Top 3 Deutsche Bank Wealth Management Interview Questions

The past fifteen years has seen a litany of scandals befall Deutsche Bank and has caused the bank to do a fundamental rethink of what lines of business it prioritizes. Following a similar path to its competitors who were hardest hit by the financial crisis – like Barclays and Morgan Stanley – they’ve made a strong pivot towards the stable fees and low risk of wealth management. Initially the pivot was a bit half-hearted relative to some (i.e., Morgan Stanley) but in the past few years Deutsche Bank has fully committed to wealth management and the business has seen strong growth.

The benefits of starting your wealth management journey at Deutsche Bank run parallel to other global investment banks, providing you a defined training program, early career stability, resources galore, and the ability to begin interacting with a HNW and UHNW client base. Even if you don’t see yourself remaining indefinitely within the confides of a large investment bank, having a name-brand investment bank on your resume does help; both in providing credibility when you move to a smaller practice, and in securing clients once you do so.

Deutsche Bank Wealth Management Interview Questions

In preparing for a wealth management interview at any investment bank – as opposed to a smaller, independent wealth management practice – it’s incredibly important to get across two things: that you have views on the current market conditions and that you can articulate those views in a way that would impress a client.

Therefore, the questions below mirror the more market-oriented questions you’ll get in interviews, and the answers mirror the level of depth you should be aiming for (keeping in mind that in an interview you never want your answers to run more than three or four minutes in length).

1. The equity markets have seen significant gains this year before pulling back in recent weeks. Do you think this is a temporary reversal or a sign of further declines to come?
2. Why do you think the 30-year treasury yield has recently reached its highest level since 2011?
3. How would you describe the Euro Area economic backdrop?

The equity markets have seen significant gains this year before pulling back in recent weeks. Do you think this is a temporary reversal or a sign of further declines to come?

This is a classic style of question because there’s no right or wrong answer. Instead, the interviewer is looking for how you approach the question and how you articulate your answer.

The gains in global equity indices – but especially US equity indices – this year have taken many by surprise. For example, the first seven months of the year saw the S&P 500 rise a staggering 21% despite the Fed continuing to ratchet up rates. However, as the question notes, there has been a recent pullback lately with the S&P 500 seeing a 5% pullback thus far in August (primarily due to rising yields stemming from stronger than expected economic data that led to a recalibration of views regarding how long the Fed will keep rates at such elevated levels).

There are some, like the strategists over at Goldman Sachs, who think this pullback is the ideal time to begin getting longer equities. This is because they have increasingly strong conviction that the US economy is on track towards a so-called soft landing: one where inflation cools back to the Fed’s target, a recession is averted, and the Fed can begin cutting rates to re-stimulate growth.

Put another way, the confidence that Goldman has in their bullish views on equities stems from the fact that they see earnings per share (EPS) growing as the economy continues to grow, and that investors who are currently on the sidelines due to recession fears will begin to put their money back into equities.

If you were slightly more worried about a recession eventuating in the next twelve months, but still wanted equity market exposure, then it’d make sense to over index on defensive equities as opposed to cyclicals. This is because cyclicals (i.e., tech stocks) tend to outperform during times when market participants are optimistic on the economic outlook, and defensives (i.e., consumer staple stocks) tend to outperform during times when market participants are pessimistic on the economic outlook.

Why do you think the 30-year treasury yield has recently reached its highest level since 2011?

The 30-year treasury yield was tracing a near exponential curve until late-2022 as the pace of rate hikes from the Fed continued and inflation continued to surprise to the upside. However, inflation prints began to cool and economic data began to come in softer than expected, and the confluence of these two factors drove yields down into the 3.5-4.0% range for most of this year.

But in recent weeks yields across the curve (most notably seen in the 10-year and 30-year treasuries) have resumed their upwards momentum, and this has been a large reason behind the recent sell off in equities. Today the 30-year treasury is at its highest level (in yield terms) since 2011, and the 10-year treasury is at its highest level (in yield terms) since before the great financial crisis.

