Anaya Nolan
If you have a law degree and are considering a career in investment banking, you may be wondering if this career path is a viable option for you. The good news is that it certainly is possible to become an investment banker with a law degree. In fact, an increasing number of lawyers are making the switch to investment banking, attracted by the allure of lucrative benefits and a more dynamic, analytical, and systematic approach. However, it is important to note that transitioning directly from law school to investment banking is rare, and most individuals choosing this path tend to gain a few years of work experience in a law firm first.
| Characteristics | Values |
|---|---|
| Career transition | Transitioning directly from law school to investment banking is rare. It is more common to work at a law firm for a few years in areas relevant to investment banking such as M&A, securities, or restructuring. |
| Salary | A career in investment banking tends to be more lucrative than a career in law. |
| Work-life balance | Investment banking may offer a slightly better work-life balance than law. |
| Recruitment | Top banks are recruiting from law schools. |
| Skills | Lawyers are perceived to be uncomfortable with numbers and lack knowledge of accounting and finance. |
| Stereotype | Bankers assume that lawyers are more risk-averse and less action/sales-oriented. |
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What You'll Learn
Investment bankers' assumptions about lawyers
Investment bankers may assume that lawyers are not well-versed in numbers and are uncomfortable with basic arithmetic. They may also assume that lawyers lack knowledge about accounting or finance. This perception could be due to the stereotype that lawyers primarily deal with legal codes and how legal considerations affect deals. However, it is important to note that lawyers can possess strong analytical skills and contribute to strategic business planning.
Another assumption investment bankers may have about lawyers is that they are not proficient in using Excel or other financial modelling tools. Bankers may quiz lawyers on financial stats, deal terms, and strategic rationale during interviews, expecting them to have a strong understanding of these areas. This assumption could be based on the perception that lawyers focus mainly on legal work and may not have the same level of exposure to financial and investment-related tasks.
Additionally, investment bankers may assume that lawyers are not well-equipped for the fast-paced nature of investment banking. They may perceive lawyers as being used to a more structured and methodical work environment, where deadlines are not as time-critical. However, lawyers can also excel in execution and working under time pressure, which is a valuable skill in investment banking.
Furthermore, investment bankers may assume that lawyers lack a deep understanding of the financial industry and investment products. They may expect lawyers to have a more general knowledge of finance, rather than specialized product expertise. This assumption could be due to the different educational backgrounds and skill sets typically associated with lawyers and investment bankers.
While there are assumptions and perceptions about lawyers' skills and competencies in investment banking, it is important to recognize that lawyers can bring valuable skills and knowledge to the field. Their legal expertise, analytical abilities, and client management skills can contribute significantly to the investment banking domain.
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Networking with bankers
Networking is a crucial aspect of breaking into the field of investment banking. Here are some tips for networking with bankers when you have a law degree:
- Start networking early: Begin building your network while still in law school or even earlier. Attend industry events, join relevant clubs or organisations, and seek out internships or part-time jobs in banking or finance to make connections and gain valuable experience.
- Leverage your alumni network: Reach out to alumni from your law school or undergraduate institution who are now working in investment banking. They may be more inclined to respond to your queries and offer guidance or referrals.
- Focus on senior bankers: When networking, prioritise connecting with senior bankers, such as Group Heads. They often have more influence and can provide valuable insights and referrals for job opportunities.
- Connect with former lawyers: Reach out to former lawyers from your firm or other firms who have transitioned into investment banking. They can offer first-hand advice on making the career change and may have valuable connections in both industries.
- Utilise LinkedIn: Take advantage of LinkedIn to search for and connect with professionals in investment banking. Send personalised connection requests and introduce yourself, expressing your interest in learning more about their career path.
- Highlight your strengths: When networking and interviewing, emphasise your strengths and skills gained through your law degree, such as analytical abilities, attention to detail, and strong communication skills. Highlight how these competencies can be transferred and beneficial in the investment banking field.
- Demonstrate your interest in finance: Bankers may be curious about why you are switching careers. Showcase your genuine interest in finance and investment banking by discussing any finance-related classes, internships, or projects you've undertaken. Explain how your legal background complements your financial aspirations.
- Build relationships: Networking is about building genuine relationships. Follow up with your connections periodically, share relevant articles or insights, and seek opportunities to assist your network. These relationships can provide ongoing support, mentorship, and referrals throughout your career.
- Be persistent: Breaking into investment banking can be challenging, and you may face setbacks. Stay persistent in your networking efforts, continuously expand your network, and don't be afraid to reach out to a diverse range of professionals in the industry.
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Salary differences
While it is possible to become an investment banker with a law degree, there are salary differences between the two professions. These differences vary depending on factors such as location, experience, and the specific industry within the broad fields of investment banking and law.
