Top 6 Wealth Management Internship Interview Questions

One of the words you'll hear an awful lot as you navigate through the world of finance is "optionality". There is no singular internship experience that provides more optionality while you are still in college than a wealth management internship.

This is because a wealth management internship - in particular, one tied to a large investment bank like Goldman Sachs, UBS, Credit Suisse, etc. - gets your foot in the door to the finance industry, but doesn't preclude you from going to other areas.

For example, when I did my first wealth management internship as a sophomore most in my class went on to do investment banking or equity research the summer thereafter. Those who really enjoyed their time in wealth management, and viewed this as a career to continue pursuing, stayed another summer (or moved to a different firm to get a different perspective on the industry).

By doing a wealth management internship you maintain maximum optionality. If you want to leave to a different area of finance, then your future interviewers will know you have some understanding of finance and likely quite good people skills. If you decide to stay, then you have great contextual understanding of the industry and will have a leg up on those who join full-time without ever being at a wealth management shop before.

In a wealth management internship you obviously won't be meeting much with clients or doing any work of much importance (given your inexperience and lack of licensing!). In reality your internship will be like a 10-16 week long interview in which those around you can better get to know you.

Remember: wealth management is a people business. The best way for experienced wealth managers to get a feel for how you would interact with clients is to see how you interact with your work colleagues. 

Wealth Management Internship Interview Questions

Many make the mistake of thinking that wealth management internship interview questions aren't difficult. While it's certainly true that you won't have the in-depth accounting questions that you would find in investment banking interviews, you will be faced with a diversify array of questions that span between the qualitative, the quantitative, and those that are market based. 

The breath of potential questions can make interviews daunting, which is why I put together the Wealth Management Interview guide to try to shed a little light on the industry.

Now let's get into some questions.

1. What do you hope to gain from a wealth management internship?
2. What do you think makes a wealth manager successful?
3. What are equity markets doing right now and what's driving them?
4. If a client came to you and said they wanted to invest in a very risky stock they read about online, what would you say?
5. How would you think about creating a portfolio for someone near retirement?
6. What are some of the differences between corporate bonds and loans?

What do you hope to gain from a wealth management internship?

This is a question that will come up in nearly every interview you do for a wealth management internship. 

What your interviewer is looking for is that you've thought seriously about what it means to be a wealth manager and that you understand what the role of a wealth management intern is (hint: it's not advising clients on what they should do!).

You should say that you're hoping to better see how wealth managers approach both bringing in new clients, dealing with current clients, and better understanding the day-to-day work of a wealth manager (which is not frequently talked about).

You can say that you're hoping to better understand how a wealth manager approaches each client's needs uniquely and crafts a plan for them and that you're eager to see how you can be as helpful as possible to those around you.

What do you think makes a wealth manager successful?

Ultimately, what an interviewer is looking to do in any interview is see whether or not you can succeed as a wealth manager. Chances are you've heard of the large number of those who enter into the wealth management industry and then leave within five years.

It suits no one - not you yourself or your employer - to have you not succeed in the role. This is particularly true at wealth management shops tied to investment banks where you'll be paid a higher salary and have more training invested in you. It's in your interviewer and your new firms best interest to hire people that are most apt to succeed.

One of the ways you can assess whether someone is likely to succeed in the role is by seeing whether or not they really understand what makes for a successful wealth manager.

While everyone may have their own spin, what I would say is that a successful wealth manager is constantly prioritizing their client's needs while also ensuring that you understand what your client needs. What this really means is that clients often don't have a firm understanding of how they really want their wealth managed once you dig in a little deeper.

A wealth managers first priority is figuring out what a client's real goal is and then crafting a plan that best achieves it. Then a wealth manager must help make sure the client doesn't deviate from it unless it is truly in their best interest to do so and they've thought seriously about it. 

What are equity markets doing right now and what's driving them?

Before heading into any interview, you should know a few objective facts. These include where the stock market is (S&P / NASDAQ in the United States, TSX in Canada, etc.), where the 10-year treasury is, where the Fed Funds rate is, among a few others (covered in the guide). 

As to what is driving equity markets, that is obviously contingent on where markets are at any given time. You should spend some time reading articles on Bloomberg, the Wall Street Journal, and Financial Times to get a feel for sentiment.

For example, right now you may want to say that in a zero-interest policy world - in which the Fed has maintained they won't be raising rates for several years - this puts a very modest discount on future free cash flows. This is always a boost to growth stocks (meaning: tech stocks) as they have FCFs that are many years in the future, so when you discount their value back to present they're much higher than they would be with higher interest rates.

