What is Investment Banking?
Investment banking is a subset of commercial banking that focuses on organizing large, intricate financial transactions like mergers or underwriting initial public offerings (IPOs).
These banks can assist businesses in many ways when it comes to raising capital, one of which is underwriting the issue of new securities for an organization, whether it be a corporation, a municipality, or another institution. They might manage the initial public offering of a company. In addition to this, investment banks offer guidance in the areas of mergers, acquisitions, and reorganizations.
Investment banking is a financial services industry that involves trading, underwriting, and distribution. The distribution of securities acts as an intermediary between companies and governments that need to raise capital and investors willing to buy securities. Investment banks typically provide a variety of services, including:
Underwriting.
Investment banks help companies and governments issue new securities, such as stocks or bonds, by underwriting the securities. It means that the investment bank guarantees to purchase the protection from the issuer and resell it to the public.
Financial Advisory.
Investment banks advise companies and governments on mergers, acquisitions, and other strategic financial decisions. They may also help companies restructure their debt or equity.
Capital Raising.
Investment banks help companies and governments raise capital by issuing new securities. They also allow investors to purchase securities through initial public and secondary offerings (IPOs).
Trading and Market-Making.
Investment banks also trade securities for their accounts and make a market in specific securities by buying and selling them as dealers.
Investment banks generate revenue through fees and commissions for these services and trading in their accounts. They are typically more focused on the needs of larger, more complex clients, such as corporations and governments, than retail investors.
What are Investment Bankers?
Investment bankers are financial service professionals who work for investment banks to offer their clients (companies, governments, and other organizations) various financial products and solutions.
They often have a finance, economics, or business background and complete the necessary accounting, financial modeling, and securities analysis training. In addition, they have relevant work experience. The securities markets, corporate finance, and various financial instruments such as stocks and bonds are often very well understood by investment bankers.
Some of the specific roles that investment bankers may play include:
Corporate Finance.
Investment bankers in this field help companies raise money by issuing new securities and advising on mergers, acquisitions, and other strategic financial decisions.
Capital Markets.
Investment bankers in this field help companies, governments, and investors buy and sell securities on the secondary market. They also help companies and governments issue new securities.
Sales and Trading
Investment bankers in this area buy and sell securities for the bank’s account and help clients execute trades.
Research
In this area, investment bankers look at companies, industries, and economies to make reports and suggestions for clients and for the bank itself.
Investment bankers usually have stressful jobs that require them to work long hours and make quick, well-thought-out decisions. Many investment bankers go on to have successful careers in other areas of finance, such as private equity, hedge funds, or the corporate sector.
What are the Responsibilities of an Investment Banker?
Depending on the role and the investment bank they work for, an investment banker’s duties can be different, but in general, they include the following:
Raising Capital.
Investment bankers help companies and governments raise capital by issuing new securities like stocks or bonds. They work on initial public offerings (IPOs) and secondary offerings and help structure selling the securities to the public.
Financial Advisory.
Investment bankers advise companies and governments on mergers, acquisitions, and other strategic financial decisions. They also help companies restructure their debt or equity.
Underwriting
Investment bankers help companies and governments issue new securities by underwriting them. It means that the investment bank guarantees to purchase the protection from the issuer and resell it to the public.
Trading and Market-Making.
Investment bankers trade securities for their accounts and make a market in specific securities by buying and selling them as dealers.
Valuation Analysis.
Investment bankers are responsible for determining a company’s or asset’s value and providing financial analysis to support the proposed transactions.
Networking and Client Management.
Investment bankers develop and maintain relationships with potential clients and work to identify new business opportunities.
Compliance and Regulations.
Investment bankers must know and comply with all relevant laws, regulations, and ethical standards.
Presentation and Communication.
Investment bankers must communicate complex financial information effectively to clients and internal teams, often through presentations and reports.
These are the typical responsibilities of an investment banker. But the list may vary depending on the bank, the department, and the seniority of the position.
Where Do Investment Bankers Work?
Investment bankers work in a wide variety of settings, some of which include banks, insurance agencies, mutual fund businesses, and stock exchanges. Other locations may also employ investment bankers. The vast majority of those who work in investment banking do so full-time, with many putting in more than 40 hours per week.
Investment Banker Career Progression
Analyst
An investment banker analyst is a lower-level worker in the investment banking department of a bank. Analysts for investment banks usually have a background in finance, economics, or business and have taken courses in accounting, financial modeling, and securities analysis.
An investment banker analyst’s main job is to help senior investment bankers with things like initial public offerings (IPOs), mergers and acquisitions (M&As), and other types of financing.
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Financial Modeling.
