analysis of a career in investment banking

8/4/2019 Analysis of a Career in Investment Banking

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ANALYSIS OF A CAREER IN INVESTMENT BANKING

Dictionary defines investment as the money that people or organizations have put into a company,

business, or bank in order to get a profit, or to make a business activity successful (Longman). An

investment banker is someone whose job is to make investments as successful and as profitable as

possible. It is investment bankers job to use the knowledge of the market and economy in advising

his/her clients on a variety of financial matters.

Investment bankers perform a wide range of finance-oriented functions. They control the issuance of

stock and oversee its sale to the public. They analyze the probability of success of a single stock, or a

whole area of public companies. They also recommend and execute merger strategies, as well as the buy

and sell bonds. Because of such a wide range of tasks, investment bankers should not limit their

education to a single major of study.

To get the most money and the most satisfaction out of a career in investment banking, a person should

try to graduate from the most prominent university. Various schools offer excellence in various areas of

study. A university can have the best finance division in the world, yet its accounting or economics

department may not even make it to the top fifty rankings.

Choosing the right university is very important since most students have preferences not only in terms of

academic reputation, but also with regard to location, price, diversity, admission standards, and many

other factors. To be an investment banker a student does not have to select one specific major of study or

graduate from a specific university. He or she can pursue a career in this field with a degree in

accounting, actuarial science, agricultural economics, business communication, economics, finance,

history, industrial management, international business, logistics management, managerial economics,

marketing, physics, political science, risk management, or statistics, to name a few.

In addition, it is always helpful to get more than one degree, or complement any of the degrees mentioned

above with a degree in law or business law. Due to the variety of educational programs, students must

evaluate their skills and interests in order to select a major that would suit them the most and that would

aide in amplifying those skills.

Interests needed to be an Investment Banker

A career in investment banking requires a variety of skills. Communication, creativity, analytical skills,

and people skills are a must in the field of investment banking. In addition, initiative, and some basic

sales abilities are also quite helpful. In order to succeed in this profession a person must be able to deal

with people as well as computers and numbers. Versatility and broad knowledge base can provide an

extra edge for an investment banker. In the course of a career, an investment banker may have the

opportunity to work for companies in every single field. The more a banker knows about the field or thecompany he/she is hired by, the higher are his/her chances of success.

The market for investment bankers has been booming since the 1980s, and it is becoming increasingly

easer to find a job in the banking industry. A degree in virtually every major of study will do.

Professionals from almost any career field can join the banking industry without needing additional

education. A degree in finance and economics is always helpful, but it does not necessarily provide an

advantage at the entry level. People with degrees in liberal arts may have a tougher time entering the


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industry than people with degree in engineering or medicine. Investment banks are always on the lookout

for people willing and able to deal with challenges that the job imposes.

To find the perfect job an investment banker may have to travel. It does not necessarily mean that he/she

must leave everything and move to New York, although spending some time on Wall Street will help an

investment banker gain a better perspective on the business world and help in future career mobility.

However, New York is no longer the hottest market for investment bankers. Great Britains growing

economy propelled London to be the best place to find a banking job by offering higher wages as well as

a higher rate of upward mobility. Other European countries with an enormous desire to hire investment

bankers are Germany, Poland, France, and Hungary. The banker job markets in Australia, New Zealand,

and South Africa are also showing an increased interest in hiring quality banking professionals. Places

such as Russia and Ukraine are to be avoided because despite their booming market for professionals in

the banking industry, the economic markets in those countries are too unstable. The Asian market is

booming; however, with a thousand applicants per position available, entry in that market is very difficult

(Wall Street Journal Online). Even though the business world does revolve around New York, there are a

lot of great jobs in the banking industry all over the world. In this global market, knowing a foreign

language can provide an investment banker with an additional edge in searching for a job.

Investment banking is one of the very few professions were there are virtually no limitations on income.

It provides excellent wages and a high potential for upward mobility. In addition, investment bankers can

apply their professional skills and knowledge to grow their personal investments. This knowledge gives

an investment banker the ability to determine where and when to invest to gain the optimal returns. In

fact, some of the companies are looking at the performance of investment bankers personal portfoli o

when making hiring decisions.

The entry-level salaries in investment banking are relatively low considering the hours one has to put in.

However, salary is not the most significant factor in finding the first job. The advantages of making good

contacts and learning from the best far outweigh the financial difficulties that lower salary may impose.In addition, it is doubtful that an entry-level analyst will have the time to worry about his/her salary.

However, after a few years of experience, wages raises dramatically.

Salaries in Investment Banking (with bonus)

Job Level Salary RangeTypical All-inComp

Prerequisite(degree/yrsexperience)

First Year Analyst $90K - 150K $125K Bachelor's

Third Year Analyst $120K - 350K $165K Bachelor's

First Year Associate $150K - 250K $180K MBA

Third Year Associate $300 - 500K $350K MBA

Vice President $350K - 1MM $700K 3-6 years

Director / Principal $400K - 1.5MM $900K 5-10 years

Managing Director /Partner

$500K - 20 MM $1.5 MM 7-10 years

Department head $800K - 70MM $3.5MM 10+ years
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Note: This table is based upon conversations with banking insiders about yearly bonuses expected to be paid

between December 2010 and February 2011. MM denotes millions. K denotes thousands of US dollars.

