The Guide to Financial Modeling & Banking Forums You Weren’t Mean To Read

In this tutorial we’re going to reveal all the time consuming and low value add activities aspiring bankers traditionally get sucked into.  That is to say, we’re going to show you all the things we wasted our time on when we were students trying to get into banking. In doing so we’ll explode some industry-wide myths, including one particularly controversial myth we can’t stand.

By showing you exactly what to avoid, we’ll save you 100 hours of wasted study time and possibly $1000s in unnecessary product costs.

 

BONUS: Download a free reporton how to save 100 hours of study by ignoring conventional advice on financial modeling, banking forums & more, plus find out how 5 of us managed to break into bulge bracket banks without having perfect grades, the best schools or insider connections.

 

The guide to FMT that many sites out there wished we didn’t publish!

I’m not sure if this is so much a guide to financial modeling courses and books, as it is a freaking sermon!  What follows is the most honest take you’ll ever get on financial modeling training – and what this rant lacks in lucidity at times, I hope it makes up for in extreme authenticity.

Before mass begins I have to admit that everyone’s circumstances and needs are different; meaning I can’t just flatly rule out this prep area for everyone.  So after a quick rant against financial modeling training, I’ll walk you through the exceptions – I’ll show you very clearly who financial modeling training is a good idea for. If you want the short version of it all here it is…

If you are a college kid looking to land a summer internship or analyst spot, or about to enter such a program, then 7 times out of 10 you should NOT do any financial modeling training ahead of the program, because 1) it’s not expected of baby faced college students, 2) banks will train you in it and 3) it’s the single most time consuming and expensive prep activity out there.  The cost-benefit analysis ain’t pretty!

PS  It’s worth knowing that it’s easy for me to speak on this issue because I did financial modeling training (FMT) before my summer internship all those years ago, I’ve since seen what actually happens when you get into banking and here at Inside Investment Banking we don’t offer a financial modeling course, book or anything of the sort to bias our opinion on it.  

 

Why 7 out of 10 students should forget about FMT

I don’t believe FMT is essential for those of you trying to get into banking from college; or about to start summer internships. 

Sure FMT might improve your chances of getting in and/or turning in a solid summer performance once in, but not enough to justify the cost in dollars and time.

Rather financial modeling training is more suited to first year analysts (and soon-to-be analysts) who having already got a taste of it in their first few weeks/months on the job (or in internships) are now looking for a little extra help and hand holding outside of work; and for any one of the exceptions I go through below.  

 

1) Bankers don’t make hire-reject decisions based on it

Please understand that completing a financial modeling course in your own time means little to most bankers

Sure it will show them you’ve got passion for banking, but that’s about it.  FMT is but a footnote on your resume.

And although your subsequent familiarity with Excel is handy, it’s far from a major influence on recruiting decisions – bankers care so much more about whether you are likeable, a good fit, quick on your feet, from a good school, possess top grades and relevant work experience. 

And hey, they can teach anyone with half a brain how to model in 2 weeks. But as I will explain in the ‘Exceptions’ section below, bankers do care about your answers to practical finance questions like “How does xxx effect the 3 financial statements?”.

So although the pure modeling skills you take away from FMT are not going to excite bankers, the practical finance knowledge you extract from this kind of training and then use to give A+ interview answers will.  Hello 2011 investment banking offer!

 

2) As an intern you probably won’t use financial modeling skills any time soon

Banking interns don’t do a helluva lot of modeling during their summer.  So as much as you’ve had or about to have springtime hard-ons over the idea of building complex models during your Summer of Love, it’s simply just not the reality for most interns.
Well, at least not outside of a training module or a mock M&A intern group project.

It’s worth noting that the modeling workload differs from group to group.

If you are in M&A or a hardcore industry/product group you could be sinking your teeth into some serious Excel work from the get go. But for the rest of you, don’t get your hopes up.

That said, all of you will use Excel throughout your summer in various capacities and the sort of tutorials and shortcuts you learn when doing a BIWS financial modeling course for example can come in very useful – you’ll basically be able tooperate at warp speed.  (More on BIWS below).

