Dear WSO Community,
I am excited to announce the launch of the IBP Institute and the Investment Banking Professional Credential to the public. This initiative has been in the works for years with pilots running at investment banks over the past few summers and we're excited to finally open registration (first public IBP Exam to be administered June 16, 2018).
The IBP Institute is dedicated to building a respected credential for the investment banking industry -- similar to the CFA for Investment Management and the FRM for Risk Managers. The IBP Exam is a rigorous test and will require between 150-250 hours of study (the exams include financial modeling in Excel) with the goal of developing a test that is indicative of success on the job -- specifically in IB.
For more details on the exam topics, please view the Exam Topics Document here. To learn more about the IBP Program and exam itself, please visit here.
I am personally very excited about the credential because I know it will open the doors to many motivated students that don't fit the traditional investment banking "prototype" (what I see on WSO all the time) and will also help employers find the most motivated and talented employees. To learn more about the IBP Career Center and candidate benefits, please click here.
I am proud to work with Alastair J.G. Matchett and Financial Edge Training, Matan Feldman and Wall Street Prep, John Tjia, David Resnick, Gregory Fleming, Mitchell Hara, Joseph Marren, Diana Giddon, David Connal, Louise Pitt, David Mell, Ben Sopranzetti and many others to improve our industry and open the doors to a wider pool of talented candidates. To learn more about the IBP Institute leadership, please read here.
I'm happy to answer questions in this thread. I assume many members of the community will have questions around the credential and if it makes sense for them. I think many of those questions will be answered by this article, but I'm happy to expand on anything you find or don't find in the FAQs or anywhere on the IBP Institute site.
Also, please feel free to reach out to me over PM or directly at [email protected] if you prefer to ask your questions in private.
Thanks,
Patrick
Pretty interesting and I saw this on linkedin earlier.
What is the purpose of this? To be honest it sounds like it's a good way to be prepped for ib but idk how it will be useful to actually getting ib interviews?
Also, why is this necessary? If it requires 1 year of experience and a BA/BS then why would people do it? Majority of people looking to get in ib don't bother after they get out of school unless they're in a valuation/tas/mo/bo/etc. type role or go the msf/mba route to rebrand. Plus people already in ib probably wouldn't want to do it since they're already in the industry and past the learning curve.
Great questions. I'll try to answer each below.
Like many credentialing bodies, the mission/purpose of the institute to help establish common standards in the industry and improve professional performance. This article specifically dives into the case for an industry credential in investment banking.
In terms of landing ib interviews - that really depends on if employers see the value in a pre-qualified candidate pool that is an expert in a body of knowledge directly relevant to the tasks needed to perform well on the job. We already know all about the IB's issues with finding and retaining top talent...the IBP can help alleviate at least some of those problems IF it is truly rigorous and is able to accurately predict success on the job (early indications from our pilot are very positive - you can read about that in the same article).
To obtain the full credential, yes, you need a BA and one year of experience... but that doesn't mean you can't pass the IBP Exam in undergrad and demonstrate mastery and that you are working toward the credential. It also means that you get access to all the benefits of the IBP Career Center during undergrad recruiting (financial modeling training, IBP yearbook distribution to banks, network of other IBPers, free resume review and mock interview with a current banker, etc). I definitely don't think the credential is for everyone. Studying for the IBP Exams is time intensive and not easy to pass (our latest pilot passed 31%). That being said, I think it's another signal to potential IB employers that you are dedicated to learning the IB body of knowledge and can be trusted to be a productive employee from day 1. Agreed 100% - this is why we'll be announcing a grandfathering process in the next few weeks for professionals already with experience in the industry. Stay tuned!
Has there been any evidence that credentials like the CFA actually improved professional performance? It's actually against the CFA Code of Ethics to say the charter improves performance, so I would assume there is no evidence. I know at my bank when we are hiring, some candidates with the CFA charter cannot answer the most basic questions. It is clear they memorized the material for the test and cannot leverage the knowledge to help them on the job. Will IBP require on-going testing to remediate this type of issue?
What are the general profile of people who participated in the pilot? If they come from top schools with top grades and top internships, then wouldn't the results of the pilot be a bit biased? Did you guys use a control group of people from outside the top ~20 schools that had subpar gpa's but showed interest in IB to see how they performed too?
Is this a test of productivity? If not I don't understand the last line. Did you guys intend to keep the pass rate low to mimic other financial certifications low pass rate? Is there a minimum passing score, or is it arbitrary like the CFA?