You can also point to the continued stimulus packages that have created stronger household balance sheets and more excess savings that retail investors have poured into the market. Combined with strong underlying growth - both in corporate earnings and GDP - this has a created upward pressure on equity prices.

To put another little spin on this answer, you can also point to how in this low rates world fixed income products are increasingly less attractive and because of that many are turning to equities (stocks) when they otherwise would have looked for safer corporate bonds or treasuries. But due to how little yield one gets from those, equities suddenly look like the only place where many investors can see meaningful returns. 

Here's a photo from my Bloomberg showing what they believe the quantitative factors behind the current levels of the S&P 500 are:

If a client came to you and said they wanted to invest in a very risky stock they read about online, what would you say?

If frothy markets a job of a wealth manager is always to try to restrain clients from looking at "golden eggs" (that, after awhile, tend not to look too golden). 

However, ultimately a wealth manager doesn't have final say the way a hedge fund manager does in making all investing decisions. If a client really wants to invest in something - even if it seems very risky - then a wealth manager has to ultimately agree (baring certain rare agreements in place). 

Because of this you need to begin any conversation with a client by noting that this is their money that they've worked hard for and they can do what they want. However, you should then lay out soberly what the risks are, what the market sentiment currently is, and try to gently poke holes in the investment thesis.

Ultimately, if the client still really wants to invest in a certain company then as a final resort the wealth manager may try to convince them to invest a more modest amount into it and take gains from the investment as quickly as possible.

How would you think about creating a portfolio for someone near retirement?

This is another very common question - almost guaranteed to come up - that is based on seeing whether or not you understand the changes in how money is invested for an individual as they age.

For example, a young doctor has many years of earnings potential in front of him or her and can "afford" to take more risk early in their life. If there's a market correction then that's fine as they are able to wait out the market and reap the gains as the market rebounds. 

For someone older and near retirement, as this is an example of, it's quite different. 

What you want to do is create a more stable portfolio that still has room for growth, but that will be able to reliably draw down the amount that the retiree ultimately desires. 

So a hypothetical portfolio pay involve 40% equities, 20% corporate bonds (investment grade), 10% cash, 10% gold, and 20% treasuries or municipal bonds.

This way the portfolio still can perform well in bull markets, but in the case of a bear market there's guaranteed income coming from the corporate bonds and treasuries / municipal bonds. In this portfolio, gold works as a bit of a hedge (although it is an imperfect one and in practice may not be used).

Finally, we always have some cash sitting on the sidelines just in case we have a terrible recession that lasts years. 

Note: Traditionally, portfolios have often had a 60/40 split although they heavily underperformed through 2022 (although, as Bloomberg reported, UBS thinks that may change moving forward).

What are some of the differences between corporate bonds and loans?

When you look at a corporate capital structure, you'll often see a series of bonds and loans. Both of these are fixed income instruments. There's some amount of principal and then there's some interest rate tied to them that a company must pay every year (usually twice a year).

There are some critical differences. Loans tend to be floating rate meaning that the amount of interest paid will go up or down as the LIBOR rate goes up or down. For example, loans will often have terms such as LIBOR + 2.5% (LIBOR is currently just 0.22%). Bonds on the other hand tend to have fixed interest rates. So while loans tend not to be overly rates sensitive, bonds are as a sudden spike in interest rates will make bonds look less appealing. 

Another difference tends to be that loans will be higher up in the capital structure and have a higher priority than bonds. So in the event of bankruptcy, the company's loans will be paid off before the bonds are. This makes bonds riskier and is why distressed companies will often have bonds that trade at much lower levels than their loans.

A final difference is that some kinds of loans have amortization embedded in them while bonds almost never do. All this means is that every year a small amount of the loans face value is paid back, whereas with bonds the full face value amount is just paid back at maturity.

Conclusion

As I mentioned at the outset, there's hardly a better internship out there than one in wealth management. Even if you aren't entirely sold on the industry (which is understandable, there's a lot of misinformation out there) it's still a great experience and can serve as a launching pad to other areas of finance that are perhaps more amenable to your personality and skillset.

With all that being said, do not expect to go into a wealth management interview and just have a casual conversation. You will be asked some tough questions and while they may seem open-ended and with no "objective" answer there are most certainly answers that your interviewer wants to hear you give.

If these wealth management internship interview questions weren't quite enough for you and you're looking for many more advanced questions, be sure to check out the Wealth Management Interview guide I put together. I made sure to make it incredibly accessible with practical interview answers instead of ones that are more academic in nature.

Good luck and remember to not be too nervous in any of your interviews and show a little personality. Wealth management is after all a people business.