Before starting our careers on the Street we had a lot of mis-perceptions of what exactly it was that we would be doing all day. In fact, we took investment banking training courses, purchased interview guides and even went so far as to drop in on classes to learn more about advanced accounting… We should have spent those hours traveling/chasing skirts/boozing because it was a waste of both time and money. As you know time and money are the only things that you’re trying to help create and save on the Street so it was unquestionably the lowest IRR investment, we’d peg it at a -90% loss (probably higher considering my opportunity cost was hanging out in Ibiza getting into things that will ensure I’ll be dead by 60). With that said this article will focus on the three biggest issues with job preparation.
Modeling is Incredibly Overrated: Yes you should understand how the three financial statements link, you can get this from a general understanding of accounting, after that please feel free to take other courses such as psychology once you land an offer because advanced courses are not needed. There are a hundred reasons why you should not learn modeling but we’ll focus on just a few:
- Do I trust you? In school everyone gets the same assignment, in the work force assignments are given by levels of trust. So if you’re joining any group, rest assured you can bet everything you own that you’ll not open a single important financial model or document. This is no different from playing sports in school, once you show me you can get the basics done, set up a calendar properly in the financial world or make a layup in the sports world I’ll slowly give you more responsibility. If you miss the basics you will not get an important assignment or model to build.
- Update Format and Display: Once you’ve proven that you’re a capable human being, with no sense of entitlement, you’ll start updating Pre-Built models, presentations and other documents. The same logic applies here, if you can’t figure out how a pre-built model works your superior is not going to believe your modeling skills are good enough to move on to zero guidance. Think of it like your coach telling you to run a set play, yes you can run fast, yes you have potential, now show them you can execute in a safe setting. Your work should print out exactly the same way as it was previously set up to do, do not make changes unless it was clearly indicated that XYZ needed to be changed, this way they don’t think the whole thing is messed up now. This is also a great time to fix formatting and display errors (such as making it print nicely) since your boss is going to go over your first model in detail.
- Nothing is the Same: Even if you did not listen and took courses online or in person for modeling, the chances of using the same model is so close to 0 I’ll go ahead and call it 0. The only time I have reused the same model at a different firm was when I switched firms taking my format with me… your chances are excruciatingly low. If you needed to take the course to understand financial statements we still don’t think you should take them because you’ll have to wait more than just a month to receive a full blown model anyway.
Take a Break: By take a break we mean go do something that will make you appear more normal and social when you start work. Whatever you do, please do not take the CFA, chances of being let go after just a couple of years in the industry is incredibly high. For numbers sake remember entering in a class of 50, after 5+ years, 4 people will remain on the Street that’s a 92% exit with the majority call it 66% leaving within 2-3 years. Instead spend your time doing something you like to make you more relaxed going into the job.
If You Must Learn Skills Before the Job: If you really can’t take a break to chill out and are a hyperactive person who must do something productive I suggest you take an excel course. This will actually make you outshine everyone in your group much more than being able to build a model. This is primarily because your initial work involves a lot of copying/pasting, pressing F2 to check errors and updating other excel documents. Navigating and using shortcuts will make you 50x faster than everyone else giving you time to triple check work while everyone else gets one go at checking. Speed in excel leads to faster work performance = more time to check = less errors = more trust = more responsibility. For fun the main ones you must know by heart are “Alt e s” (paste special), F2 (check formula), F2 then F9 (displays value), F5 (go to special) which is best for checking links by holding CTRL and pressing [ and then pressing F5 enter to go back to the original once you found where it links. Finally there is F4 which makes the strange $ signs appear in formulas in excel which locks the row, column or entire cell when you copy your formulas around, it also repeats your previous action if you recently did a movement in excel such as copying the number 5 in row 1 column B.
Conclusion: Think about your new job extremely logically, if you were making millions a year would you trust a kid out of college/MBA to take on your most important projects? Unlikely. Would you test the person you hired before you gave him harder work? Yes. Do you start on a level foot when you enter the door? Yes, or else he would not hire you in the first place. So with all that said, please save you money on things like modeling, every dollar you spent is a dollar that is going straight down the drain. Fortunately after working in finance for quite some time, we can confidently say that we have not seen a single one that is worth the money, either learn some excel and PowerPoint or prepare for back office work.