Whilst if you are in Equity Capital Markets or something capital raising related, I dare say it doesn’t even matter if you know how to spell E.x.c.e.l. – that’s how often you’ll be making love to it.  (Joking!)  

 

3) Any sizeable bank is going to teach you how to model

Every decent size bank has its own training program for interns and newly minted analysts, and it will cover the whole spectrum of financial modeling.  So even if you do end up in a heavy modeling group, you’ll be taught all you need to know.

Why pay for training the bank is going to give you for free?

Remember it costs them a bomb to train you.  HR once told me we were costing them $20,000 for 3 months of training. 

Once you appreciate that figure you’ll want to save your own hard-earned coin. And hey, if you value your time – and realize how little of it you’ll have once you start your banking job – then I must also ask “Why spend weeks of personal time doing training the bank is going to let you do on the clock?”.   

 

4) Financial modeling courses are notorious for creating bad habits

Learning how to model before you start working can instill bad habits and incorrect knowledge, which actually puts you into ‘negative’ territory – something I learned during my first week all those years ago. That is, every bank has its own way of doing things, its own shortcuts and its own precedent models. 

So coming into your internship or analyst program with preexisting ideas on how things are done does not always help.

More frequently – and in my case – this kind of pre-summer prep actually wastes your time as you have to unlearn all the tips and tricks you picked up from your 3 months of FMT hell.  The best pre-summer guide to financial modeling then is perhaps no guide at all!  

 

5) Your group will train you the best way

Your group will teach you everything you need to know, how to do it their way, and only when you need to know it, which means you won’t get misinformation or be overwhelmed at any one time.

Best of all they’ll get you to apply all these lessons right away and this is without doubt the most effective way to learn how to do financial modeling.  i.e. learning on-the-job – where lessons are applied immediately and burned into your memory courtesy of the high pressure working environment and real action you take.

That last point is particularly important, because even those financial modeling training courses that are interactive(ie you are not simply reading or watching, but are in fact building an Excel model alongside the tutorial series, eg Deal Maven) won’t burn the lessons into your cerebral cortex quite like on-the-job training.

Are you willing to sacrifice your time and money for temporary lessons – the type you’ll forget about before you even walk into the bank on Day 1?

PS  Insult to injury, we often spent hours procrastinating before our online modeling study sessions, such was the boring nature of these courses.  (I’m going to reveal one course that has departed from this sleep-inducing mold below…it uses video to keep you awake, entertained and motivated!!).  

 

Who should do financial modeling training then?

Because financial modeling training usually costs $100s if not $1000s of dollars and requires 40, 50 or even 100 hours of your time, I am going to be really specific on who it’s for so you can easily choose what’s best for you. The one thing you are going to notice below with all the exceptions, is that I am arguing that these types of people should do financial modeling training for purposes other than actually being able to build a model from scratch.

ie the real benefits of financial modeling courses lie outside of learning how to actually build a model, and are rather to do with gaining knowledge in practical finance– including financial terms & phrases (eg depreciation), financial concepts (eg LBO), financial statements (eg CFS), financial statements analysis (eg multiples) and basic financial math (eg calculating EBITDA).

Unlike modeling skills, practical finance knowledge will be used during every single interview you attend and then throughout your entire summer internship.  So while the former is ‘nice to have’, the latter is ‘must have’ knowledge.  

 

1) Finance/Accounting/Business Virgins

If you haven’t studied finance or accounting – or anything with a business twist – then your knowledge base may need a helping hand. 

Although bankers won’t take an arts major or science geek to town with questions about LBOs or DCFs, they’ll still want to test your business nous and throw some basic finance questions at you.

And when you enter the internship or analyst program you’re going to be hit with the same training programs and work tasks as fellow grads with finance majors – which could mean unlike them, you hit an impossibly steep learning curve…hello death-by-overwhelm!

The reason I advocate financial modeling training for you guys is that any good FMT program will initially walk you through the very basics of practical finance – and these introductory tutorials will be easy as pie to follow.