Just a few questions, definitely not trying to beat up the certification. At the end of the day I personally view most certifications as profit ventures, seeking to cash in on the dreams of recent graduates. The grandfather portion seems a bit sketchy because it feels more like a way to market that people in the industry already have the certification, while they didn't go through the formal testing. From the consumer perspective I don't see a lot of value yet. At the end of the day breaking into IB is a numbers game. If I come from no name, not nationally ranked school with a 2.8 GPA and no internships but I have this certification, will I have a leg up on the guy from Harvard with a 4.0 and 3 internships at top banks? On the other hand, if I am the Harvard guy do I really need this certification or have I proven myself through successful internships & academic excellency?
Thanks for the questions Praesto, I'll try to address each one below.
Good question - I'm not sure if there is any hard evidence for other credentials. I think because they (CFA, FRM, CPA, etc) are so widely accepted as the standard, they can lean more on theoretical education and less on practical skills development. In terms of "improves performance", this was in reference to the goal of improving professional excellence (you can read in most of their mission statements or Code of Conduct/Ethics).I can say for the IBP pilot, even though admittedly it's small numbers, there is evidence that the candidates that passed were more likely to be compensated near the top of their class (whether bonuses are a good proxy for performance is another discussion entirely). You can read more about it in this article...we're excited to see the results of the next cohort next summer to see how they perform.
This lack of practical skills in other credentials is actually where I think the IBP will shine. The body of knowledge on the exam does not test the candidates ability to regurgitate facts and financial theory. In order to pass, they will need to master the skills that will be used on the job. Specifically, digging through financial statements, financial modeling in Excel under time pressure, PowerPoint slide manipulation and written communication skills (among others). Exam Topic document here. The majority of the most recent pilot participants were either analysts or interns going through training (across 8 banks this past summer). The goal of the pilot isn't to see if signing up for the IBP will help candidates get interviews, it is to see if the candidates that pass the IBP perform better on the job and to help give the IBP Institute more data (on items and exam structure) leading up to the first public exam in June 2018.When I said "In terms of landing ib interviews - that really depends on if employers see the value in a pre-qualified candidate pool that is an expert in a body of knowledge directly relevant to the tasks needed to perform well on the job." ... I think being able to point to the results of the pilot and these first few cohorts will be meaningful in making this argument to employers as the credential scales (that work has already started with several of the BBs).
The IBP Exams are not solely a test of productivity, however, given that candidates will be required to actually build financial models during the exams, those that struggle to do so efficiently will be at a distinct disadvantage. So while the exams test important theoretical concepts relevant to IB (accounting, fin statement analysis, corp fin, valuation, m&a process, LBOs, etc) to ensure a base level of knowledge, they are also tested on practical application of that knowledge. Given that we just opened the credential to the public, the pass rates of our pilot program cohorts (27-32%) is our best estimate to what the pass rates of the public cohort will look like in 2018. This pass rate is based on evaluating each cohort and exam independently, but it's not arbitrary. We can't pass candidates that have large knowledge gaps. A grandfather policy is fairly common for new industry credentials. It's a way for current IB professionals that have no way to sit for the exam to still be a part of the Institute. If this helps educate industry professionals on how rigourous the process is (and therefore helps future cohorts of certified IBPs), then we view that as a positive. I respectfully disagree, but you did say "yet" ;-). I'd point to all of the resources you get from the IBP Career Center and study materials (included in the exam and enrollment fee). Hint: the market value of all of those resources exceeds to price of registration... but look, I understand where you're coming from. The credential is obviously relatively new and I think a healthy dose of skepticism makes sense. No, but let's look at a more realistic/common scenario. What if you are dropping your resume for summer internships at OCR at Harvard and you and 100 other candidates have ~3.4-3.8 GPA...10 of them have passed the IBP Exam showing that they have put in over 100hrs to pass a rigourous exam directly relevant to the industry. Who would you choose to interview?OR, what if you are one of the thousands of students from a semi or non-target and you are networking your ass off, doing as many informational interviews as humanly possible. You've passed the IBP Exam and suddenly a boutique bank has an analyst/associate opening. Who do you think they will be more confident hiring? The non-target that has put in a lot of work to pass the IBP or the applicant that just says he wants to do IB?
