Languages in finance

Hundreds of thousands of university students apply for investment banking positions every single year. Inevitably, students look for ways to gain a competitive advantage when making their applications. For some, this may mean teaching themselves a foreign language or two. However, is this the best way to go about improving your application? And if so, which languages are the best?

Fundamentally, investment banks look for candidates which have skills that are useful on the job. For example, founding a non-profit would signal to banks that you have leadership ability. A summer internship at a valuations firm shows you have developed your financial modelling. So, does learning foreign languages improve your ability to do the job?

Working in London does not mean you will only use English. You can often find yourself covering clients in, say, Spain. In order to communicate effectively and develop proper client relationships, you would need to be fluent in Spanish. Furthermore, it goes without saying that if you want to work in a regional office like Frankfurt or Paris, it would be very useful to be fluent in the local language. Also, private equity firms in London hire very few people who only speak English, so if you are looking to move to the buy-side, learning a language would give you a leg up when it comes to recruiting. Foreign languages are less useful in the US as the vast majority of deals are domestic. However, you may notice a trend here. The only time languages are useful are when you are fluent. Intermediate/beginner proficiency will get you nowhere.

Therefore, it will take you a long time to develop useful foreign language skills as you need to be at a close to native level of speaking. Often times, interviewers will switch the language to test your proficiency. The Foreign Service Institute of the United States government has produced approximate learning expectations for native English speakers. Languages are grouped into five different categories of difficulty:

• Category 1 (575-600 class hours)

  • Afrikaans, Norwegian, Danish, Portuguese, Dutch, Romanian, French, Spanish, Swedish, Italian

• Category 2 (750 class hours)

  • German

• Category 3 (900 hours)

  • Indonesian, Malaysian, Swahili

• Category 4 (1,100 hours)

  • Vietnamese, Hungarian, Hindi, Ukrainian, Turkish, Greek, Hebrew, Finnish, Bulgarian, Albanian, Lithuanian, Polish, Russian, Serbian

• Category 5 (2,200 hours)

  • Arabic, Cantonese, Mandarin, Japanese, Korean

As you can see, the amount of time an English speaker needs to put in to learn various languages varies greatly. The time estimates listed are to get to a limited working proficiency. To get to a near-native fluency level would take even longer. As a result, learning a language in Category 3 or above may not be the best use of your time. There are plenty of, say, Chinese students who moved to the US/UK for university who will always be able to speak better Chinese than you. Furthermore, people from Scandinavia or Germany often know English and you do not need to speak their local language to develop a proper client relationship.

Goldman Sachs has stated that French, Russian, German, Italian and Spanish are their most sought after languages. However, the growth of various emerging markets, such as Turkey, may change this. Therefore, French, Spanish and Italian seem like the best languages to learn as they provide the most benefit for the amount of time they take to learn.

However, there may be better uses for your time, especially if you are coming to the end of your university years with not much time before you are meant to start working. If you are learning a language for the sole purpose of investment banking, it will be very hard to motivate yourself to study the language for hundreds, if not thousands of hours over a period of multiple years. Time is often better-spent networking, brushing up on your technical skills, applying to internships, or even improving your communication skills in English. It should be something you enjoy, and ideally should be started in high school to allow yourself to develop fluency.

To conclude, learning a language is a serious time commitment, requiring multiple hours of study per week for multiple years to reach a level that is useful for finance recruiting. However, when fully developed, foreign languages can be very beneficial for your career, allowing you to develop better client relationships with foreign clients, and even allowing you to move to the buy-side. Learning a language is an activity best suited to high school / first-year university students who have already secured top grades, a place at a top university and relevant work experience.