Investment banker analysts create financial models to help value companies and assets and forecast financial performance.
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Due Diligence.
Investment banker analysts research and analyze companies, industries, and economies to support the proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Investment banker analysts are responsible for preparing presentations and reports that summarize the findings and recommendations of their analysis.
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Networking and Client Management.
Investment banker analysts may assist senior bankers in developing and maintaining relationships with clients and potential clients.
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Compliance and Regulations.
Investment banker analysts must know and comply with all relevant laws, regulations, and ethical standards.
Investment banker analysts typically work long hours and have high-stress jobs, as they are often required to meet tight deadlines and make quick, informed decisions.
The salary of an investment banker analyst is lower than that of experienced bankers, and the more experience the analyst has, the higher the pay will be. This role is considered a stepping stone for many to become full-fledged investment bankers or to move on to other finance-related positions.
Associate
A professional who is in the middle of their career and works in the investment banking division of a bank is called an investment banker associate. Investment banker associates often have several years of experience working in the field and advanced knowledge and abilities in various subject areas like corporate finance, financial modeling, and securities analysis.
An initial public offering (IPO), mergers and acquisitions, and other forms of finance are examples of transactions that an investment banker associate primarily assists senior investment bankers with while executing.
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Financial Modeling.
Investment banker associates create financial models to help value companies and assets and forecast financial performance.
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Due Diligence
Investment banker associates conduct research and analyze companies, industries, and economies to support the proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Associate investment bankers are in charge of putting together presentations and reports that summarize the results and suggestions of their analysis.
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Networking and Client Management.
Investment banker associates may assist senior bankers in developing and maintaining relationships with clients and potential clients.
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Compliance and Regulations.
Investment banker associates must know and comply with all relevant laws, regulations, and ethical standards.
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Leading Teams.
Investment banker associates are responsible for leading teams of analysts and overseeing the work of more junior team members.
Investment banker associates often work long hours and have stressful jobs because they must meet tight deadlines and make quick, well-thought-out decisions. The salary of an Investment Banker Associate is higher than that of an Analyst but lower than that of the Vice President, Director, and Managing Director.
Many people use this position as a stepping stone to becoming full-fledged investment bankers or other finance-related jobs. It’s also seen as a way to move up in the investment banking division.
Assistant Vice President
An Investment Banker Assistant Vice President (AVP) is a senior-level professional who works in the investment banking division of a bank. They typically have several years of experience as investment banker associates and have advanced knowledge and skills in financial modeling, securities analysis, and corporate finance.
The primary role of an investment banker AVP is to lead and execute transactions, such as initial public offerings (IPOs), mergers and acquisitions, and other types of financing.
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Leading Deal Teams.
Investment banker AVPs oversee the work of analysts and associates on their teams and lead teams of analysts and associates.
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Financial Modeling.
AVPs create complex financial models to help value companies and assets and forecast financial performance.
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Due Diligence.
Investment banker AVPs conduct in-depth research and analysis on companies, industries, and economies to support proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Investment banker AVPs prepare presentations and reports that summarize the findings and recommendations of their analysis and present them to clients and senior management.
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Networking and Client Management.
Investment banker AVPs develop and maintain relationships with clients and potential clients and work to identify new business opportunities.
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Compliance and Regulations.
Investment banker AVPs must know and comply with all relevant laws, regulations, and ethical standards.
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Business Development.
Investment bankers AVPs are responsible for developing and expanding the bank’s business.
As an AVP, the investment banker will have more responsibility and autonomy than at the junior level. People also expect them to have a strong understanding of the securities markets, corporate finance, and financial instruments such as stocks and bonds.
People hope they understand the industry, the market, and the bank’s clients. The salary of an investment banker AVP is higher than that of an associate, which is considered vital in the investment banking division.
Vice President
A senior bank worker specializing in financial investments is a vice president (VP) in investment banking. They have expert-level knowledge and abilities in financial modeling, securities analysis, and corporate finance and have worked for several years as an investment banker AVP or associate.
An investment banker’s vice president’s primary responsibility is managing and completing deals, including IPOs, M&As, and financings of various kinds.
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Leading Deal Teams.
Investment banker VPs oversee the work of analysts, associates, and AVPs on their teams and lead teams of analysts, associates, and AVPs.
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Financial Modeling.
Investment bank vice presidents develop complex financial models to help value companies and assets and forecast financial performance.
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Due Diligence.
Investment banker vice presidents conduct in-depth research and analysis on companies, industries, and economies to support proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Vice Presidents of investment banks make presentations and reports that summarize the results and suggestions of their analysis. They give these to clients and senior management.
