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Do Grades Matter for Investment Banking?

I have a 2.5 GPA, can I get into investment banking?

As with most other questions, it depends.

However, for most circumstances, the answer is no. Grades matter for investment banking. If someone does not understand the weighted average cost of capital in a classroom setting, they are going to have even more difficulty understanding it while getting screamed at by their associate.

Generally, the lower down the market an investment bank participates in the less grades matter.

At the most coveted investment banks such as the elite boutiques or bulge brackets, analysts may be expected to run a lot of analysis that requires individual thought and speak to what the data suggests (sometimes, there is still very much a preponderance of mindless work). There is a very high output expectation required under pressure and work is expected to be flawless – this means printing out work and checking it over and over again.

At the lowest level of corporate finance advisory jobs, which may be one person in a basement working with micro-capitalization companies, this is more about copying boilerplate S-1 prospectus filings and then changing a few words here and there before submitting documents to a regulatory body so a stock can be a pink sheet security. If mistakes are made, the documents are sent back for review and the cycle repeats.

As you may surmise, grades will be taken more seriously by the larger firms. Although grades are not perfectly correlated with intelligence and a finance degree is not the most mentally taxing discipline, high grades suggest either natural intelligence or hard work (which includes checking test answers before handing it in) as opposed to incompetence and laziness. It also suggests that given a defined goal, you have managed to achieve it with satisfactory results repeatedly – if you assume that getting 100% is your goal.

GPA Cutoffs for Investment Banking

Students with poor grades will not be invited in for interviews with the highest paying banks. The cut off for Bulge Brackets is usually 3.5 or an 80% average, but the median is much closer to 3.7 or 3.8. Expect 30% of banks to give you a call assuming the appropriate networking obligations have been met with a 3.6, 50% with a 3.8 and 80% above 3.8.

For mid-market banks, 3.3 and above will usually garner calls provided there is relevant work experience. For small corporate finance outfits, anyone can get an interview, the focus of the conversation will be “can you do repetitive work for long periods at a time”.

Older managing directors, especially those who do not have A averages, may be more open to hiring students with lower GPAs. However, the majority of senior staff do care about it as an initial screen, and low grade candidates that have trickled through the HR screen via an MD recommendation may see hostile interviewing techniques from analysts and associates who wish to impose their own brand of meritocratic justice.

Also, when you read on other websites where once you have an interview the resume is on equal footing with other candidates, that is a blatant lie. If your resume is sub-standard, it is an uphill battle – although not to say an uphill battle that you cannot win.

Skew for Grades in Investment Banking

Investment bankers have a bias towards good grades, but there are ways to highlight certain points on your resume that may put it in a more favorable light assuming that certain criteria are met. This means that your overall grades may not be good but your finance, accounting, economics and math grades are high.

Finance, accounting and economics topics learned in class are used on a regular basis in investment banking. University mathematics less so, other than figuring out marginal profit, which does not necessarily require calculus. However, these do matter for sales and trading – in particular the more quantitative disciplines.

Physics, chemistry and other hard sciences will also be weighted more favorably. As such, a 3.6 GPA with strong math, finance and accounting classes with weak creative writing or French scores is relatively stronger than a 3.6 GPA with all classes around 3.6. The opposite is looked at less favorably.

What Can You Do to Get into Investment Banking If You Have Bad Grades

If you have low grades, you can consider aggressively networking, working hard to pull up grades in your current courses and reading as much about the markets and corporate finance as you can.

With lower grades, getting coffees is more difficult, but if you can land enough coffees with senior staff, you can get fasttracked for an interview where you can prepare for scathing questions from analysts and associates who feel that you jumped the queue. Senior staff generally do not care about grades as much and are better positioned to get you an interview, whereas junior staff, even if they like you, may be reluctant to push your resume forward as they are taking a risk if you screw up as the grades should have been an indicator. All things equal, networking is far more important when grades are bad.

Another good way of de-risking your candidacy to investment bankers is to pass some other test or designation with flying colors. A high GMAT score will dismiss the notion that you are not capable of doing the work – write the percentile, investment bankers are too lazy to figure that out. Getting CFA Level II will show bankers that you have a good understanding of corporate finance and are willing to put in the time to work – you are disciplined. Writing CFA Level I Candidate is a negative on resumes.

The biggest get-out-of-jail-free card for bad grades is to have a decent brand name on your resume with good references. Investment bankers will be happy to look at someone who has already worked for a year at Deloitte Corporate Finance with a good performance review as much of the work is the same while performance is vetted to some degree already.

There are two instances when grades do not matter as much.

  • Relationship Hires – Your parents are important to the investment bank either as a client or as an employee
  • Targeted Recruitment – You fall under an identified group that the investment bank wants to increase focus on to make sure that they are capturing the best talent by looking at areas that have not been applying at a high frequency. Historically, investment banks have looked to hire more women and underrepresented minorities

There are still plenty of people who fall under these camps, so if you fall under any of these groups, you should focus on mastering the interview instead of grades.

Once you are already in investment banking, grades matter less (but they still matter).

Related Reading for Investment Banking

Investment BankingInvestment Banking for Dummies · What Do Investment Bankers Mean When They Say “Sell Side” or “Buy Side”? · Should You Start Your Investment Banking Job Early? · Why Investment Banking? · Breaking into Investment Banking as a Big 4 Accountant in Audit · Investment Banking in Canada · Investment Banking Hierarchy – Analyst to Managing Director · How Has Investment Banking Changed Over Time? ·
NetworkingDo I Need Social Skills to Work in Investment Banking? · Investment Banking Information Sessions · Encouragement before Full-Time Recruiting for 2018 · How to Not Get Blacklisted from Investment Banking Recruiting · How to Show Your Passion for Finance · Walk Me Through a DCF · Investment Banking Resume Observations · Coffee Chats and Informational Interviews ·
Matt
ex investment banking associate
https://www.linkedin.com/in/matt-walker-ssh/

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