Take Deal Maven for example – a popular online course – it will ease you into the world of IB and even define the most basic of basic terms like IPO or Asset! 

Nice.

Having this level of knowledge is a bare minimum in banking recruiting in my opinion and combined with the intermediate level tutorials you’ll find in these courses you’ll gather enough knowledge to impress bankers during interviews and once in – plus you won’t hit a brick wall of a learning curve in your first week on the job!

Bonus reason?  Passion indicator.  When your education track record is light on business education, then participating in something like a financial modeling training course can help – albeit not as much as you think.

PS  Please watch out for the more advanced tutorials in these courses because more often than not they are way too complicated for your purposes.  

 

2) Business students lacking ‘some’ knowledge and confidence in fin/acc

FMT will fill the gaps in your practical fin/acc knowledge left by a theory focused college degree and it will give you bags of confidence ahead of your interviews, or more probably ahead of your internship or analyst programs.

The reason FMT can instil this confidence is because it will show you what’s coming up and roughly how to do all the basic banking tasks like ‘add backs’ or EBITDA calculations.

Also for those of you who don’t consider yourselves fast learners (good luck in banking!) FMT can be a Godsend because it gives you a 10 week head start on everyone else – more than enough time to familiarize yourself with the ins and outs.

PS I’d add into this category, any students who are going into an analyst program but feel they didn’t learn much/enough during their summer internship on practical finance and modeling.  Or are otherwise extremely nervous about starting!

 

3) Any student considering applying to boutique investment banks

This is a really important exception for you guys to know about, because increasingly in today’s recruiting environment bulge bracket banks are shutting their doors – or at least keeping them pretty damn exclusive – meaning boutique banks are rapidly becoming the hot destination for students with dreams of investment banking.

Unlike the Goldman Sachs of the world, many boutiques don’t have the size or resources to support full on training programs for new hires – we’re talking boutiques proper here (not about middle market investment banks or prestigious boutique banks).

This means that my edict above “banks don’t expect you to possess FMT skills or related practical finance and accounting knowledge; instead they will train you how to do everything” doesn’t apply here.

Instead, boutique banks want plug-n-play analysts – and even expect interns to have some ready to use financial skills/knowledge.

So if you can show them that you’ve already mastered the basics (definitions, concepts, calculations, analysis etc) and are ready to actually do some value-add work, then they will be more ready to give you a go. Or at least hand you an unpaid banking internship for a couple weeks this summer.  

 

4) Analyst program hopefuls without banking internships

If you are applying for analyst programs without a banking internship then financial modeling training is a good idea since it goes some way to closing the experience/knowledge gap. But don’t be lulled into a false sense of comfort.  No banker is ever going to view your stint with Deal Maven or Wall Street Prep as equal to the kind of training banking interns receive.  

 

5) Students hellbent on getting into investment banking

A.k.a. – us when we were students!!  Yep, that’s a dirty confession – almost all of us on the IIB team did financial modeling training as students. Some of us did Deal Maven, others Wall Street Prep. And yet here we are saying 7 times out of 10 you shouldn’t do it. 

How do we reconcile this?

Well, we said there were exceptions right, and here’s the insane one; students who want to cover all bases, become mini Gekkos and importantly, have the money & time to do it should consider enrolling in an online financial modeling course.

Or I should say – students who want to foolproof their break in strategy and are willing to burn 100 hours a week studying investment banking recruiting (in this case FMT) much to the neglect of any actual academic study or part time work should consider it! 

Yes, that sounds like us as students alright. I figure it’s time to explain to you guys why someone with a finance/business degree, top marks and bags of specific/practical finance knowledge would choose to spend $500 on financial modeling courses.  

 

Why I did financial modeling training as a student

Well, first of all no one had the gumption to tell me not to bother. 

Everyone online was simply saying “do it” and oh yeah P.S. I sell an online modeling course.  Thankfully you have the bias-free Inside Investment Banking tuts to give it to you straight.