In the United States, investment bankers can earn significant salaries straight out of university. As of 2023, a first-year analyst in investment banking can expect a base salary between $100,000 and $120,000, excluding bonuses. The bonus structures in investment banking are aggressive, with firms often paying bonuses that can equal up to 50-100% of the base salary. Therefore, total compensation for a first-year investment banker can be substantially higher. Performance and results heavily influence earnings in this field.
In contrast, the starting salary for attorneys in the legal field varies widely depending on the specific practice area and location. Corporate law, particularly in the private sector, is considered the most lucrative for new associates. As of 2023, first-year associates in corporate law earned a median salary of $200,000, according to the National Association for Law Placement (NALP). However, it is important to note that this figure can differ based on the specific firm and region of the country.
When comparing investment banking and law, it is worth noting that investment banking typically requires fewer years of schooling, resulting in lower student debt for aspiring professionals. On the other hand, law is a broader field with more diverse career paths available for young attorneys. The educational requirements for becoming a lawyer are generally more stringent than those for investment bankers, who often prefer candidates with undergraduate degrees in finance, accounting, or business administration.
In the United Kingdom, trainee solicitors in law firms have an average salary of £46,000, while junior bankers start at £50,000. However, some UK law firms offer higher starting salaries, such as White & Case at £52,000, and Weil Gotshal at £60,000. These salary differences should be considered alongside the potential for long work hours and a more demanding schedule in investment banking compared to certain legal roles.
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Transitioning from law school to investment banking
If you are set on transitioning straight from law school, there are a few steps you can take to increase your chances of success. Firstly, consider enrolling in an investment banking course to learn the fundamentals of the industry. The CFI Institute, for example, offers a course that covers the basics and guides candidates towards securing a high-profile position. Major investment banks like Goldman Sachs, JP Morgan, Morgan Stanley, and Credit Suisse also run Analyst Programs that provide a foot in the door.
Networking is another crucial aspect of breaking into the field. Start by cultivating connections with investment bankers or professionals in the corporate world, who can open doors to promising job opportunities. You can also reach out to former lawyers from your firm or other firms for advice and insights on transitioning from law to finance. LinkedIn is a useful tool for finding and contacting potential connections.
When applying for jobs, be sure to highlight how your legal knowledge and expertise are relevant to the investment banking industry. This could include your analytical and systematic approach, as well as your negotiation, decision-making, and strategic business planning skills.
It is important to note that a career in investment banking is likely to be well-compensated but brutal, with long hours and a poor work-life balance. It is not uncommon for people to leave after one or two years, so it is worth considering whether you are prepared to make that commitment.
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Interview questions
It is possible to become an investment banker with a law degree. In fact, an increasing number of lawyers have been transitioning into the world of investment banking. This is because investment banking offers a more analytical and systematic approach than law, which is often very structured. Additionally, investment banking tends to offer higher compensation than a career in law.
If you are a lawyer or a law graduate looking to break into investment banking, here are some interview questions to prepare for:
Tell me about yourself
Briefly highlight any past finance experience you have. Mention internships, programs, or previous jobs that are highly relevant to the role. Also, give a quick overview of your education, especially if you had relevant coursework.
Interviewers want to see that you are passionate about investment banking and have the drive to succeed in the industry. Talk about what makes you passionate about the job. You could also mention that you are inspired by the long-term commitment banks are now trying to encourage.
Review articles on mergers & acquisitions and initial public offerings (IPOs) to prepare for this question.
Select strengths and weaknesses that bankers want to see, such as hard work, drive, ability to work long hours, attention to detail, and financial skills. A good weakness to mention could be your inability to delegate tasks well or second-guessing yourself when making decisions.
Prepare three short stories from your work experience. One or two can be from school if you are an undergraduate or recent graduate.
While this is not something to worry about too much, try to avoid saying something stupid or inappropriate.
Technical questions
Interviewers may ask you to calculate specific numbers, explain formulas, or walk them through various investment banking activities. Prepare for questions on accounting, equity value, enterprise value, valuation, and DCF analysis.
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Frequently asked questions
Yes, it is possible to become an investment banker with a law degree. However, it is rare to transition directly from law school to investment banking. It is more common to work at a law firm for a few years in areas relevant to investment banking, such as M&A, securities, or restructuring.
Bankers may assume that lawyers are uncomfortable with numbers and do not know much about accounting or finance. To counter this perception, provide strong evidence that you have developed these skills. You may also need to address why you are switching careers and explain your long-term plans.
A law degree can provide valuable knowledge and expertise relevant to the investment banking industry, such as an understanding of legal considerations in deals. Additionally, a law degree can help you develop analytical and systematic thinking skills valued in investment banking.
