale banks have the greatest incentive to drive change and could exploit their customer base and product know-
how to drive development of a new electronic-based business model. They might also explore combinations with
newer entrants. All players who bet on the break-up of the traditional structure and subsequent disintermediation will
pursue a series of transforming steps:
 Select position:
- Research focus
- Knowledge and capital
- Processors/execution utilities
 Invest in new capabilities
 Create first move to start restructuring (e.g., build first execution utility)
 Establish new pricing practices.
The challenges ahead for investment banking and capital markets firms are great. Over the next several years there
are likely to be some big plays that will significantly alter the competitive landscape, as in the recent Dean
Witter/Morgan Stanley merger. Further, continued deregulation will invite greater competition and exacerbate
overcapacity. And the inevitable market downturn will increase the pressure on weaker players.
Present market conditions and remaining regulatory barriers, in conjunction with hefty compensation packages, are
lulling the keepers of the status quo. No doubt there are executives in multiple industries, such as retailing,
communications, airlines and network television, who wistfully remember that same state of mind. But change will
come, swept in by regulatory, economic and technological realities, and a clear view of the strategic endgame, as
well as options for competing, is a necessity for all institutions.
101 Park Avenue, 20th Floor - New York, New York 10178
Offices and Partners · More about the Banking and Capital Markets Group

About the Authors

Peter Davis - A former Vice President in Booz·Allen & Hamilton's Banking and Capital Markets Group, Peter
specializes in securities and wholesale banking strategy, governance and organizational structure. He has over ten
years' experience in the securities industry and as an industry consultant and has led numerous assignments for
leading investment banks, capital markets firms, brokerages and money center banks. He received a BA with
Highest Distinction from Rutgers College and an MBA in Finance from the Johnson Graduate School of
Management, Cornell University.
Richard Foster - A Vice President in Booz·Allen & Hamilton's Banking and Capital Markets Group, Richard
specializes in strategic advice on business development, organizational and capital structure, and management and
information technology. In assisting clients to implement strategic thinking, he has also advised at a technical level
on trading strategies, trading floor layout, pricing policy and operations. A graduate of Cambridge University, he
received a Doctorate for his thesis on strategic planning in rapidly changing environments. He can be reached in
London at 44-171-393-3388 or foster_richard@bah.com.
Harry Totonis - A Vice President who leads Booz·Allen & Hamilton's Banking and Capital Markets Group,
Harry specializes in corporate and business strategy development for financial services institutions. His experience
has included work for a wide range of global and domestic institutions across core banking businesses such as
wholesale banking, operating services, retail branch banking and credit card. He has also been a frequent speaker at
key industry conferences. He received a BA and MBA in Finance from Ohio State University. He can be reached in
London at 44-171-393-3333 or totonis_harry@bah.com.
Step 1: The Job
Each job announcement or job advertisement may include any combination of a description of the job, job
applicant qualifications and desired qualities. The description, qualifications and desired qualities are the
keys to preparing for the interview. On a job announcement or job advertisement, these keys may be
found under headings such as:
 Position
 Qualifications
 The Duties
 The Requirements
Here's a description for a supervisory job:
"The ideal candidate will possess excellent leadership, managerial, communications and inter-
personal skills. The candidate should be a self-starter, team player, as well as promote teamwork
among others, have a strong customer orientation, is approachable, and effective and creative
problem solver, and establishes and maintains effective working relationships . . ."
The underlined words are the knowledge, skills and abilities (KSA's) that we’ve identified for this job.
Knowledge - information applied directly to the performance of a function. For example, supervision is a
knowledge.
Skills - learned acts. In the example above, we have managerial skills. Other examples include operating
a personal computer, using a firearm or operating a backhoe.
Abilities - performance of behavior that you can see. In the description above, communications is an
ability.

Step 2: Potential Interview Questions

Identify potential interview questions in 7 easy steps:
1. Match the underlined words (KSA's) to the Question Bank Index categories in the Interview
Question BankSM.
2. Review the list of questions under each KSA Question Bank category. Many of the questions are
similar. We’ve tried to include as many variations as practical. People often make the mistake of
studying specific questions. Study specific questions and you'll be thrown off when the question is
worded differently or a different question is asked.
3. In addition to the KSA's you've identified, think about the knowledge and skills specific to the
job that you are interviewing for. For example, a heavy equipment operator will have knowledge
about safety rules specific to heavy equipment. List the specific knowledge, skills, and "hot topics"
specific to your job. Write possible questions for the specific requirements and "hot topics". Check
out our "General Questions" heading in the Interview Question Bank. You’ll find a list of common
questions that can apply to just about any technical or field expertise.
4. Study the KSA questions and create mock or practice interviews. Choose questions from each
of the KSA Question Bank categories that you've matched to the KSA's. Each practice interview
should consist of seven to fourteen questions. Tailor the questions to fit the organization and
specific job that you are interviewing for. Include questions that you’ve written for specific
requirements or "hot topics"
5. Ask your friend, roommate, significant other, spouse, or coworker to help you. Have them create
practice interviews by pulling questions from the headings we've identified and from the questions
you've written for knowledge and "hot topics". You'll benefit from having somebody else help you
because: 1) you'll have to think on your feet, because you won't know what the questions are;
and 2) you can receive feedback on your body language (posture, the pitch of your voice, hand
movements), content, and the clarity of your answers. Ask your "interviewer" to write down the
questions and their comments. Review the tips below from the Interview Game Plan so that
everything you do becomes second nature.
 Make a positive and professional first impression by being assertive and
giving a firm handshake to each interviewer and addressing each
interviewer as they are introduced.
  Reinforce your professionalism and your ability to communicate effectively
by speaking clearly and avoiding "uhs", "you knows", and slang.

