An investment banker works for a banking institution to raise capital and advise economic decisions. While that may sound confusing, an investment banker’s job is relatively straightforward.
According to Robert R. Johnson, professor of finance at Heider College of Business, Creighton University, “Investment bankers raise money by selling securities and transferring that money to people who need it to grow businesses or bring other costly projects to reality.”
What Is an Investment Banker?
Investment bankers collect data, make financial models, and advise their clients and employers based on their findings. Bankers early in their careers are referred to as analysts — investment bankers are a special type of financial analyst that specialize in buying and selling securities and facilitating large corporate transactions, like mergers and acquisitions (M&A).
Investment bankers work for many types of investment banking companies, ranging from bulge bracket global banks (like Goldman Sachs) to boutique investment firms (like Capstone Partners). Regardless of where they work, investment bankers typically start as analysts, eventually becoming associates after a few years of experience and maybe an advanced degree. They then become vice presidents (VPs) and managing directors (MDs) — the ultimate decision-makers in the investment banking industry.
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What Do Investment Bankers Do?
Investment banks have two main functions, typically referred to as the buy side and the sell side.
“Investment bankers are best known for the part of their business that sells securities, or the sell-side,” says Johnson. “This function of the investment bank is responsible for finding investors to buy the securities being sold, which raises the money needed by businesses and governments to grow and prosper.”
On the buy side, investment bankers assist in advising purchasing and transactions. Johnson continues, “Serving in its role on the buy side, the investment bank can offer suggestions to large institutional investors like mutual funds, pension plans, or endowments on which securities may be appropriate for it to buy in order to meet its return targets.”
Some common responsibilities of investment bankers include:
- Underwriting: raising money for investors and companies
- Mergers and acquisitions (M&A): helping companies interested in buying another company and facilitating the transaction
- Initial public offering (IPO) process: transitioning a private company into a publicly traded company
- Book building: the process of determining how much an IPO will be priced at by asking investors to submit bids
- Prospectus drafting: creating a document that details an investment offering, including the risks and objectives of the investment
- Issuing and selling securities: creating and marketing tradable assets, like bonds, stocks, and options
- Equity research: analyzing market information to better inform investor decisions
- Asset management: controlling an institution or individual’s assets and advising them on financial decisions
- Corporate restructuring: consulting a company on how to change its financial plan to increase capital
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Day in the Life of an Investment Banker
Investment bankers lead notoriously busy lives and investment banking hours can be overwhelming — these bankers work anywhere from 60 to 100 hours per week! Analysts typically have longer hours, and as you gain seniority in the investment banking world, you earn more downtime at the expense of greater responsibility.
The daily life of an investment banker depends heavily on what work they are handling at that moment. The busiest days are typically when the banker is involved in a live deal — meaning they have a client trying to find a buyer or seller. There are slower days, though, when a banker is more focused on pitching to potential clients.
Typical Day as an Investment Banking Analyst
7 a.m. to Noon
Respond to emails while heading to the office, then begin working on a PowerPoint for your first meeting of the day. Have a meeting with your client alongside your managing director, vice president, and associates. Take detailed notes and review the call with your associate after.
Noon to 5 p.m.
Create a financial model in Excel that shows how your client’s company would be affected if they were to buy Company A, Company B, or Company C. Once you’ve finished a draft, send it to your associate for feedback and corrections.
5 p.m. to 8 p.m.
Begin creating a PowerPoint presentation about the model you created so you can show your client tomorrow. Make corrections to your model based on feedback from your associate. Once your model is revised, send it to your managing director and the rest of your team.
After 8 p.m.
Make edits to your financial model, if needed, based on feedback from your managing director and finish the presentation for your meeting tomorrow.
Investment Banker Salary
Financial and investment analysts make an average of $108,790 per year, according to the U.S. Bureau of Labor Statistics (BLS). However, “financial analyst” is a broad job title, and includes other career paths besides investment banking.
Ultimately, although investment bankers typically work long hours, those long hours can pay off — entry-level analysts at Goldman Sachs reportedly make $110,000 base salary, and at other leading banks the salaries aren’t far behind. These numbers also don’t include the other types of compensation investment bankers are typically eligible for, like commission, stock options, and performance bonuses.
Big banks like JPMorgan and Goldman Sachs are willing to pay top dollar for great analysts because investment bankers also make their banks a lot of money. It’s hard work, but with a high base salary and big year-end bonuses, the busy days may seem a little more worthwhile.
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How to Become an Investment Banker
Education
To gain an entry-level position as an investment banker, you’ll need at least a bachelor’s degree. A degree in finance, economics, or business can give you the foundation in mathematics and business needed for a successful career in investment banking. However, while these degrees can be helpful, what you major in isn’t the most important factor. What matters is that you have the skills to do the job.
Moving up in the ranks may require an advanced degree. While analysts typically start with a bachelor’s degree, associates often seek out Master of Business Administration (MBA) degrees or master’s degrees in finance. Advanced degrees can make you more marketable and reinforce the skills you need in banking.
Certifications and Licensing
Investment bankers have a few certification options, but the most popular is the chartered financial analyst (CFA) designation. This certification requires passing a rigorous program, but it shows a strong knowledge of investment banking, economics, portfolio management, and equity research.
There are also many other certifications available. Each shows a certain degree of expertise and specialization:
- Certified Financial Planner (CFP) certification from the CFP Board of Standards
- Financial Risk Manager (FRM) certification from the Global Association of Risk Professionals
- Chartered Alternative Investment Analyst (CAIA) from the CAIA Association
- Certified Public Accountant (CPA) from the American Institute of Certified Public Accountants
- Chartered Mutual Fund Counselor (CMFC) from the College of Financial Planning
Additionally, investment bankers typically need to be registered with the U.S. Securities and Exchange Commission, which involves passing certain exams administered by the Financial Industry Regulatory Authority (FINRA).
Skills for Investment Bankers
In addition to a strong work ethic, the ability to multitask, and time management skills, investment banking skills include a balance of hard versus soft skills.
Since investment banking is a client-facing profession, investment bankers must have soft skills like:
- Strong relationship management skills
- Interpersonal skills
- Communication skills
- Analytical thinking
- Problem-solving skills
- Attention to detail
They also need to be able to do the technical work required in banking, using hard skills like:
- Financial modeling
- Business valuation
- Creating presentations
- Filing transaction documents
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