But I think even if I got the unbiased advice I would have still done a stint of FMT online. And once again, let me be clear.  I would NOT have chosen it so I could learn how to build a model from scratch – this is after all not necessary as I argue above. Instead, I would have laid down the $500 in order to gain the practical finance education that most FMT courses deliver in droves.

You see FMT is great at taking your theory-skewed knowledge from college (as a finance/business/accounting student) and showing you how it’s actually used in the real world of banking…ie the real financial statements, the real calculations, the real concepts, the real lingo/phrases and everything else that investment bankers deal with day to day.

And although this practical finance education is not mandatory – ie you can still get in and thrive once in without it – like the rest of the IIB team I was prepared to study anything, spend everything and prep to the max in order to guarantee my future. 

As a student who had just borrowed the equivalent of Greece’s annual GDP to go to college, I was desperate to make sure I came out at the end with the lucrative grad job.

Apart from the practical finance tutorials you get in FMT, I’d argue the other reason I would still do it is because it gets you familiar with Excel – the shortcuts, the tools, the features. 

Armed with these little Excel hacks I was able to turn around dozens of basic work tasks like spreading comps, faster than everyone else.

Conclusion: If you’ve got the money, the time and the crazy vein-popping determination to cover every single base then do it – go throw a couple hundred dollars at an online financial modeling course!

 

If you decide to go nuts, read our financial modeling guide here

Like all things IB-help related financial modeling courses are usually damn expensive with some providers offline charging $1000s for weekend financial modeling boot camps and online providers wh*ring out half-rate products for $100s.

To ensure you don’t waste your money or time Inside Investment Banking recommends Mergers and Inquisitions’ modeling courses – provided under the name Breaking Into Wall Street.

Not only are these courses made by a real banker who cares, but they’re made in relation to real companies (and some, real deals). 

That beats hypothetical, BS-filled courses written by academics every time!! And probably the thing I care most about is making sure you guys don’t go into debt in order to enrol in a $5,000 modeling course – and with BIWS courses starting at just $150 or so I know you’ll be safe. As part of our honesty policy we’re pleased to say we aren’t affiliated with or in any way receive cold hard cash for suggesting BIWS. 

We just think Brian and the team over there have done a kick ass job with their Breaking Into Wall Streetsite.

If you do have a rich daddy named Goodluck Prince or a gold deposit in Banwanaland, then I will pass on the recommendation of Wall Street Oasis founder Patrick, for the Analysts Exchange financial modeling program.

Unlike BIWS they offer real world public courses, but also the famed 1-1 virtual training with a banker option (ie a service, not a product).  The 1-1 program is 100% tailored to your needs, fully interactive and well, from all reports of students who’ve done it, f**king brilliant. Naturally you can’t pay for a course like this by breaking apart your younger brother’s piggy bank and swindling a few bills.

Analysts Exchange online virtual course actually runs into the thousands I think.  But you need to trade value to get value.  And I think it’s the kind of price tag my younger self would have been happy to pay in order to get so much face time with a real banker.

Never forget that whatever you invest in breaking into banking resources, you earn back within your first weeks as a freaking intern!   Not even a freaking 1980s Berkshire Hathaway investment can match the ROI you’ll get from investing in yourself at this critical juncture of your career. 

[Note to self: calm down on the Dr Phil-esque tirades]  

 

Are there any cheap financial modeling courses?

Well, there is always the world of financial modeling books – they rarely pop the $100 mark and are information dense.

I’d point to Financial Modeling Benninga as a good example – you can actually get the Simon Benninga Financial Modeling 3rd edition on Amazon for less than $70. 

That’s an absolute bargain basement price when you consider most students call it the Bible, the absolute mac daddy of the financial modeling guide world. Weighing in at north of 1000 pages though it is not a mere introduction to financial modeling guide. 

And with coverage spanning everything from freaking Monte Carlo methods to basic VBA tutorials, you’ll certainly get more than you bargained for.  I know it reminded me of some fairly daunting finance textbooks I used during college.

