5 Tips to Master Investment Banking Interview Questions

Investment banking (IB) interview questions are not an easy deal. In fact, preparing for them can be quite overwhelming once you realize how much time and effort you will have to dedicate in order to learn how to answer them all.

However, it doesn’t have to be like this.

Finding the right answer to every possible question is not hard. There are almost too many resources on the internet teaching you how to answer these IB questions, word by word. But you have to think about the person on the other side of the table as well.

Your interviewer won’t see anything special in you if you just say everything you found on the Internet. Truth is that they’ve interviewed hundreds of candidates, and most likely a lot of them prepared the same way you were planning to, memorizing the WSO/BIWS guides from front to back, or reading the 300+ pages of Rosenbaum. If your plan is to do exactly that, you will just be reciting an outdated script your interviewer has probably heard too many times already.

You don’t have to memorize 400+ answers and questions in order to succeed. The key is to prepare smarter, not harder. Keep reading and get the job of your dreams with these 5 tips to master investment banking interview questions.

1. Know what questions to expect

Before you can prepare to ace an interview, you need to know what to study for. Yes, technically there are an infinite number of questions your interviewers could ask you, but in reality, not all questions are created equal. Spending your time memorizing 400+ questions when your interviews are only going to be 30 minutes each is plain silly. 80% of those questions are probably questions you’ll never see… so what’s the point?

Make sure you start with the guaranteed questions, such as tell me about yourself/walk me through your resume, why investment banking, and why our bank. From there, be ready to go deep on every single item on your resume, talk about your strengths and weaknesses, and have examples of times when you’ve exhibited the qualities that investment banks look for.

Similarly, on the technical side of the interview, different types of questions have a different probability of showing up in your interview. More on this in the next point.

If you prepare the right way, this doesn’t need to take a lot of time.

2. Study your technicals in the right order

When it comes to technical questions, you should study the concepts in order of increasing difficulty. There are two reasons for this:

1) The easiest concepts are most likely to show up in your interview, because if you don’t even know the basics, the interviewer is not going to bother testing you on the more advanced concepts.

2) All the concepts are actually related and build on top of each other. Without having a strong foundation on the easy stuff first, you’re not going to be able to master the more advanced concepts. You’d simply be building a house of cards that eventually comes crashing down. Learn to walk before you run!

So what is the order, you ask? Learn the accounting and three statements first. Understanding how all the different line items flow and relate to each other is the foundational knowledge you need to understand everything else. Next, move on to valuation methodologies, because that’s the core of almost everything you do in banking, regardless of whether you’re working on a capital raise or M&A deal. Once you understand how both the three statements and valuation works, then you can learn about M&A. The three statements allow you to understand accretion/dilution, while valuation allows you to understand how the purchase price is determined… which is also an input to accretion/dilution!

And lastly, you can learn about LBOs, which is really just a variation of M&A, except the buyer is a private equity firm instead of an actual company. Again, here you need to have strong knowledge of the three statements to actually understand how an LBO model works, and you need to understand valuation to determine the purchase price.

If you do these out of order, a lot of these concepts won’t make sense to you. Do you see how everything is all related yet?! Which brings me to my next point…

3. Don’t use brute force memorization, connect the dots instead to achieve physical mastery

Most people struggle with technicals because they are just using brute force memorization, where they memorize all the different formulas, but have no idea how they are related to each other. If you’re just memorizing things, the interviewers nowadays are way too sophisticated for that anyway. They know the questions that are in the most popular interview guides, and they know if they just ask the exact same questions, they won’t be able to distinguish the good candidates from the mediocre ones. Instead, they are going to change things up, disguise the questions, ask a different variation, change the numbers and assumptions, to apply pressure and test if you really understand what you’re talking about.

With that said, the key to really mastering the technicals is to CONNECT THE DOTS. When you connect the dots across the different concepts, you start to see the big picture and everything starts to make sense. And when everything starts to make sense and that light bulb goes off in your head, you no longer need to memorize anything. Everything clicks, and the technical knowledge becomes something that’s ingrained in your long term memory.