The basic entry position in investment banking is a financial analyst. An analyst is required to analyze

financial reports, gather and analyze information, prepare financial plans, and make predictions regarding

the outcome of future deals. Analyst is expected to do a lot of reading, and to be up to date with all the

latest trends of the business world. Wall Street Journal and other business periodicals are essential for

analyst. In addition, personal lifestyle of the analyst is severely restricted by extended working hours,

which range form 70 to 120 hours per week.

It is also very important for an analyst to make contacts everywhere in the industry. These contacts may

be virtually worthless at the beginning, but they will become very useful in the later stages of ones

career. An analyst should also attend a variety of social gatherings, seminars, lunches, dinner parties, and

sporting activates to make contacts, as well as to be seen by recruiters, despite the vigorous work

schedule. These activities may prove to be tiresome and extremely expensive; however, they will

definitely pay off later.

An analyst holds a great deal of responsibly, as analysts provide the foundation for most investment

decisions. However, despite all the challenges, the burnout percentage is fairly low. Only eight percent of

financial analysts leave their jobs in pursuit of a career in a different field (Princeton Review). The

primary reason for such a low percentage is the fact that most people know what they are getting into.

They enjoy the challenges and patiently wait for the rewards. After three to five years, an analyst is

usually promoted to a junior associate position.

An investment banker can also attain the position of a junior associate by attaining an MBA. This

approach may be less practical, since even though a business school supplies invaluable knowledge of the

business world, it fails to provide real life experience. However, if a banker does not find a position of

analyst appealing, getting an MBA is a good way to go.

Junior associate has mostly the same duties as an analyst. Fortunately, an associate may have several

analysts on his or her staff to help reduce the workload. An associates job is simple, make the boss look

good (James Libman). Although the job is still tedious, the pay is improving.

A junior associate must be very flexible and willing to travel. It is not uncommon to be receiving orders

to fly to the other side of the planet tomorrow and to stay there indefinitely.

Some of the other crucial skills for an associate are finding compatible companies, dealing with huge

egos, performing well in groups, taking control of meetings, and arranging for client meeting. The ability

to use Excel and generate spreadsheets in your sleep(James Libman). The ability to work under

pressure is also very important. Impossible deadlines are a part of the daily routine for an associate.

Benefits of a Career in Investment Banking

Investment banking provides the perfect opportunity to learn about money. The ability to invest properly

can secure a persons financial independence.


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Another benefit of a career in investment banking is the ease of entry. A degree in virtually every area of

study will enable a person to secure a position as ether an analyst or an associate. Additionally, with

booming market, finding a job has never been easer.

A career in investment banking may also provide an excellent opportunity to see the world. Expect to do

quite a bit of traveling in the early stages of a banking career. It is very common for banker to visit more

cities and countries around the world by the age of twenty-five, then most people do in a lifetime.

A high salary is an important factor in deciding on a career. Investment banking offers a salary range

almost without bounds. Salaries as high as $235,000 are available straight out of business school

(Careers in Finance). Later in the career, a salary can grow to as much as seven or eight digits.

Drawbacks of a Career in Investment Banking

Extremely long hours and relatively low salaries at the first stages of the career in investment banking as

well as strenuous work schedule may be significant drawbacks. It takes a lot of hard work and patience in

order to succeed in this field. Constant pressure to meet deadlines and a lot of nights spent sleeping in the

office can serve as a major deterrent for entering the field of investment banking. In addition, the job mayrequire a banker to constantly move around the world. In order to succeed in investment banking one

must be willing to give up his/her social and personal life for a few years.

Investment banker is required to design, analyze, and execute a variety of business transactions with the

ultimate goal to maximize financial profit. To succeed as an investment banker a person must be

determined, goal oriented, and dedicated. An investment banker must possess communicational,

analytical, and interpersonal skills.

Multiple factors such as choosing a university, selecting a major of study, and selecting location of future

employment, will affect the career of an investment banker. Each student should decide which option is

right for him/her based on his/her interests. Another subject that should be considered is the point ofentry into the field of investment banking. After attaining a bachelors degree, students have the option of

entering the field of investment banking as an analyst, or to continue his/her education by attaining an

MBA and entering the field as an associate.

A college graduate with a degree in an assortment of majors of study with a strong analytical ability

should consider investment banking as a possible career choice. Investment banking offers a challenging

and exciting career that provides substantial financial rewards. With high salaries and good prospect for

upward mobility, investment banking may be an excellent career choice for anyone who is interested in

business and finance.

If you are considering a career in business or finance and are interested in working with people, youshould consider a career in investment banking. To decide if investment banking is a right career option

for you, you should talk to investment bankers. Find and talk to bankers who are in different stages of

their careers in order to gain insights about the field. Try getting some information from the investment

banks. Getting an internship at an investment bank would not only provide you with a wealth of

information about the career, but would also allow you to start developing a network of contacts. You

should also lookup the references attached to this report for some additional information.


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ANKIT SINGH

MIB (2012 Batch)

analysis of a career in investment banking

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