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What is Investment Banking? Why is it so Sought After?

Investment Banking was a product of the first great recession in the world of Finance. During this economic calamity, Investment Banking was used as a rescue plaster to hold company assets from steeping along the global meltdown. Even though the economic scenario changed, the primary function of strategically raising capital assets has continued to live on.

Investment Banking participates in various activities in regard to higher finance maintenance exercised by providing their clients with the assistance and the gateway towards the capital market. In other words, access to capital market, which is a part of the financial system where buyers and sellers engage in raising their financial capital by trading shares, investments, and bonds, is facilitated to the client by Investment Bankers. Unlike regular banks, an Investment Banking firm does not work on deposits. Instead, they assist their clients in trading securities for other financial securities or help them with underwriting and with security issue related assistance or similar security promotional activities. Additionally, during times like firm merging and acquisitions, Investment Banking may also provide services such as trading of derivatives, market making, equality securities and fixed income instruments like currencies and commodities.

There are several basic types of businesses in Investment Banking. First is Trading Assets or Financial Securities for Cash or other more desirable securities for the client. Here, the Investment bankers expedite and facilitate the process of this market making. Second one is the Sell-Side. Under this come the advisory investment services related to private equity funds, life insurance companies, mutual and hedge funds, and unit trusts. Investment bankers can engage in various activities such as raising equality capital, raising debit Capital, enrolling in propriety trading for the client, and insuring bonds and launching new products in a typical Investment Banking setting.

Qualification Needed for a Career in Investment Banking
There are several degree programs that may lead to a career in Investment Banking. Most of these programs focus on Accounting and Finance, the core areas involved in the Investment Banking world. Although Bachelor degrees are suited for entry-level positions, rising in the career hierarchy required a graduate management degree. Field experience, couple with strong academic qualification, is the way to go in the field.

Skills Needed for a Career in Investment Banking
A Career in Investment Banking requires a myriad of skills that can be acquired with concentrated education and experience in the field. To start with, a favourable combination would be of strong analytical and quantitative skills to understand the technicalities of finance. One can further make use of these skills and achieve qualifications like stochastic calculus, differential equations, bond valuation, and pricing. In the same rope come valuable Accounting skills which can be combined with a CFA or a CMA exam to have an edge over others in this career. Next set of useful skills in a career in Investment Banking would be Sales skills, Interpersonal and communication skills, strategy and creative skills, the ability to work within teams. All these skills can be pooled together for market-making for your clients.

Hierarchy of a Career in Investment Banking
A career hierarchy in Investment Banking is a standard progression. This career starts with the position of an Analyst, Associate, and Account manager, – all depending on the different position names decided by the respective firm. The most important thing in a career in Investment Banking is one’s dedication to sustain in this field. If motives are firm and mind made up to carry on this road, the career ascendance should be fairly customary.

Investment Banking Analysts positions are occupied by fresh Business or Finance students. This is the base of the career and it lasts for two to three years. Analysts work in teams to understand the commercial role they have entered in. The duty of Investment Analyst is to learn, take part in presentations by associates, make pitch books, analyze Public data, valuation, credit, and perform other administrative duties. Many companies also give Analysts the chance to work on the Sell-side, advising clients on selling investment services to asset management firms.

Undergraduate education in Business and Finance will open up the entry level positions mentioned above, but if your aim is to dive into a core Investment banking career, where you are responsible for taking important monetary decisions for your clients, a reputed MBA is the way to go. An MBA, from a reputed business school, will fast track an Investment Management career. A specialization in Finance is an advantageous credential to have. This position lasts for about three to four years, depending on the Investment Banking firm joined, to move to the position of a Vice President. After moving on to a senior banker position, one would be managing relations with clients, cracking deals, obtaining projects and managing the corporate team.

Pros of an Investment Banking Career
While entering Investment banking, one will have the opportunity of observing and working with some of the brightest Investment giants and of traversing an up trickling learning curve. Moreover, with the onset of this career, as an Analyst or an Associate, individuals are given plenty of responsibilities to form a solid base. This will prove to be very beneficial for those who plan to evolve their financial sense fast. Additionally, the salaries for all the higher positions are quite good along with some added benefits.

This is one industry that respects and expects hard work, so the chances of success will be directly proportional to the commitment you have attached to one’s work.

Cons of an Investment Banking Career
One of the biggest drawbacks of Investment Banking is the long working hours. It is quite common in the field to work overnight and over the weekends. Juggling personal plans with such a hefty work schedule can be extremely challenging. Additionally, the work in Investment Banking is sedentary. With Bankers tied to their desks most of the time, crunching numbers and churning out spreadsheets and presentations, one may get easily discouraged with little physical activity. Since Investment Banking deals with Capital Markets, there is, like other market related professions, little scope for error, which heightens the already steep stress level demands of the field. Personally, Investment Bankers also need to have strong personalities to handle the immense competition in the field and uncertain nature of the markets.

Who is a Career in Investment Banking good for?
In Investment Banking, your success will depend on your ability to communicate with clients and get deals done. At this level, it is also important to have a good understanding of market trends, the political, macroeconomic environment and deal mechanics. If you are game to handle these challenges, the world is your oyster!

Best Companies for a Career in Investment Banking

  1. The Blackstone Group
  2. Goldman Sachs
  3. Morgan Stanley
  4. J.P. Morgan
  5. Centerview Partners
  6. Evercore Partners
  7. Houlihan Lokey
  8. Greenhill & Co.
  9. Perella Weinberg Partners
  10. Credit Suisse