I think your dislike of industry certifications is probably rooted in some bad experiences (like the CFA candidates you mentioned that weren't actually able to apply the theory to work). I think the success or failure of the IBP Institute is fundamentally rooted to two primary questions:I'm confident we have the resources and leadership to pull off both.
I do see the value of a standardized test at the campus recruiting level. However, I'm not grasping why as an investment banking analyst, I would return home at ~2am and then go study some more investment banking material for a credential.
Isn't lateral recruiting done off of real deal experience? Rather than understanding theory? Just my two cents of course
Yes, we envision the majority of candidates taking the IBP Exams still to be in undergraduate / recruiting for internships and/or FT (or career transitioners / non-traditional candidates). We'll be announcing a grandfathering policy in the next few weeks for current IB professionals.
As far as lateral recruiting is concerned, you're absolutely correct. Although I'd caution to think of the IBP Exams as "theoretical". They are focused on making sure that candidates have the practical skills needed to succeed on the job (not just the theoretical body of knowledge needed for IB) -- it's exactly why the candidates have to actually build models in Excel during the exam.
What kind of success have students from the pilot runnings seen in terms of IB placement (assuming some have graduated from undergrad by now)? Did most have decent profiles going into the program?
Similarly curious about this. Not to go all stats here, but I was involved in the decision making process at a former investment bank about whether or not to use a particular pre-employment test, Koru. They ultimately didn't, as they found the stats behind 'does it actually predict success?' weak. Have you looked at the correlation between the scores on the pilot and (assuming they were hired), their corresponding performance scores at their bank? On the candidate side, I would be curious about this, since if the employers don't believe it predicts success, then there would be little value in me taking it.
At the same time, on the candidate side, I would also be curious about casuality. Have you found that getting the credential causes success, rather than is just correlated? Banks just care if it's correlated with success ("I don't care why people that score well on XYZ test do well here, as long as I know it increases my chances of a good hire"), but as a candidate I want to know if it actually increases my knowledge enough to make a difference.
That goes back to BoBandy's question. Is the group in the pilot simply one of excellent candidates to start with? Then we don't know if the reason why they did well at work was due to them having a credential, or if they were just good bankers to start with.
HireVue has some interesting info on their website about the typical correlations in pre-employment testing that employers look for. Typically the correlation between score on XYZ test and performance score falls between 0.2-0.4. HireVue is 0.3-0.4. Hard to find above 0.4.
https://www.hirevue.com/blog/whats-the-value-in-pre-employment-testing
Thanks for the question Bo. The pilot was run after the training program for employees already working at investment banks (mostly analysts), so the goal of it wasn't to demonstrate the recruiting benefits of the IBP Program (since they already had the job), but to collect data on the exam format and see if performance on the job was correlated. This way, the value of the credential will be much more obvious to employers and the recruiting benefits for future IBP cohorts will follow.
The results so far are promising, but we are under no illusions that this will be adopted across the industry right away (we have had some very constructive meetings with top banks thanks to the connections of our Advisory Board and we expect these to continue). It is the Institute's job to ensure that we stay in front of recruiters at the banks and that we educate what is being taught and how it is relevant.
We're confident that once the credential is viewed as a valid way to identify a great potential employee, the demand for IBPs will follow.
Interesting initiative, but with all due respect succeeding in investment banking as a junior guy (in my experience, at least) is centered around: a) how quickly you can get up the learning curve so you can actually produce without constant hand holding, b) your ability to work efficiently with few errors, c) extreme attention to detail, d) learning from mistakes and NOT repeating them, and e) knowing what you're actually talking about (i.e. not just be able to talk about the math behind your super well-formatted comps spread, but WHY you chose those comps and why it matters to your client).
Other stuff can be / is important, but my point is that if you are a motivated, focused grinder that WANTS to be in IB and can put up with some punishment, you'll be fine. M&A and capital advisory is not rocket science...it is MUCH more simple to execute a transaction than it is to pour through portfolio theory and all the other stuff covered by CFA. Reps are what indicate that you'll be a good deal guy, not showing you can pass a test, and you only get reps by showing up to work.
Again, props for doing the leg work to put this together, but I'm struggling to see the value as a certification. I do think it would be effective to have a couple strung out MD's pacing through the exam room asking "where are we on [insert deliverable here]" every five minutes and then throwing shit when they get an answer wrong, just a thought.