Never again will you have to say things like “oh I haven’t reviewed my technicals in a week, I need to refresh myself on it because I’ve forgotten everything.” That’s the difference between brute force memorization (not sustainable) and physical mastery (permanent knowledge).

4. Know where you are along the curve for behavioral questions

Once you have your technicals nailed down, you need to understand that’s just the minimum requirement. In other words, technical questions can get you eliminated, but it won’t be what gets you the job. This is because even if you nail all of your technicals, chances are many other candidates are also doing the same. So from there, the thing that separates the winners from the losers is actually behavioral questions.

When it comes to behavioral questions, the first thing to understand is that unlike your technicals – which are being graded on a “pass/fail” basis – your behavioral answers are actually being graded on a “curve” instead. This is because unlike technical questions, there’s no “right” or “wrong” answer per se. That’s why it’s extremely silly when everyone just recites the “standard” behavioral answers that they read in the popular interview guides, as if everyone should just say the exact same things. If only it were that easy!

In reality, when it comes to behavioral questions, the interviewer is trying to determine who really stands out as a candidate, so feeling good about the answers you’ve come up with for yourself isn’t quite good enough. Having spoken to hundreds of investment banking candidates, I can tell you that 9 out of 10 people always think they’re pretty good at behavioral interviews. This is not surprising, because people often feel like talking about themselves is a pretty straightforward thing to do.

However, it doesn’t matter that your answers are “good” if all of your competitors’ answers are “better” or “best.” Considering the acceptance rate in investment banking, we know that statistically, 9 out of 10 people are actually going to fall short! So the only way to really know if you’re set on the behaviorals, is if you know for certain that your answers are better than everyone else’s answers. In fact, I’d aim for 95th percentile or higher to be safe.

Problem is, most candidates simply have no idea how they stack up against the competition. Because they’ve never interviewed other people, and don’t know what other candidates are saying, it’s impossible for them to know.

Unfortunately, there are no magical shortcuts around this – the only way to accurately assess is to have someone with A LOT of experience interviewing candidates do it for you.

5. Base your area of improvements on a large sample size

And that brings me to my last point. If your behavioral answers aren’t quite where they need to be yet, you need to get constructive feedback on how you can improve them. You cannot and should not try to figure this out on your own, because whatever mistakes you have in your answers are most likely going to be hidden in your blindspots. It’s why you made those mistakes in the first place.

Your answers are by definition already your “best effort” – so someone else needs to point out the flaws for you. Please don’t think “oh I just need to think about this a little more and then I’ll be able to come up with something better.” It really doesn’t work like that.

Ideally, this feedback should come from the same person that’s grading your answers along this “curve.” The main thing to keep in mind before you seek out this advice, however, is that whatever advice this person is giving you needs to be based on a large sample size of data – i.e. someone who’s interviewed a lot of candidates before. Oftentimes, candidates tell me they will just ask the upperclassmen in school for advice. Sure, that is a good place to start, but it doesn’t always help, and sometimes can even backfire.

This is because even though the upperclassmen you’re talking to may have gone through the process once themselves, that is still a very small sample size. They are basing their advice on their own experience, which is basically the experience of one candidate. A sample size of one is not enough to accurately place you on a curve of any sorts.

Lastly, an answer that worked for any single upperclassman may not necessarily work for you, because no two candidates are the same. Sometimes when you talk to multiple different upperclassmen, they’ll give you conflicting advice regarding the same answer. In that scenario, you actually become more confused about what you should do, and start to question yourself even more. Less certainty leads to less confidence, which results in worse results.

To avoid this, it is ideal to have a single source of feedback, and to ensure that person is experienced and qualified enough to be giving you advice. After all, for something as important as your career, you want to make sure you get this right. The analogy that I use is: if you needed heart surgery, would you want an experienced heart surgeon who has operated on hundreds of people? Or would you want the med school student who just started his residency to slice you open?

In conclusion, interviews in investment banking are extremely difficult to come by, and every interview you get should be treated as an opportunity to be handled with care.

If you follow these tips during the preparation process, you will be able to prepare for the big moment in an effective yet efficient way, that will actually help you give the impression you want while letting the bank know that you’re the best person for the job.