How to answer “Why Investment Banking?” question ?

The “Why Investment Banking?” question is a staple in the investment banking interview process, and it typically appears at the beginning of interviews. This question aims to gauge a candidate’s motivations and understanding of the industry. Given the competitive nature of investment banking, it’s crucial to prepare a unique and compelling response.

Investment banking revolves around two primary functions: M&A advisory services and capital markets underwriting. M&A advisory involves providing strategic and financial advice to clients on mergers, acquisitions, and divestitures, while capital markets underwriting focuses on raising capital through equity or debt issuances. Understanding these core functions is essential when crafting your response.

To effectively answer “Why Investment Banking?”, follow these guidelines:

• Personalize Your Response: Share a personal anecdote that sparked your interest in investment banking. Explain the steps you’ve taken to pursue this career and your progress so far.
• Structured Sequence: Organize your answer chronologically, ensuring your thought process is clear and logical.
• Narrative Element: Create an engaging story that balances personal insights with professional aspirations. Make sure your narrative is interesting and keeps the interviewer engaged.
• Conciseness: Keep your answer under one minute. Focus on pivotal moments that solidified your commitment to investment banking without going off-topic.
• Practicality to Position: Connect your story back to the role you’re interviewing for. Highlight your career ambitions and long-term goals that align with the firm’s objectives.

In addition to these guidelines, here are some practical tips for interview preparation:

• Research the Firm: Understand the firm’s history, structure, and notable transactions. Show that you’ve done your homework by asking insightful questions about their past deals.
• Exhibit Humility: Recognize that the interviewers are more experienced. Avoid coming across as overconfident or pretending to have the same level of expertise.
• Conversational Tone: Aim for a relaxed and conversational interview atmosphere. Think before you speak and remain calm.
• Positive Spin: Always frame your responses positively. Maintain a calm and upbeat demeanor throughout the interview.

When structuring your response, emphasize the logical decision-making behind choosing investment banking, demonstrate your understanding of the industry, and show that your decision was well-considered and not driven by superficial reasons like money or prestige. Highlight the fast-paced environment, the opportunity to analyze various business models, and the chance to develop a wide range of skills as key motivators.

Here’s an example of a strong response:

“Since entering university, my interests have shifted towards more analytically challenging projects. In the past semester, I’ve taken intensive coursework in accounting and quantitative finance. From my perspective, investment banking is an exciting challenge that combines my interest in performing in-depth analysis to support corporate decisions with analyzing business models and industries. I am committed to investment banking because it offers opportunities to develop a well-rounded skill set in finance and rewards competency. While I anticipate the long hours and workload to be challenging, I look forward to the personal growth that will come from this experience. Based on my coursework, leadership roles, and internships, I’ve developed a strong work ethic and time-management skills. I am excited about the opportunity to contribute to your firm and prove my capability in adding real value.”

Avoid common pitfalls such as lack of enthusiasm, neglecting to mention the specific firm, giving vague responses, rote memorization, and failing to personalize your answer. Here’s an example of a poor response:

“I’m not entirely sure why I want to work in investment banking. I suppose it’s a decent way to start my career, and I’ve heard it pays well from friends who are bankers. I don’t have much experience in finance, but I’m open to learning. My parents also think it’s a good career choice.”

This answer is problematic because it lacks enthusiasm and specific reasons for choosing investment banking, and it suggests external influences are driving the decision.

When addressing what makes investment banking unique, it’s important to recognize the high turnover rate among junior bankers. While the industry is often seen as a stepping stone, never mention exit opportunities as a reason for wanting to join. Instead, focus on what you bring to the firm and how you can contribute.

Comparing investment banking with private equity, understand the different revenue models, the nature of client engagements, and the skills required. Investment banks offer advisory services and short-term client engagements, whereas private equity firms are active investors involved in long-term relationships with portfolio companies. Both paths require strong financial modeling and valuation skills, but the decision to choose one over the other depends on whether you prefer to be an advisor or an investor.

For non-finance majors, breaking into investment banking requires a clear understanding of the role, technical skills in financial modeling and valuation, and a compelling personal narrative. For example, an art history major might explain their shift towards analytical pursuits and how investment banking aligns with their interests in critical thinking and quantitative analysis.

In conclusion, thorough preparation and a genuine, personalized response are key to successfully answering the “Why Investment Banking?” question. Emphasize your enthusiasm, specific motivations, and how your background and skills make you a good fit for the role. Remember, you’ve been invited to interview because the firm sees potential in you—approach the interview with confidence and readiness to showcase your suitability for the position.