In a recent note from Goldman Sachs two factors were identified for this recent surge in yields: economic growth surprising heavily to the upside and the anticipation that the Fed will maintain rates in elevated territory for longer than previously expected.

Below is a fascinating graphic where Goldman tries to decompose what’s driven this recent yield surge, with almost the entire move being attributed to surprising economic growth data and the belief that rate will stay elevated for longer than anticipated (what they call “policy”). It’s interesting to see that the move isn’t being driven by actual changes in expectations for underlying inflation. However, if growth continues to stay extremely elevated and the labor market remains tight then you’d expect there to be upside risk to inflation moving forward.

How would you describe the Euro Area economic backdrop?

The equity market rally in the US took many by surprise, but it’s difficult to argue that the economic backdrop didn’t warrant at least some type of rally (although many believe the rally is somewhat overextended right now). This is because the US data has had a goldilocks feel over the past seven months: inflation has routinely come in softer than expected, growth has routinely come in stronger than expected, and unemployment has stayed at cycle lows. That’s a recipe for a soft landing.

The Euro area tells a different story – the data isn’t foreshadowing a deep recession, but the data also isn’t foreshadowing the kind of growth seen in the United States. Euro Area GDP growth was flat in the first quarter and saw a modest uptick in the second quarter (0.3% QoQ) that was primarily driven by robust growth in relatively small countries like Ireland and Lithuania.

The economic growth story of the Euro Area right now is really one of manufacturing vs. services. If a country’s economy is reliant on industrial activity, then you’ve been seeing flat (Germany) or negative (Netherland, Italy) economic growth over the past quarter. Meanwhile those countries with a strong services sector (France, Spain) have shown relatively strong growth.

Additionally, lurking behind all of this is an inflationary environment that’s significantly elevated relative to the United States. Today, core inflation in the Euro Area is still running at 5.5% YoY despite the mostly flat growth seen this year. There are some bright spots, such as goods inflation coming down as happened last year in the United States, but nearly any way you slice it the inflation backdrop in the Euro Area is going to warrant additional rate hikes from the ECB.

As we enter firmly into the latter-half of the year, the economic prospects of the Euro Area – on both the growth and inflation fronts – will hinge significantly on energy prices. The current crude oil rally of approximately 15% over the past two months will crimp growth and push headline inflation higher, and the reliance of the Euro Area on liquefied natural gas (LNG) following the invasion of Ukraine makes the Euro Area highly sensitive to swings in LNG pricing (thus far in August gas wholesale prices have surged around 40% due to risks of strikes occurring at Australian LNG facilities).

Taken together, the Euro Area represents a mixed bag having skirted falling into a meaningful recession thus far, but with significant weakness in some of its largest economies that would be exacerbated by sudden surges in energy prices. And, of course, underlying inflation is still elevated, so the ECB has little choice but to keep rates elevated or inching upwards even in the face of continued economic weakness.

Summary

The current head of Deutsche Bank’s wealth management division, Claudio de Sanctis, is undertaking a complete revamp of the wealth management division as the bank seeks to re-prioritize wealth management.

There’s no doubt that Deutsche Bank’s wealth management footprint is significantly smaller than some of its European peers – especially after Credit Suisse was absorbed into UBS, thereby merging two of the strongest global wealth management practices.

However, the smaller footprint of Deutsche Bank in wealth management shouldn’t be a deterrent: you’ll still get the training, career stability, and access that’s so critical when you begin in wealth management. Plus, if Deutsche Bank’s growth strategy pans out there could be significant upward mobility given the lesser headcount of Deutsche Bank’s wealth management division relative to its peer group.

Hopefully these questions have been helpful in your interview preparation. If you’re looking for even more questions to prepare, be sure to go through the much longer list of wealth management interview questions that I’ve put together. It’s also worth your time poking around the asset management interview questions that I wrote about as well as there’s quite a bit of overlap between wealth management and asset management interview questions.