How to beat investment banks' psychometric tests (2024)

Investment banks have opened up their graduate programmes to applications. This means it’s time to perfect your CV, understand what it takes to get through the application form and highlight achievements that will set you apart from the competition. But there’s another element – the dreaded psychometric tests.

Numerical tests are well-known, but the reality is that – depending on the investment bank – students will also be tested on logical reasoning, verbal reasoning, personality profiling and situational judgement.

If this sounds daunting enough, bear in mind that the term ‘test’ is something of a misnomer. “Aside from the numerical tests, there’s no right or wrong answer,” says Mark Parkinson, a business psychologist who sets these tests for organisations. “They’re really questionnaires and giving the ‘wrong’ answer will ultimately come back to bite you, because you’re probably not suited to the job.”

Getting through numerical tests

Numerical tests are first applied during the initial screening stage of the investment banking recruitment process. These tests are online and are comparatively easy – banks will also subject their applicants to numerical tests at the assessment centre and these are more difficult.

However, to any graduate from a top university who’s studied a finance or maths degree – which, let’s face it, is where most banks tend to hire from – numerical tests should be a walk in the park. You’ll be assessed on arithmetic, fractions, decimals and ratios to varying degrees of difficulty.

“The name of the game is covering enough ground in the test so you don’t miss any questions,” says Parkinson. “It doesn’t take a mathematical genius, but if you’re not comfortable with numbers or used to a test environment, you will struggle.”

There are two common problems most people encounter. One is not making it through all the questions on time.The tests usually last 20-25 minutes and involve 18-25 questions - completing them all is a challenge. Another is not reading the question correctly - again, usually due to time constraints - and coming up with the wrong answer.

For example, you may see a simple XY graph where X is year one, year two etc. and Y is a numerical statistic. The question will ask you what was the Y figure in year three and candidates will jump to the graph and quickly tick their answer and move on, while missing that the Y column was actually cumulative. What's more, many tests ask multiple questions on the same data set, so not taking time to fully comprehend what's in front of you on one question can have broader implications on your score.

It’s essentially a vetting system put in place to filter out the huge number of applications banks receive. Even if you do well, you need to be in the top 30-35% of applicants to be considered, so it pays to be absolutely sure of your ability before taking the real thing.

There are plenty of places to practice – from the large psychometric test companies themselves, such as Kenexa or CEBSHL, while other sites like Grad Diary tend to benchmark students against one another. Another factor to consider is which banks use which test providers. Historically,Morgan Stanley, BofA Merrill Lynch and JP Morgan used Kenexa and Barclays uses CEB SHL. Different test firms have subtle differences in the rules they set, so it's worth familiarising yourself.

Testing your logical reasoning skills

A trickier proposition entirely is getting through the logical reasoning tests.

“Investment banks are essentially looking to test your abstract thinking and whether you have the intelligence to do the job,” says Cary Cooper, professor of organisational psychology at Manchester Business School.

Verbal reasoning tests look at your ability to comprehend written material and decide what follows logically from it. There's a standard format for these - you'll be presented with a statement containing a lot of logical information and asked to answer the question around three standard responses:

A – True

(Does it follow logically from the information or opinions contained in the passage?)

B – False

(Is it logically untrue based on information or opinions contained in the passage?)

C – Cannot Say

One example provided by CEB SHL is this:

“Many organisations find it beneficial to employ students over the summer. Permanent staff often wish to take their own holidays over this period. Furthermore, it is not uncommon for companies to experience peak workloads in the summer and so require extra staff. Summer employment also attracts students who may return as well-qualified recruits to an organisation when they have completed their education. Ensuring that the students learn as much as possible about the organisation encourages interest in working on a permanent basis. Organisations pay students on a fixed rate without the usual entitlement to paid holidays or bonus schemes.”

Statement 1: It is possible that permanent staff who are on holiday can have their work carried out by students."

Abstract reasoning tests assess your ability to identify rules or patterns in data and come up with a logical solution.

“Essentially these are testing ‘horse power’ of the mind rather than intelligence,” says Parkinson. “The sort of person who will succeed in the workplace is one who can look at a problem in various ways, work out a hypothesis and test if it works. If it doesn’t, close it down and come up with something else. It tests strategic versus tactical thinking, both of which are important and desirable to employers.”

Again, he says, the key is simply to practice. The tests can be relatively straightforward, but intimidating if you’ve never encountered them before.

