Investment banking is a career in the financial sector that needs extensive analytical, mathematical and critical thinking skills. Many investment bankers rely on their financial skills and background training to succeed in this industry. People who enjoy working long hours in a fast-paced work environment may enjoy working as an investment banker, so it's important to understand this role and the steps to get there. In this article, we'll explain what an investment banker is, explore the job responsibilities of investment bankers and the path you can take to become one.
What is an investment banker?
Investment bankers offer financial services to government bodies and companies, and help them to obtain capital by borrowing money or issuing shares. They serve as financial advisors to corporations or the government, and take on a major role in launches of initial public offerings (IPOs) for companies preparing to go public. They also function as intermediaries between investors and stock or bond issuers. Some people may also enter investment banking as a way to venture into more well-paying and prestigious positions in venture capital, wealth management and private equity.
What does an investment banker do?
An investment banker manages companies' investment ventures and the financial processes that are involved. Their profits come in the form of fees from clients. A job in the investment banking line may involve working with clients globally, which means your work schedule can change with the different time zones. While the work can be demanding, it can be financially rewarding with good remuneration packages.
These are some tasks investment bankers can be expected to perform:
- Conducting research
- Examining company's financial health
- Building financial models
- Giving presentations
- Advising companies about which securities to issue to investors
- Helping companies raise money
- Deciding initial stock prices to raise funds
- Issuing stock and managing IPOs
- Floating a bond
- Coordinating or negotiating mergers and acquisitions
- Familiarising with legal and compliance processes
Related: Tips for Better Work-Life Balance
Average salary of an investment banker
Entry-level investment bankers can be compensated more than their peers in other industries, and that's one of the attractive points about pursuing a job in investment banking. Investment bankers generally earn $101,229 per year, and the amount varies depending on performance and experience. Their remuneration comprises two main parts: salary and bonus.
Investment bankers get good bonuses when the financial market is doing well, that is, when the world is not experiencing an economic recession. This is because taking the investment risks are likely to have generated profit when the economy is doing well. To get ahead in your career as an investment banker, you'll require grit, ambition, hard work, skills, connections and experience.
How to become an investment banker
While you typically need a minimum of a finance-related university degree to enter the investment banking industry, there are many ways to progress and hone your skills while doing the job. The steps below list the usual route investment bankers embark on:
1. Get a university degree
You can start by obtaining a bachelor's degree in related fields such as finance, economics, business or accounting. It usually spans four years, and you can learn topics ranging from market trends to economic history. Studying a course that's related to investment banking can also demonstrate your interest and passion, which can increase your chances of getting hired.
2. Pursue further studies such as a graduate degree
If you've pursued an undergraduate degree that may not have been related to investment banking, you can opt for further studies in a related field for your master's degree, such as business administration or finance. In that way, employers are more likely to focus on your most recent qualification.
You may want to consider doing your master's course with a more prestigious business school, where there's a high hiring rate for their graduates. This can signify the school has good ongoing relations with the investment banks, such as strong internship programmes. It can also be helpful because you can engage with alumni who are working in the investment banks, and a similar educational background can be the common thread.
3. Secure investment banking internships
Academic qualifications and theoretical knowledge from your studies can only get you to a certain point in your job application process. Gaining practical experience through relevant training such as internships can give you a solid foundation in investment banking. As with most other companies, Investment banks value work experience, so it's always advantageous to get work experience with them. Internships can also result in full-time job offers.
4. Apply for investment banking jobs
The concept of applying for job positions in investment banks is similar to that of getting internships in the industry, which is to gain exposure to the facets of the investment banking industry. It takes persistence to land a job in this highly competitive field. You can choose to continue taking on internships while you await an offer in your desired position, or try applying to another department in the same company. No matter what, demonstrating that you're interested and available to employers can give you opportunities, sometimes unexpectedly.
These are two main roles you can apply for should you decide to pursue a career in investment banking: analyst and associate. Typically, analysts can get promoted to become associates after working for a few years in their role, or after earning their Master of Business Administration. Career progression in an investment bank can look something like this, from an entry-level role to a more senior role:
- Vice President
- Senior Vice President
- Managing Director
5. Work on your investment banking skills
Investment banking is a field that requires both technical and specific soft skills. Thus, you can improve the relevant skills to gain an edge over other candidates. These are the technical work and skills you may need to know when you start your job as an investment banker:
- Financial modelling
- Sales and business development
- Preparation of transaction documents, pitch books and presentations
- Business valuation
As for the non-technical characteristics, these are the soft skills that investment bankers can benefit from:
This is beyond the comprehension of analytics, mathematics, finances and economics. It's essential to know your role and also how colleagues' efforts or other elements come together to ensure the overall goal is met. Investment bankers need to be intellectually curious to solve challenging problems and craft unique solutions.
Read more: What Are Technical Skills?
Performing well under rigorous demands and examination can be important for this role. You can start by setting goals and then working towards them. Knowing what you can do to succeed in this role is the beginning, and persevering through challenges and various situations in the job is how you can make it.
Investment bankers follow rules and regulations, but they're also challenged to work on novel solutions. Approaching situations from a different perspective can impress clients as you may be able to seek out hidden opportunities for them. Consider taking business-related classes in university to hone this skill.
Being open-minded is part of being culturally competent, and it can help you comprehend different cultures and societies well, which is great for doing international businesses. Knowing another language can also make you more highly sought after, so do consider taking classes for a second language or signing up for an exchange programme in school.
This interpersonal skill is an amalgamation of social and relationship-building skills, the ability to handle challenging clients in stressful situations, adopting a positive mindset and growing and advancing client relationships. Try to be personable to investors and other investment bankers, even if you don't currently do business with them. By doing so, you are establishing a good reputation that can help you gain opportunities in your career.
In an industry where there are tight deadlines and targets to hit, it can be easy to neglect your mental and physical well-being. Manage stress proactively by taking some time for self-care. For example, clear your mind by closing your eyes for a minute. Taking short breaks can give you some time to recharge so that you can get back to work with more clarity.
Investment banking can give you significant opportunities for learning and skill building, especially in business and finance. It's important to understand that investment banking is a business, and investment bankers are expected to generate revenue. Improve your entrepreneurial skills by watching videos and reading books on business, entrepreneurship and sales.