But would I recommend something like Financial Modeling Benninga over BIWS?  Well, no.  For the extra $100 or $200 it takes to get into a BIWS financial modeling course it’s a no brainer.

BIWS is not only going to teach you via video (so important when you realize that a written financial modeling guide contains more sleep inducing drugs than a freaking soccer mom fresh out of Tijuana), but it’s only going to teach you things you need to know as a young/aspiring banker. 

It’ll show you the 80-20 basics. For example, Brian is not going to yak on about option pricing methods or spend 100 pages talking about immunization strategies, instead he’ll only walk you through financial concepts i-bankers use everyday – and the sort of concepts you might need to know during interviews or internships.

Plus he’ll show you the insider hacks for Excel (the sorta killer tips and tricks you need to speed up your Exceling and woop your competition!).

So to conclude, BIWS trounces Financial Modeling 3rd Edition when it comes to aspiring bankers with $300 in their pocket.  But if you like the idea of a reference manual – something to pick up now and again and flick through – then I’d say the comprehensive FM 3rd edition might be for you after all.  

 

Leave the ‘banking life’ gossip alone

“What do investment bankers do?” This question and all its equally intriguing friends like “What are investment banking analyst bonuses going to be in 2011?” or “What are the sweetest shoes to kick around in this summer?” are to my mind kind of like self-pleasure. Fine for a while. 

Maybe even helpful.  But go too far and your sight will fade, your palms will grow hairy and your financial muscle will atrophy. What is a healthy amount of banking gossip?

Feel free to spend a couple hours reading up on what bankers do, what tasks are involved and how a typical day is spent.  Seek out the pros and cons of the life as well.

We’re currently writing a 20-page look at the taurine-fueled highs and gun spinning lows of a young investment banker to help you figure this very information out. Armed with this inside look you’ll be able to work out whether investment banking is for you and it will be handy for your interviews when bankers ask the why investment banking question and other interview questions like “What do you expect to do as a junior banker?”.

It will also help you in networking and interviews when bankers try to gauge how passionate and prepared you are for the sometimes depressing realities of ‘the life’.

Alas, just as teenagers don’t know when to stop, 20-something aspiring bankers can’t seem to put down the Oliver Stone-inspired rants of banking bloggers and forum feeders everywhere.  So next time you find yourself reading about ‘banking fashion’ or ‘hot night spots’ please heed our advice and move on.  

 

Don’t master the job yet

Which is to say don’t worry too much about pitch books, comps and all things monkey-like right now. 

Once again we’re trying to showcase an area students spend so much time on, but which isn’t vital to master in order to break into IB as a college student.

Sure having a rough idea about what a pitch book is (what it’s for, what goes into it etc.) can help show you have an understanding of the job, but knowing the extreme intricacies of it just isn’t essential at this point in your banking life (ie as a student trying to break into banking).

If you can wait till you are inside the bank you’ll be fine.  Training sessions will teach you everything you need to know about pitch books, comps etc.

And trust us bankers assume your level of knowledge on all things monkey-like is low – likeOwen Wilson low. Meaning there is no pressing need to “get a head start”.

And even if in some Willy Wonka dreamland, knowing these things in detail was necessary to get into banking, they would still pale in significance to all the other prep areas. 

E.g. Intimate knowledge about pitch book formatting v rock star skills for the 10 most popular interview fit questions – it should be clear the latter trumps the former. PS We will however list the most common investment banking tasks in tutorial 9 (eg spreading comps) and share some tasty insider secrets on how to crush these tasks come internship time.  

 

Get out of the gossip-plagued banking forums

Before I receive a bloodied duffel bag filled with hate mail from Wall Street Oasis’s top users let me explain our stance here. In the experience of the Inside Investment Banking team, whenever we visited forums as students we’d often end up bleary eyed, completely lost and four hours late to our business finance lecture. 

Which is to say unless you have a very specific question you want answered, forums won’t help your prep plans.

Instead banking forums will usually suck you into pointless topics with endless threads on trifling issues that simply involve a bunch of guys tearing each other apart as they try to answer “Is Silverman Jaks hue of blue more ‘bankerish’ than No Credit Swiss?”.

