In this post, I will focus on the investment banking career path and how an aspirant can build a successful career.
Unlike the investment banks of the 20th century, modern-day investment banks are much more structured, technologically advanced, and well-networked.
They attract a large pool of skilled talent from countless universities that churn out investment bankers across the world.
So, let us briefly touch on what investment banking is.
Typically an investment bank is a financial intermediary that offers a variety of services to both individual and institutional investors, ranging from financial advisory, underwriting, facilitating investment transactions to an advisory on mergers and acquisitions.
One should not get confused with the term ‘banking,’ as investment banking is far from traditional and commercial banking.
However, many commercial banks also offer investment banking services.
An investment banking career path presents the opportunity for global exposure to the aspirant as the work involved is irrespective of geographical boundaries.
The clients and projects approach from different corners of the world and are not restricted to the national boundaries of a country.
The nature of the work is also such that it does not demand a lot of fieldwork, which means that a team of investment bankers can work out of a remote location without their physical presence in front of the client.
However, it does not mean that investment bankers do not travel around the world for business.
Investment banking analysts and associates are junior bankers while the vice president and managing director from the senior bankers.
Before going into a choice of profiles within investment banking, let us have a look at the career path of an investment banker:
Investment banking analysts are people just out of business school or employees with 1 or 2 years of work experience.
Analysts are junior investment bankers and they take part in the planning and execution of large financial transactions.
They are usually involved in data collection, creating presentations, and fundamental analysis of financial data.
This experience is essential for any aspirant to be a successful investment banker as most of the financial concepts get developed during this course of his/her career path.
After 3-4 years of experience, an investment banking associate is promoted to an associate level, with additional responsibilities like client interaction and managing a team of 4-5 analysts.
The team size usually depends on the magnitude of work assigned to the associate.
A vice president is usually an investment banking expert with experience in various projects.
A VP is responsible for maintaining client relationships and ensuring operational efficiency at each level of the hierarchy underneath.
Managing Director/ Senior Vice President
It is a very senior post in the investment banking domain and can be achieved only after 15-20 years of experience in the field.
Managing directors are responsible for getting more business and converting potential clients into actual deals.
Investment Banking Career Path
Following is a broad classification of services offered within the domain of investment banking:
1. Corporate Finance
In a corporate finance position, you would work towards helping the client raise capital to start new projects or scale up the ongoing operations.
The work of the corporate finance team includes recommendations on structuring and identifying potential sources of funds.
Investment banking is a prerequisite for corporate development. since it includes determining the right balance between equity, debt, and securities for higher profitability levels
The team should have sound knowledge of applied finance and its concepts.
This is the most public profile in the investment banking domain and is usually considered a foundation of investment banking.
Any successful investment banker must have worked in this division for a few years at some point in the job.
2. Mergers and Acquisitions
The team here is responsible for servicing the client on a strategic level and acting as an advisor in facilitating the deal’s valuation, structuring, and negotiations.
Through mergers and acquisitions, investment bankers must meet the capital-raising objectives of companies.
This division is one of the significant sources of revenue for investment bankers across the globe.
The team here needs to have strong financial modeling skills to be able to derive insights that are financially and strategically sound.
It is often tough to start an investment banking career path in this profile.
A candidate needs to have at least 4-5 years of hands-on experience in financial services before getting an entry in this profile, as the work involves a lot of strategy building, which requires enough exposure to various facets of business management.
3. Capital Markets
It includes both equity and debt markets, where the team advises the client on the most appropriate time, valuation, and form of issuance.
Investment banks often help their clients issue funds in the market.
This involves an in-depth understanding of the capital market and its volatility.
An aspirant looking for a career in this profile must be strong in financial, securities, and derivatives analysis.
It is usually the starting profile for most investment bankers around the world.
An aspirant can join as a financial analyst in this profile and then can take off in various streams within investment banking.
4. Sales and Trading
On behalf of the clients, the team is responsible for undertaking transactions in equities, currencies, bonds, etc., with other institutional investors and traders.
It is one of the most desired jobs in investment banks and requires a robust understanding of financial instruments, capital markets, options futures, and derivatives.
As it involves verbal and organized written interactions at all levels, interpersonal and communication skills are of vital importance.
Growth in this profile is among the fastest in investment banking profiles.
Consistency in performance is of utmost importance for an investment banker to move up the hierarchy in this profile.
An investment banking analyst can become a senior associate in a short period as the performance is very quickly quantified in such a profile.
Private equity and debt research, financial restructuring, public finance, and project finance are a few other, amongst numerous, services offered by investment bankers to their clients.
All these services require a high inclination towards financial analysis and number crunching to build a successful investment banking career.
Are You Ready To Rock?
There you have it: a complete blueprint for investment banking success.
Don’t just click away. Check out this interview guide on banking interviews right now.
Please leave a comment below if you have any questions — or have some personal experience to share from your investment banking career.