Preparing for Front-Office Interviews
Three former students, now gainfully employed in front-office roles, give the inside scoop on what to expect during interviews for investment banking, sales and trading positions.
Investment banking interviews
If you make it to the final round of an investment banking interview process, you will encounter an assessment center. Most banks use them. At that center, the final stage will be a round of interviews.
While first-round interviews are about competency and fit, assessment center interviews focus on evaluating your ability to do the job, so expect a technical interview with members of the business.
Macroeconomic questions — They may start by taking a general route and asking you macroeconomic questions on inflation, unemployment, gross domestic product, foreign exchange (FX) and your view on the economy, such as:
- What is the dollar/yen exchange rate today? Where do you think it will be in one year and why?
- What is the current price of oil? What have we seen in the last three to six months? Where will it go?
- What is your view on the current sovereign debt situation?
Technical questions — Then they’ll drill down to more specific questions, such as:
- You purchase some Ford Motor Company bonds. How can you hedge your interest rate risk? (Go short on treasuries,
so you are left only with the firm-specific Ford risk.)
- Graph the price-yield relationship of bonds.
- What is an inverted yield curve?
- How would you explain credit spread?
Brainteaser questions — Finally, there are also the apparently trick questions designed to test your logic, such as:
- You have a balance that doesn't tell you how heavy each ball is. You can only use the balance twice. How can you identify the heavier ball?
- If one tap fills up a swimming pool in two hours and another tap fills it in four hours, how quick will it be if both fill it up at the same time?
My advice — Practice as many brainteaser questions as you can. The key to questions you can’t answer is to make a good intelligent guess and try to explain how you are thinking about the answer to demonstrate your thought process.
I always remember when I got a really nasty volatility question, which the interviewer turned into an FX question and I got lost. My formula was right but my math went to pot.
He was kind enough to walk me through my mistake so I took a breath and said, "Oh I see, what you are saying is that I should have done X, Y, Z." He was impressed that I had listened and picked it up quickly, and we moved on. He also recommended me as a good hire.
If you're interviewing as a trader, you should also be prepared for the following:
Can you tell me about a time when you took a risk?
The key to this question is not the risk but the analytics surrounding it. Talk about your thought process before taking the risk, how you weighed up the opportunity cost, etc., then the results of taking the risk. Do not be surprised if your interviewer throws other possible outcomes at you in order to see your reaction and how you would handle it.
How do you handle stress?
The market has a way of turning cool, calm, collected individuals into irrational, impulsive and angry players. If you fall into the latter group, you will not succeed.
If I were to give you $250,000, where would you invest?
Follow the markets to make sure you have an answer to this question and can rationalize and justify your decision.
Are you willing to put the interests of the company and a client before your own?
I beg of you not to waffle on about the ethical implications of this question; it is simply a direct loyalty question, and you just need to answer yes.
Which attributes do you think are vital to a good trader? Demonstrate you have these.
A good trader is able to digest large amounts of information and to play out scenarios that tie in together. If you want to be a trader, you will need to think for yourself and piece together various scenarios and outcomes. You'll also need to keep your objectivity when things unfold in a fast and volatile market. To prepare for this question, focus on competencies and abilities suited to trading roles.
What is a call option?
Technical questions will depend on who is interviewing you. For example, a high yield trader, a commodities trader and an equities trader will all tend to ask questions based on their product.
Other examples include: if the yen/dollar exchange rate is 110 yen/dollar today and the one-year forward rate is 115 yen/dollar, what does this imply? Would the price of a call option go up or down when the maturity of the option is longer?
My advice — Whichever role you go for in an investment bank, some questions are inevitable. You should always be prepared to say why you want to work for that bank and why you want that job. And you should always come with some questions of your own.
I cannot guarantee 100 percent that you will be asked these questions if you interview for a sales position in an investment bank, but I can say that they are the questions I like to ask when I'm interviewing graduates and the kind of questions I was asked myself. You have been warned...
Tell me about yourself – walk me through your resume.
Let's face it. If you can't sell yourself, you have little hope of selling anything to a portfolio manager.
Why do you want to work for Bank X?
This is your opportunity to demonstrate you have researched and prepared. It is not enough to sit and reel off a million statistics about the achievements of the firm. Touch on the people, the culture, the structure of the graduate program. Make it personal. What genuinely interests you in Bank X?
The answer to this question will help weed out those who truly love selling from those who just happened to fall into sales as a profession. Your interviewers are looking to discover your self-awareness and motivation. Know your strengths and be able to show how they relate to sales.
What part of the sales process most appeals to you and which part do you think is most important?
The question is effectively designed to test your knowledge of the sales role within the bank/division and whether your selling style fits the culture of the firm or particular desk. If the desk's revenue is based on a long sales process, the interviewer will be looking for a sales person with patience, diligence, organization and the ability to follow up. High-sales-volume flow desks will want someone driven to get the trade and close.
What attributes do you think are vital to a good sales person? Demonstrate you have these.
The key to this question is to focus on the abilities that every sales graduate needs and to provide concrete examples of situations in which you've demonstrated them. They include understanding your target audience, asking the right questions, listening to the client and negotiation skills.
If you weren’t to have a career in sales, what would you do?
This question is designed to unearth your true career goals. I personally ask, "Where do you see yourself in three/five/10 years?" You often find candidates haven't prepared to discuss their true ambitions. The off-the-cuff response often received reveals much about their long-term fit within the firm.
My advice — However these questions are phrased, they are designed to find out more about you. How motivated and passionate are you? Can you sell? Will you achieve good results? Do you fit into the culture and style of the firm/desk?