Apart from the unorganized and fragmented nature of them, forums – as a general observation – also lack in-depth quality advice, because people commenting rarely have the incentive to leave anything beyond a remark or two, as opposed to the thoughtful and detailed analysis you need – and which we hope we’re delivering to you with these free tutorials.

FYI – a majority of forum comments seem to come from people who’ve never even worked in investment banking and that’s probably the biggest worry. Meanwhile, with aliases to protect users, forums often end up devoid of any actual advice at all. 

Instead they are littered with snide remarks and ‘witty’ ripostes, the end product of a 9-day linguistic shit fight between GekkoJr1119 and Blankfeinabitch333! But like I said in the previous tutorial on investment banking blogs and banking forums, forums are helpful when 1) you have a very specific question you need answering (thanks to searchable threads), 2) you stick to the ones most populated by bankers (eg Wall Street Oasis), and 3) you can find a forum specifically about your local recruiting market – and it’s filled with fellow students who can share local tips.

Facebook Groups devoted to investment banking recruiting may be worth a look however. After all, members of these online discussions can’t hide behind aliases, which means they’re less likely to simply tap out abuse and more likely to offer real, authentic and helpful advice.  And who knows, you could end up networking with fellow students given the nature of Zuckerberg’s contraption.  

 

Ignore the hard-on inducing musings

Blog entries, article pieces and forum threads everywhere seem to spend more time talking about how to land exit opportunities in Private Equity or how to break into business school than they do about how to get into banking in the first place. 

And for you guys still in college those discussions are useless – at least for now.

It always amazes me how much time college students spend researching exit opportunities for investment banking analysts before they’ve even broken in.

Sure, I agree it is fun to dream, and that for many of you banking is but a stepping-stone to the land of private equity, B-School and/or VC.  But this research is about as useful as Paris Hilton.  i.e. it serves no purpose other than to distract.

Unfortunately the investment banking blogosphere covers it in-depth to play on the glamor element of IB. Next time you find yourself enraptured by the Prius-driving, Church-stepping and Chez TJ-chowing ‘day in the life’ of say a venture capitalist (another cool exit opp available with IB!), wake up and get the hell out of there.  Daydreaming like this is wasting your prep time and seriously limiting your chances of getting into banking.  

 

Watch out for MBA & experienced-hires advice

The final area to skip for all you college kids out there is anything focused on students looking at Associate level entry – whether they be MBAs, lawyers, engineers, consultants or some other type of monkey wannabe. You should avoid the advice aimed at old monkey wannabes for 5 reasons;

  • Recruiting rules are different
  • Resumes another species
  • Content of interviews upgraded
  • Rules of networking brand new
  • And the internship guidelines not useful

And trust us, 70% of investment banking advice out there is aimed at these old aspiring monkeys. Why is there such a bias out there towards advising MBAs? Because there are tens of thousands of them looking to break into banking and they’re willing to pay anything to do it. 

Sadly that means the chances of you getting stuck in the wrong kind of advice are high if you are not vigilant. But thankfully you have us to help with this. 

We are after all the only resource on the planet 100% exclusively devoted to college students looking to break into investment banking!!  

 

Warning: preparing for internships is different

Most of the advice we’ve given above is aimed at students who are just starting out in their IB journey.  i.e. you have never even had an internship, instead you are trying to sail through recruiting (resumes, interviews, networking etc). But if by contrast you have already landed an internship, or even a full time spot, our advice on several points above would differ.

We’d tell you to prep up on 4 technical areas, 3 useful skills and an entire body of technical knowledge. This however is a whole ‘nother topic, and something we talk about more in the free email course.  So if you’re a soon-to-be-intern or analyst, then check out how our advice differs for you.

 

BONUS: Download a free reporton how to save 100 hours of study by ignoring conventional advice on financial modeling, banking forums & more, plus find out how 5 of us managed to break into bulge bracket banks without having perfect grades, the best schools or insider connections.