Some points here I'd like to address:
Yes, but how are the banks finding those applicants right now? Why did a lot of the BBs drop on-campus interviews and why are they using Hirevue?I think you are underestimating the issues that are relevant at a lot of banks right now. Namely:
...and yet major knowledge gaps still exist for most new hires and firms still don't have the confidence to give more non-traditional candidates much of a chance due to limited resources. This is not a trivial issue but it is something that can be tested. Being able to step back and see the big picture is a critical component to succeeding in IB (especially long-term). Can a candidate describe the role of an investment bank and the different divisions? Do they see how everything is interrelated and how each analysis connects? Ha, this is great. We think the stress of actually having to build several models in Excel in a timed/high-stakes environment will actually be very similar. Who can deliver when the pressure is on? :-)They are not able to recruit the best of the best anymore and/or retain them (are these applicants really interested in IB or just looking to it for the exit opps?). The quality has declined because instead of innovating, many banks are still looking to the same 20 schools and just moving down to their 2nd or 3rd choice
Training is getting shorter and shorter due to budget cuts and a need for new hires to hit the desk ASAP. That learning curve you mention is STEEP, especially for liberal arts or non-traditional candidates (I know because I was useless my first 3-4 months as an analyst coming from Williams).
MASSIVE knowledge gaps exist that a 1-3 week training program has no chance of closing for most new hires. We know this because the founding firms of the IBP Institute train over 20,000 students and professionals annually on technical investment banking skills considered necessary for success on the job. Over 60 investment banks, including two of the three largest investment banks globally, hire us to run their formal analyst training programs, so we've seen this decline first hand. [These trends are not going away].(https://ibpinstitute.org/insights/establishing-standards-in-investment-…).
As an aside, I just spoke to an Analyst to Associate promote at a BB yesterday that is an absolute rockstar. He barely made it into IB because of his non-target status (we're talking no name school) and had to practically move mountains to land a few interviews...now I'd call him the golden boy, being tapped for several leadership councils and will likely make VP in a few short years. His quote: "Why wasn't this around when I was recruiting!?"
Aren't there a lot more candidates like this that the banks are simply missing because they don't have the time or means to either 1) find them (HR and Info sessions can only go through so many resumes) and/or 2) train them (if I've cut my training program and/or I'm a MM or boutique firm, I need someone that can hit the ground running)?
I'd say yes (I see them all the time through the WSO resume review and mentor service).
Kudos to your team for all the work done around this and thanks for the thoughtful responses to the comments. While I understand the concept here, I'm similarly hesitant about the value and worthwhileness of such a certificate. (But I'm open to being convinced otherwise!)
Like KLMC, I tend to agree that what makes for strong analysts has materially less to do with testable, technical/analytical skills, than it does with how motivated, diligent, and generally capable candidates are. There are certainly skills/concepts that can be helpful if learned ahead of time, and analysts should come in with a basic foundation, but most of the day-to-day work isn't exceedingly complicated, and most groups/industries (let alone banks) will have particular ways they want to see things done, even if the underlying concepts are the same. (i.e. learning on the job is generally effective enough)
Admittedly, taking the time to really study the materials and pass the exam can be a good indicator of motivation/work ethic/general capability, but my current opinion is that this certification is not an optimal way to gauge those characteristics. Given the guideline of 200-250 hours of study, that's a significant amount of time that, in my view, could be better spent on school, extracurriculars or networking. I frankly don't think we need to/should push this type of intensive career prep on college kids even earlier than we already do, regardless of how "dedicated to banking" they might be.
Having been on the recruiting side of the table, this certification isn't something I would particularly value in a candidate, especially given how quickly and effectively first-years have historically been able to ramp up. Could this certification help produce better prepared candidates/bankers? Possibly, but I don't think the amount of study/stress is warranted given the realities of the job.
If I was still in school and this certification had become an "expectation" for IBK candidates, would I have taken it? Probably, but I also think it would've added a lot of unnecessary unpleasantness to an already intensive recruiting process. If I believed that this test was really predictive of analyst success, I may be convinced otherwise, but knowing that it's not necessary for on-the-job success makes me hesitant to encourage this type of approach.
Keep in mind that given the current recruiting timelines, most would be studying for this around their sophomore year. I get that this might help weed out people who aren't "on top of it" or "sufficiently dedicated", but this feels like it could devolve into an artificial hurdle that's ultimately unreasonable/unnecessary for 19-20 year olds.