 Use positive words. Instead of "if", "I think", "I feel" and "I wish" use
"when", "I am" and "I would"

 Establish rapport by relating to each interviewer. Note the wording that is

used by each interviewer and when appropriate use similar words.
Maintain eye contact with each of the interviewers throughout the
interview.

 Sit comfortably. Sit erectly, but don’t sit stiffly or sprawl over the chair.

 Don't expect the interviewers to have confidence in you, if you don't have
confidence in yourself. Project confidence and a positive attitude. Maintain
awareness of your voice, posture, energy level, and enthusiasm. Make
hand gestures to emphasize important points, but avoid distracting
gestures or making too many hand gestures.

 Smile confidently, but not to the point where you would appear to be too
casual. Smiling will also help you relax and establish a rapport with the
interviewers.

 Manage weaknesses or barriers so that they appear to be indications of

your strengths.

 Be attentive. Listen to each question carefully and don’t interrupt. If you

aren't sure of what is being asked, politely request that the question be
repeated.

 Close the interview with a strong closing statement of your qualifications

for the job.

 Thank the interviewers. Shake their hands individually and thank each
interviewer by name.
6. Practice, practice, practice. One practice interview is not enough. If you have somebody
help you, have at least three practice interviews. You'll be able to use their feedback to correct
mistakes, strengthen weaknesses, and build upon strengths.
7. Review your Interview Wraps from previous interviews. Use your experience from previous
interviews to help you on this interview.
Note: The underlined words in the Interview Question Bank are words that may be interchangeable. For
example, instead of the word "job", the word "position" might be used.

Step 3: Answers, Answers, Answers

The interview focuses on "what you say" and "how you say it". In this step, we focus on "what to say".
As you know, there are many different types of interviews and interview questions. You can review the
different types at Job-Interview.net's Interview Tips page. Let's keep it simple. You're going to be asked
about:
  What you know - about your work experience, education, training, goals, character, personal
qualities, the job that you're seeking, the company that you're interviewing for, and the
knowledges required to perform the job that you're seeking.
 Identify a problem or issue - given a situation, find the problem or issue. The question may
focus on a situation that you've handled in the past or how you would handle a hypothetical
situation.
 Identify a solution - given the problem or issue, how do you proceed? The question may focus
on a problem or issue that you've handled in the past or how you would proceed in a hypothetical
situation.
The questions may be straightforward or combine the above. For example, "Tell us about a safety issue at
your current job. How did you handle the issue and what reports were you required to file?"
Your goal is to provide an answer that not only answers the question, but also reinforce your qualifications
for the position.
People prepare for job interview questions in many ways. Often people will write specific answers to as
many specific questions as possible and memorize the answers.
We recommend looking at categories of questions and using outline answers. Why? With practice,
you will hit all the important points and although your answer will be slightly different each time, your
answer will come across naturally and with confidence. The key is to be able to think during the interview
and adjust your answer to fit the question. For example, take the category of "General Experience". The
answer to the question, "How does your current position qualify you for the job?" is simply a variation of
your answer to the question, "How does your experience qualify you for the job?".
Key success points to remember:
 The most qualified person to do a job is someone who has already done the job. If you were to
hire someone to fix the plumbing in your house, who would you hire? Someone who has never
fixed the plumbing or someone who has? As you answer the interview questions, cite your work
and life experiences in examples to reinforce to the interviewers that you've already done what
they're looking for, and you've done it successfully.
 The interview will typically focus on the KSA's you've identified. If the interviewers start the
interview with a description of the job, you may learn more about the job.
 Try to use the same wording as the KSA's. If you use different wording, then you are
depending on the interviewers to make the connection between the words you use and the
KSA's. For example, if the job requires someone to supervise, use the word "supervise" and not
the word "manage".
 Do you know the company and the job that you're interviewing for? Check financial sources,
annual reports, and news media for information on the company, their culture and current events.
If possible, visit the company, their stores or offices to get a sense of the culture and dress code.
 What salary are you seeking? What's the appropriate salary for the job that you're seeking, for
your geographic area and for your industry. Check Salary.com for free salary information
 For each Question Bank Index category that you've matched to a KSA, review the answer tips
that are either provided with the questions or at the bottom of the page.
 Don't use limiting words, such as only or just. For example, I "only" supervise five employees.
You're making an assumption that five employees is a small number. The fact is that you don't
know what the interviewers consider as a small number and what is a large number.
 Use appropriate wording. You won’t receive extra points for every word that has more than 10
letters. Use technical terms only when appropriate to the question.
 Use action words. Here's just a sample:
accomplish lead
achieve manage
coordinate negotiate
delegate organize
develop prioritize
direct recommend
establish reduce
evaluate reorganize
execute resolve
expedite review
expand revitalize
implement supervise
improve train
increase transform
initiate upgrade
introduce
implement
 Be concise, logical and to the point. Use short sentences.
You'll find tips for your interview presentation at the Interview Game Plan.
Step 4 SPstep4.htm