Pursing a career as an investment banker can be a rewarding endeavor. Investment banks operate as an intermediary between companies that want to raise money by issuing securities and individual orinstitutional investors who are willing to provide money in exchange for securities. Investment bankers handle every aspect of these transactions. Learn what it takes to become an investment banker.
Key Takeaways
- Investment bankers typically start their careers as interns during college.
- Investment banks facilitate deals between companies that want to raise money and investors.
- Investment bankers handle financing issues like helping a corporation choose what type of securities to issue.
- Investment bankers also help with the completion of mergers and acquisitions, including company valuation, strategizing, and deal finalizing.
What Does an Investment Banker Do?
Investment bankers advise companies on what kind of securities to issue, such as stocks or bonds, and how, when, and at what price to issue them. They also handle placement of the securities with investors, a process known as underwriting. In addition to working with private and publicly traded companies, investment bankers also underwrite municipal bonds and other types of debt securities.
Beyond company financing activities, investment bankers also handle a variety of other complex financial transactions. For example, an investment banker may helpfacilitate a company mergerand acquisition(M&A) by providing advice and other related services to parties involved on either side of a potential transaction. They may assist an M&A client with company valuation, strategy formation, and deal negotiation.
Note
Investment bankers may also be involved in financing the final deal if it requires the issuance of new debt or stock.
Typical Career Path for Investment Banker
Many investment bankers begin in the industry by participating in internships with investment banks when they are undergraduate students. Although an internship is not required to enter the field, it is an excellent way to get started.
After graduating with a bachelor's degree, it is possible to begin working in the field as an investment banking analyst conducting research and producing analytical reports for more senior staff members. Working as a financial analyst in a wealth management firm, bank, hedge fund, or another financial organization is also a good way to begin building experience.
Typically, with several years of experience and a strong record of good performance, an analyst can often move into a junior-level position as an associate investment banker. This position may also be available to a highly qualified candidate with a master's degree and a strong resume but little investment banking experience.
Commonly, the junior analyst phase is "on-the-job training" that usually lasts about 2 years. Some companies provides education to new analysts. Junior investment bankers eventually participate in most aspects of investment banking, including the planning, structuring, and execution of large financial transactions. With good performance, junior bankers can move into senior positions overseeing transactions from start to finish.
Common Education Tracks
A bachelor's degree is the minimum educational qualification required to work as an investment banker. Entry-level analyst positions in the field are typically open to bachelor's degree graduates, and it is possible to move onto a senior banker role without a master's degree in many investment banks.
However, a master's degree is very common among the mid-level and senior staff in this industry,as it helps to pave the way for career advancement. In some investment banks, a master's degree is required for entry into the investment banker career track.
The five largest investment banks in the world are Goldman Sachs, JPMorgan Chase, Bank of America Corporation, Morgan Stanley, and Citigroup.
Most investment banks prefer degrees in finance, accounting, business administration, and other business disciplines. Undergraduate degree subjects are less influential in the hiring process if a candidate has a master's degree in business administration, finance, or another highly relevant subject. Coursework in finance, economics, and mathematics is highly recommended.
Required Certifications
Professional certifications are rarely required to get started in investment banking or to progress into senior positions. That said, the Chartered Financial Analyst (CFA) designation, awarded by the CFA Institute, can be advantageous in the job market.
This professional designation is generally considered the most important certification for professionals working in the investment field. It is available to investment analysts and other types of financial analysts who have a minimum of four years of qualifying experience. Candidates must pass three examinations to earn the designation.
Investment bankers have to obtain appropriate licenses from the Financial Industry Regulatory Authority (FINRA), an oversight body responsible for securities firms and brokers operating in the United States.
As the licensing process requires sponsorship from an employing firm, professionals in the investment banking career track typically complete licensing requirements after getting hired. Many investment bankers require Series 63 and Series 79 licenses, although requirements can vary depending on the job.
Is a CPA or CFA Better for Investment Banking?
A Certified Public Accountant (CPA) and a Chartered Financial Analyst (CFA) are two credentials that can help you advance a career in finance. However, a CPA is generally designed for a career path in accounting whereas a CFA is more appropriate for investment banking.
Is it Hard to Get a Job as an Investment Banker?
An investment banker is considered a highly competitive career path. However you can take certain steps to increase your chances of landing a job with an investment bank. Getting a degree in business administration from a reputable university and landing an internship at a large investment bank are key first steps to getting a job as an investment banker.