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Networking and Client Management.
Investment banker VPs develop and maintain relationships with clients and potential clients and work to identify new business opportunities.
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Compliance and Regulations
Investment banker VPs must know and comply with all relevant laws, regulations, and ethical standards.
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Business Development.
Investment banker VPs are responsible for developing and expanding the bank’s business.
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Leadership
Investment banker VPs lead, mentor, and manage the team.
Senior Vice President/Director
An Investment Banker Senior Vice President or Director is a senior-level professional who works in the investment banking division of a bank. They typically have several years of experience as an investment banker Vice President and have advanced knowledge and skills in financial modeling, securities analysis, and corporate finance.
The primary role of an Investment Banker SVP/Director is to lead and execute transactions, such as initial public offerings (IPOs), mergers and acquisitions, and other types of financing.
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Leading Deal Teams.
Investment banker SVPs and Directors lead teams of analysts, associates, AVPs, and VPs and oversee the work of more junior team members.
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Financial Modeling.
Investment banker SVPs and directors create complex financial models to help value companies and assets and forecast financial performance.
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Due Diligence.
Investment bankers’ SVPs and directors conduct in-depth research and analysis on companies, industries, and economies to support proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Investment banker SVP/Directors prepare presentations and reports that summarize the findings and recommendations of their analysis and present them to clients and senior management.
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Networking and Client Management.
Investment banker SVP/Directors develop and maintain relationships with potential clients and work to identify new business opportunities.
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Compliance and Regulations.
Investment banker SVP/Directors must know and comply with all relevant laws, regulations, and ethical standards.
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Business Development.
Investment banker SVP/Directors are responsible for developing and expanding the bank’s business.
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Leadership
Investment banker SVP/Directors lead, mentor, and manage the team.
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Strategy
Investment Banker SVP/Directors are responsible for developing and implementing the strategy for the bank’s business.
As an SVP/Director, the investment banker will have more responsibility and autonomy than at the junior level. People expect them to have a strong understanding of the securities markets, corporate finance, and financial instruments such as stocks and bonds.
People also hope to have a strong knowledge of the industry, the market, and the bank’s clients. They will be involved in decision-making processes and have a more significant role in leading and managing teams. The salary of an Investment Banker SVP/Director is higher than that of a VP, and it is considered a vital role in the investment banking division.
Managing Director/Partner
A Managing Director or Partner in Investment Banking is a senior-level professional who has reached the highest level of management within the investment banking division of a bank. They typically have many years of experience as an investment banker and have a deep understanding of the securities markets, corporate finance, and financial instruments such as stocks and bonds.
The primary role of a Managing Director or Partner in an investment bank is to lead and execute transactions, such as initial public offerings (IPOs), mergers and acquisitions, and other types of financing, as well as to show the bank’s overall strategy and direction.
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Leading Deal Teams.
Managing Directors and Partners lead teams of analysts, associates, AVPs, VPs, and SVPs/Directors and oversee the work of more junior team members.
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Financial Modeling.
Managing directors and partners create complex financial models to help value companies and assets and forecast financial performance.
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Due Diligence.
Managing Directors and Partners conduct in-depth research and analysis on companies, industries, and economies to support proposed transactions and identify potential risks and opportunities.
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Presentation and Communication.
Managing Directors and Partners prepare presentations and reports that summarize the findings and recommendations of their analysis and present them to clients and senior management.
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Networking and Client Management.
Managing Directors and Partners develop and maintain relationships with potential clients and work to identify new business opportunities.
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Compliance and Regulations.
Managing Directors and Partners must comply with all relevant laws, regulations, and ethical standards.
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Business Development.
The managing directors and partners are responsible for developing and expanding the bank’s business.
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Leadership.
The managing directors and partners lead, mentor, and manage the team.
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Strategy.
The managing directors/partners are responsible for developing and implementing the strategy for the bank’s business.
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Representing the Bank.
The managing directors/partners are the face of the bank and are responsible for representing it to clients, shareholders, and the public.
Investment Banker Salary
The salary of investment bankers can range substantially depending on various criteria, including their precise position, the investment bank they work for, and their location. Nonetheless, investment bankers are generally among the highest-paid professionals in the financial industry.
In the year 2022, investment bankers’ base wages typically fall between $70,000 and $150,000, depending on the level of experience and level of responsibility held by the individual. However, most of an investment banker’s pay is bonuses, which can amount to a sizeable amount. Consider the bank’s and employee’s performance, with prizes determining bonuses ranging from $50,000 to $500,000 or even more.
It’s important to remember that an investment banker’s pay can change based on where they work. Generally speaking, salaries in big financial hubs like New York City, London, and Hong Kong are greater than those in smaller cities.
