Top 5 Goldman Sachs Private Wealth Management Interview Questions

Goldman Sachs private wealth management (PWM) interview questions are among the toughest in the industry. That's because Goldman - like other investment banks with wealth management practices - tends to infuse interviews with more technical questions.

In particular, Goldman will be looking to delve more deeply into your understanding of asset classes outside of equities and to thoroughly probe your understanding of current market conditions.

Why Goldman Sachs' private wealth management interviews are among the most difficult

There are three reasons why Goldman PWM has such a rigorous interview process:

First, the clients that Goldman will cater to will be either high net worth individuals, families, endowments, or foundations. These clients will have needs that are quite a bit more complicated than those with net worths below, for example, ten million.

These clients will be looking not only to leverage the advice of wealth managers at Goldman, but also Goldman's capacity to get them access to certain kinds of fixed income, credit, and alternative asset exposure.

This requires wealth advisors to have a broad contextual understanding of high finance and to be able to help clients get access to everything that Goldman's platform will make available to them.

Second, while some wealth management firms will hire broadly, see how folks do, and then fire most of them after 2-5 years, Goldman takes a much longer view. GS provides extensive training and makes substantial investments - both in time and in money - in order to support wealth managers as they begin their career.

For this reason Goldman is much more selective in who they hire as they seek to minimize the risk of investing time and money into those who are unlikely to work out.

Third, Goldman takes their reputation incredibly seriously. Given that wealth managers represent the firm to clients, Goldman takes the hiring process incredibly seriously to avoid hiring those who could potentially cause reputational harm to the firm down the road. 

Goldman Sachs Private Wealth Management Interview Questions

While Goldman Sachs conducts some of the toughest interviews in the wealth management industry, there's no need to be overly concerned. With a few weeks of preparation - along with following financial news - you should be well prepared to answer general questions regarding rates, FX, and equities.

The following are a sample of some of the questions you should have answers ready for. 

Question 1: Why Goldman Sachs private wealth management?

Question 2: What's the Fed Funds rate right now? Do you think it'll be moving up over the next few years?

Question 3: What's the mandate of the Fed?

Question 4: Tell me about a failure of yours? What did you learn from it?

Question 5: If we have a bond with a price of 90, a coupon of 10%, and it matures next year, then what is the yield to maturity (YTM)?

Why Goldman Sachs Private Wealth Management?

In a previous article, I addressed the question, "Why wealth management?" that will crop in almost every interview that you do. 

Everything I wrote in that article applies to PWM at GS, however there another element that you should add into your answer. 

As mentioned above, GS prides itself on being a platform that will attract high net worth clients (or foundations / endowments) almost irrespective of who any of its wealth advisors individually are. 

Goldman does this - as you'd probably expect - by providing a suite of client services that range from access to folks within the firm to talk to (beyond just the client's wealth manager) along with access to investments that others may not have access to (in particular in credit and alternative assets). 

Further, Goldman has almost made a big push into developing training programs for young wealth managers along with continued training programs for those who have years of experience. 

Any answer you give as to why GS PWM should include the fact that GS offers an incredibly strong platform, reputation, and career development opportunities. 

A great way to integrate this with what I've said before about answering these types of questions is to note that while wealth managers are quite autonomous by definition, you want to join a firm that provides a strong platform (in terms of access to human capital within the firm and investments to pitch clients) along with development training that will make you the best that you can be. 

What's the Fed Funds rate right now? Do you think it will be moving up over the next few years?

While many wealth management interviews will focus on market questions that surround equities - since equities are what is discussed most in the popular press - Goldman will want to see how you understand other asset classes.

This is largely because, as already mentioned, the type of clients being served will need to consider rates markets in much of their planning. 

You can check the Fed Funds rate here, and you should always bring up the range that the Fed has chosen, which at present is between zero and 25 basis points (in other words, between 0.0% and 0.25%).

In order to give a sound answer as to where Fed Funds will go, you can note that where the 2yr treasury is. If the 2yr treasury isn't substantially higher, then it's unlikely that the market is pricing in substantial future rate hikes (or the two year would be higher).

To be more precise, you can look at Fed Fund futures (that are currently not pricing in a rate hike over the next six months). 

You could also look at forward treasury rates such as the 1y2yr, which would be where the 2 year treasury would be 1 year from now.  

Strong answers will show your capacity to answer a problem a number of different ways with varying degrees of proximity. To give a reasonable answer as to where rates will be going you can use Fed Fund futures (which is the best answer), just look at the two year treasury as a rough approximation, or look at forwards of treasuries (to approach the problem yet another way). 

It's also a good idea to know generally what the shape of the yield curve is at present:

What's the mandate of the Fed?

One of the roles of any wealth manager will revolve around having conversations with clients about general market conditions, which will often involve talking about the Fed.

Common interview questions will not just be around where markets are, or where they're going, but also more fundamental such as this one. 

The Fed has a dual mandate of both price stability - generally interrupted as keeping inflation at or below 2% - and maximum employment. The Fed has a number of policy tools, but the main one is setting the Fed Funds rate.

A lower rate will stimulate both inflation and employment, and a higher one will dampen both inflation and employment. 

This of course creates a tricky situation for the Fed as inflation and maximum employment are naturally in tension. As the economy heats up, and unemployment drops, inflation will tend to rise. 

Tell me about a failures of yours? What did you learn from it?

This is another classic behavioral question. Part of me thinks that the reason why this question is really asked by most is to see whether you have the emotional intelligence to know not to say something overly personal or inapplicable. 

Your "failure" should be one that is either professional, academic, or athletic in nature. Ideally it will be professional if you have any kind of work experience whatsoever. 

A great example of a common failure we've all likely suffered is being late for an important deadline. The thing you can say that you've learned as a result of it was the importance of consistent communication even when delivering the bad news that you're going to be late on the deadline.

If we have a bond with a price of 90, a 10% coupon, and it matures next year, then what is the yield to maturity (YTM)?

To get the YTM for a bond maturing in just one year, then you can use the formula: YTM = (coupons + (face value – current price)) / current price, which gives you: 20/90 or 22.22% (you don’t have to do the mental math to get the exact percent, as long as you get the formula right).

For calculating maturities longer than one year, you need to use the estimated YTM formula (which doesn’t get you an exact number, but close to it).

In order to play around with bond math, you can use an online bond calculator and change around the variables.

Conclusion

Goldman Sachs private wealth management is likely one of the best places to begin your wealth management career. Not only does it provide the brand name, it also offers one of the most extensive and continuous training and development programs in the industry.

GS PWM will not be right for everyone, of course. It will be slightly more constrictive in the kind of clients one can bring in and the general level of autonomy will be lower than in an independent shop.

The five interview questions above were meant to give you a taste of the diversity to expect. You won't face just behavioral questions, but will rather need to have a reasonably sound understanding of markets (beyond just equities) along with some basic technicals.

As always, I hope this has proved helpful. You can check out some more wealth management interview questions I compiled (or the pwm questions). Or if you'd like access to everything I've put together over the years (over 180 questions in total) be sure to check out the wealth management interview guide if you'd like even more.