How Much Money Does an Investment Banker Make?
Investment banker salaries will depend on the position and where you are in your career. For example, a job in investment banking may start at $70,000. But you could earn well over six figures in a higher position. According to Glassdoor, the average salary of an investment banking analyst is $177,000, as of Dec. 17, 2023.
The Bottom Line
Investment bankers advise companies on issuing securities and handle the placement of the securities with investors, known as underwriting. Degrees in finance, accounting, business administration, and other business disciplines are common in the investment banking career path. A junior analyst can spend about two years in the phase of "on-the-job training."
The right career for you will depend on a number of factors, including your interests and passions as well as your skills set. Consider your personal goals, along with the full job duties of an investment banker before you embark on this career path, which can entail demanding hours but also significant financial rewards.
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Investment Banking Overview
Investment banking involves acting as an intermediary between companies seeking to raise capital and investors willing to provide funds in exchange for securities. Investment bankers handle various aspects of these transactions, including advising companies on the type of securities to issue, determining the timing and pricing of the issuance, and underwriting the placement of securities with investors.
Role of Investment Bankers
Investment bankers play a crucial role in facilitating deals between companies and investors. They advise companies on the securities to issue, such as stocks or bonds, and assist in determining the appropriate timing and pricing for the issuance. Investment bankers also underwrite the placement of securities with investors, ensuring that the securities are sold successfully.
In addition to company financing activities, investment bankers are involved in other complex financial transactions. For example, they may provide advice and services related to mergers and acquisitions (M&A). This can include assisting with company valuation, strategizing, and negotiating deals.
Career Path in Investment Banking
Many investment bankers start their careers as interns during college. While not mandatory, internships provide valuable experience and can be a great way to enter the field. After graduating with a bachelor's degree, individuals can begin working as investment banking analysts, conducting research and producing analytical reports for senior staff members. Gaining experience as a financial analyst in a wealth management firm, bank, hedge fund, or other financial organization is also beneficial.
With several years of experience and a strong performance record, analysts can progress to junior-level positions as associate investment bankers. In some cases, a master's degree and a strong resume may also qualify candidates for this position. Junior analysts typically undergo on-the-job training for about two years before participating in various aspects of investment banking, including planning, structuring, and executing financial transactions. With good performance, junior bankers can advance to senior positions overseeing transactions from start to finish.
Education Requirements
A bachelor's degree is typically the minimum educational qualification required to work as an investment banker. While a master's degree is not always required, it is common among mid-level and senior staff in the industry. Some investment banks may even require a master's degree to enter the investment banking career track. Degrees in finance, accounting, business administration, and other business disciplines are preferred, and coursework in finance, economics, and mathematics is highly recommended.
Certifications
While professional certifications are not always required to start a career in investment banking or progress to senior positions, they can be advantageous in the job market. The Chartered Financial Analyst (CFA) designation, awarded by the CFA Institute, is considered one of the most important certifications for professionals in the investment field. It requires passing three examinations and having a minimum of four years of qualifying experience.
Investment bankers also need to obtain appropriate licenses from the Financial Industry Regulatory Authority (FINRA) in the United States. The specific licenses required can vary depending on the job, but Series 63 and Series 79 licenses are commonly required.
Comparison of CPA and CFA for Investment Banking
While both the Certified Public Accountant (CPA) and Chartered Financial Analyst (CFA) credentials can be beneficial in a finance career, they have different focuses. A CPA is generally designed for a career path in accounting, while a CFA is more appropriate for investment banking. The choice between the two depends on individual career goals and interests.
Job Market and Salary
Becoming an investment banker is considered a highly competitive career path. However, there are steps you can take to increase your chances of landing a job in investment banking. Getting a degree in business administration from a reputable university and securing an internship at a large investment bank are key first steps. Salaries in investment banking vary depending on the position and career stage. Entry-level positions may start around $70,000, while more senior positions can earn well over six figures. According to Glassdoor, the average salary of an investment banking analyst is $177,000, as of December 2023.
In conclusion, investment banking is a rewarding career that involves facilitating financial transactions between companies and investors. It requires a strong educational background, preferably in finance or related disciplines, and often involves starting as an intern or financial analyst before progressing to more senior positions. Professional certifications, such as the CFA designation, can be advantageous in the job market. While the field is competitive, taking the right steps can increase your chances of success.