The softer factors: personality tests and situational judgement

Some banks also indulge in online personality tests in an attempt to gauge the ‘traits’ of potential employees. This is not really something you can fake – these questionnaires tend to pick up inconsistencies and, if you’re not suited, you’ll end up miserable.

“What they’re looking for is extroversion, neuroticism, a sense of purpose, emotional stability and conscientiousness,” says Cooper. “If it’s done properly the responses should be tailored to the individual organisation. Banks are also looking for other factors – is this person ethical? There’s no point employing a conscientious person with no ethics.”

These are the most common traits banks look for, but you really shouldn’t try to game the system, says Cooper.

“You’re not going to guess what characteristics they’re looking for, so will end up being inconsistent and if you lie then you’re genuinely not going to have the personality that will fit into the organisation,” he says.

More recently, both investment banks and Big Four accounting firms have started introducing situational judgement questionairres. This is how it sounds, you’re given a scenario with a range of actions that could determine possible outcomes and asked to suggest the best ones.

“The answers are based on interviews with senior business people who are doing the jobs right now,” says Parkinson. “There’s a sliding scale on the answers and you can actually get negative points for the wrong response. This is quite a crude indicator of your performance on the job.”

If this sounds intimidating, the reality can be fairly self-evident. The example Parkinson provided us with was this:

"At the end of a busy day at work you accidentally send an email containing an attachment with some confidential information to the wrong person.

Which of the following would be the best thing to do?

A Decide to leave the office and deal with any problems when you return tomorrow.

B Decide to over look your error, send the email to the correct person and leave things like that.

C Immediately send a follow up email to the "wrong" person,or if possible telephone them explaining your mistake. Then send the email to the correct person.

D Find your manager, explain what has happened and let them deal with any problems."

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Investment Banking Graduate Programmes

Investment banks often open up their graduate programmes to applications, providing opportunities for individuals to kickstart their careers in the industry. To increase their chances of success, applicants need to perfect their CVs, understand the application process, and highlight achievements that set them apart from the competition.

In addition to the application form and CV, applicants are often required to undergo psychometric tests as part of the selection process. These tests assess various skills and attributes, including numerical reasoning, logical reasoning, verbal reasoning, personality profiling, and situational judgement.

Numerical Tests

Numerical tests are commonly used during the initial screening stage of the investment banking recruitment process. These tests assess an applicant's ability to work with numbers, including arithmetic, fractions, decimals, and ratios. While these tests may be relatively easy for graduates with a finance or maths degree, they can still pose challenges for those who are not comfortable with numbers or are not used to a test environment.

One common challenge in numerical tests is time management. The tests usually have a time limit, and completing all the questions within the given time can be challenging. Another challenge is reading the questions correctly, as misinterpreting the question can lead to incorrect answers. It is important to carefully read and understand the questions and the data provided.

To prepare for numerical tests, there are various resources available, including practice tests offered by psychometric test companies like Kenexa and CEBSHL. It is also worth familiarizing yourself with the specific test providers used by different banks, as there may be subtle differences in the rules they set.

Logical Reasoning Tests

Logical reasoning tests are designed to assess an applicant's abstract thinking and intelligence. These tests evaluate an individual's ability to comprehend written material and determine what logically follows from it. The format typically involves answering questions with three standard responses: True, False, or Cannot Say.

Abstract reasoning tests, on the other hand, assess an individual's ability to identify rules or patterns in data and come up with logical solutions. These tests measure strategic and tactical thinking, which are important skills in the workplace.

To succeed in logical reasoning tests, practice is key. While the tests can be intimidating if you have never encountered them before, familiarizing yourself with the format and practicing with sample questions can help improve your performance.

Personality Tests and Situational Judgement

Some investment banks also use online personality tests to assess the traits of potential employees. These questionnaires aim to gauge factors such as extroversion, neuroticism, a sense of purpose, emotional stability, and conscientiousness. It is important to be genuine and not try to game the system, as inconsistencies may be detected.

In addition to personality tests, situational judgement questionnaires have been introduced by some banks. These questionnaires present scenarios and ask candidates to suggest the best course of action. The answers are based on interviews with senior business people who are currently in the job. It is important to carefully consider the options and choose the most appropriate response.

In summary, investment banking graduate programmes often involve a multi-stage selection process that includes psychometric tests. These tests assess various skills and attributes, such as numerical reasoning, logical reasoning, verbal reasoning, personality traits, and situational judgement. Preparation and practice are key to performing well in these tests.

Please note that the information provided is based on the search results provided and my training up until January 23, 2024.

How to beat investment banks' psychometric tests (2024)


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