I think we all agree that it's important to hire motivated, capable people with strong work ethics. And, I believe that it's important for candidates/first-years to have the foundational knowledge needed to ramp up efficiently. To the extent that the spirit of this concept is to do that, it's a positive thing, but as it currently is, this process seems unnecessarily burdensome, given the day-to-day of banking.
Just my thoughts, but felt I'd share to the extent it might be helpful/interesting :)
Has this program been piloted on students, or only on IB analysts? I'm wondering if there are any actual user experiences comparable to mine (non-target junior w/some finance experience at a broker-dealer firm).
This seems exactly to be the super-focused program that I've been looking for, but $1,000 is a big investment! So I'd really be interested in seeing whether this would be the best resource for my time/money, or whether it'd be beneficial to look elsewhere.
Ah never mind my question, I see that you already answered this!
I definitely agree that banking recruiting is inefficient, and banks are struggling to find and retain talent, but have to disagree again with a couple of points!
First, about the reference to why banks are now using HireVue - I think this actually proves the opposite point. HireVue uses an open source technology, Affectiva, which uses machine learning algorithms to pick up emotional intelligence and stress response stuff during their structured interview questions. A client of HireVue will collect this data from candidates over a multi-year period, and then run correlations of the HireVue/Affectiva emotions data against how the recruits that were then hired by the firm ended up performing (using their performance score). HireVue currently is one of the best predictors out there for employee performance - and much of the reason why is because they have proven that it's not things like how many finance courses someone took in school etc. that predict success. Rather, just looking at EQ alone yields a model validity of ~0.3-0.4, which is high for the industry.
Same goes for using Koru. It's a shift away from the technical stuff. You can teach someone that!
Another reason banks use HireVue is cost savings (no more expensive trips sending bankers to schools). Where does IBP drive cost savings for employers? Would they be able to eliminate the expensive training programs entirely? Only if all their new hires were certified, no? What image would this reflect to new hires and the PR vultures if it got out that the bank was so cheap that they are eliminating the core 'investment' the firm makes in its employees, new hire training and orientation?
Perhaps it wouldn't be cost savings on the hard dollar side, then. Would it drive dollars from having higher productivity from new hires in the first few months? So not 'out of pocket costs', but simply better first year analysts/associates? This is a big claim that I would want to see proven in the data. That's the great part of this - it's no longer an issue of one person saying "I think this predicts success" and another arguing "no, it's this." One can test these things. Like I mentioned before, 'validity' is the metric these pre-employment tests are compared on. If the correlation between the scores on this IBP test and their subsequent performance scores as employees is in the ranges suggested by the Dept. of Labor for screening (posted above in the previous comment), ~0.2-0.4, or even at those of HireVue, then yes, this certification has value in selecting high performers. I (and presumably, employers) would just want to see the support for it.
Same reason why GS, for example, now has a team within their human capital management group called "HCM Strats." A bunch of Ph.D.'s just focused on this stuff exactly: how do they use non-traditional processes to identify and select potential high performers. Also why GS just rolled out their own internally-developed personality test, (see article in WSJ in August). Because they were able to show that it's not taking a lot of finance courses that predicts success. There's a lot more to the picture.
Lastly, thinking as an employer still, how would saying to recruits that we place value on this certification affect our recruiting processes? Believe it or not, banks see recruiting as a war against each other for talent (for example... let's all leap frog each other in the recruiting process and start interviewing in June), and anything that might 'turn recruits off' and discourage them from applying could be seen as a yellow light. This is much more commitment on the part of candidates than a ~30 minute video interview or a ~20 min personality test.
Again, just my two cents. Overall, definitely agree the process needs to be more fair!
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I think it is a good option to make you more competitive, however, I'd caution you to think that obtaining the credential is like punching your ticket to IB.
Since you already graduated from undergraduate, you are already facing an uphill battle because the traditional entry points are straight out of undergrad or after an MBA. There are lateral positions that open up that you can land an interview for if you're actively networking, but I would be much more open to any group at any bank to improve your odds (vs trying to focus on tech, for example).
The corporate/venture banking experience would only qualify if you are doing typical IB tasks such as valuation work, financial modeling, etc...
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This is good stuff. I'm a fan of comprehensive organized certifications so I think this is a nice step in the right direction
One piece of unsolicited advice: it would be best if the included study materials (readings) were also available as hard copy, instead of only online/digital forms. This is how all the other certifications are, and it gives the certification more weight (no pun intended)
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