Additionally, the salary of an entry-level investment banker is lower than that of experienced bankers; conversely, the income of a senior investment banker will be higher than that of an entry-level investment banker because senior investment bankers have more experience.
Knowing that current market conditions can affect investment bankers’ pay is essential. You will reduce bonuses and overall remuneration when the economy slumps or the market is volatile.
How to Become an Investment Banker
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Secure an Entry-Level Position
To get a job as an investment banker at the entry-level, you need a bachelor’s degree in a related field, like finance, economics, or business. Having a good record in school and doing relevant internships or jobs can also help.
Networking is also vital in the finance industry, so networking events, informational interviews, or joining industry clubs can be helpful ways to connect.
Also, many investment banks want applicants to pass a series of financial skill tests and undergo a tough interview process. Therefore, preparing for these tests and practicing interview skills can also be beneficial.
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Complete Advanced Education and Training
To complete advanced education and training as an investment banker, you can pursue a Master of Business Administration (MBA) or a Master of Finance (MFin) degree. These programs typically take two years to complete and provide in-depth knowledge of financial theory, investment strategies, and financial modeling.
Additionally, you can obtain professional certifications such as the Chartered Financial Analyst (CFA) or the Financial Risk Manager (FRM) to demonstrate your expertise in the field.
You can also gain knowledge and skills through on-the-job training and working with more experienced colleagues. Investment banks often have formal training programs for new hires and promote continuous learning opportunities for their employees. Additionally, participating in industry events, conferences, and workshops can help you stay current with the latest trends and developments in the field.
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Earn Additional Certifications
Investment bankers can pursue additional certifications to demonstrate their expertise and advance their careers. Some of these include:
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Chartered Financial Analyst (CFA)
It is a globally recognized certification demonstrating high proficiency in investment analysis and portfolio management.
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Financial Risk Manager (FRM)
This certification focuses on identifying, measuring, and managing financial risks.
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Chartered Alternative Investment Analyst (CAIA)
This certification focuses on alternative investments such as hedge funds, private equity, and real estate.
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Chartered Market Technician (CMT)
This certification focuses on technical analysis, using charts and other tools to identify patterns and predict future market movements.
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Financial Modeling and Valuation Analyst (FMVA)
This certification focuses on financial modeling and valuation techniques in investment banking and corporate finance.
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Project Finance Professional (PFP)
This certification focuses on financial and economic analysis.
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Series 7 and Series 63
These licenses are required by the Financial Industry Regulatory Authority (FINRA) to sell securities and are typically necessary for those who work in securities sales, trading, and investment banking.
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These certifications require passing an exam and continuing education. Some certificates may be more relevant to a specific area of investment banking, and some are more globally recognized.
Investment Banking: What Do Investment Bankers Do? – Conclusion
In conclusion, investment bankers are professionals who work in the financial industry, primarily in investment banks. Their primary role is to help companies and governments raise money by issuing and selling securities. They also advise clients on mergers and acquisitions and help them navigate complex financial transactions. The work of an investment banker can be divided into three main areas:
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Corporate Finance includes helping companies raise money through initial public offerings (IPOs) and issuing debt. Investment bankers also advise companies on mergers and acquisitions.
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Capital Markets include buying and selling securities, such as stocks and bonds, on behalf of clients. Investment bankers also help companies and governments issue securities and help them to understand the financial markets.
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Sales and Trading. Investment bankers in this area buy and sell securities on behalf of their clients and help them navigate the financial markets.
To become an investment banker, one typically needs a bachelor’s degree in a related field, such as finance, economics, or business, and advanced education and training can be helpful.
Additionally, certifications such as the Chartered Financial Analyst (CFA) or the Financial Risk Manager (FRM) can demonstrate expertise in the field. Investment banking is a challenging and competitive field, but for those who are interested in finance, it can be a rewarding and lucrative career path.
Investment Banking: What Do Investment Bankers Do? – Recommended Reading
Frequently Asked Questions- What Do Investment Bankers Do?
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How Long Does it Take to Become an Investment Banker?
Investment banking takes 4-6 years. After graduating from a top university, you may become an investment banker.
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What Do Investment Bankers Do Day to Day?
Investment bankers interact with clients, send emails, develop offers, make financial predictions, sign new clients, provide IPOs, and merge and acquire companies. Investment bankers do these every day or weekly.
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Why Should I Become an Investment Banker?
Investment banking lets you learn to create complex financial models early in your career. Bankers may not be good investors, but they spend much time on valuation work, which might be a good start to a career.
Updated: 6/3/2023
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