The investment banking industry is competitive and fast-paced. If you’re looking for a high-stakes work environment, and have a passion for finance and investment opportunities, you might be interested in pursuing this career.
To be successful, investment bankers need business expertise, emotional intelligence, and leadership skills, along with financial know-how and determination to perform in stressful situations.
Those wishing to enter the field must also have a deep knowledge of investment processes, mathematics, and critical thinking skills to succeed, along with a passion for high-risk and fast-paced work environments.
What Is Investment Banking?
Investment banks are divided into three main areas, which include sales, trading, and asset management. At these organizations, investment bankers offer financial and other services to governments, individuals, and corporations, depending on the size and focus of the institution.
These bankers may raise financial capital through underwriting or — acting on behalf of their client in certain situations — may participate in mergers and acquisitions, and tackle general investment and asset management operations.
What Does an Investment Banker Do?
The daily responsibilities of an investment banker vary greatly depending on the type of organization and what role they assume at the company. Additionally, the investment banking industry is incredibly diverse and fast-paced, which means entry-level bankers could find themselves wearing many hats on any given day. For those who love tackling new challenges and never feeling bored at work, the investment banking industry might be perfect.
On most days, investment bankers may be required to:
- Advise clients on financial situations;
- Analyze operational or financial company performance;
- Collaborate on projects;
- Coordinate operational processes;
- Develop and maintain client relationships;
- Evaluate capital needs of clients;
- Negotiate deals;
- Supervise or train junior team members;
- Create and give client presentations.
Other, more specific duties may include performing securities valuations, specializing in green financial instruments, and conferring with clients to restructure debt.
Skills Required for a Career in Investment Banking
A common misconception about investment banking is that anyone good with numbers will be a great fit for this position. While a natural proclivity for quantitative data and numbers is an asset to any beginning investment banker, there is a range of other skills and personal qualities you must possess to succeed in this career path. Most importantly, you must thrive in a fast-paced work environment, be ambitious, and be willing to work hard to achieve your professional goals.
As one of the only high-paying positions in the finance industry that generally welcomes new or fairly new MBA graduates, investment banking can be one of the most competitive sectors in the banking industry, and many new and veteran employees are expected to work long hours.
A career in investment banking requires a blend of hard and soft skills. Since the industry is so competitive, it’s often necessary to maintain and continue to hone these skills over time.
- Financial analysis: Investment bankers need to be comfortable working with large amounts of numerical data and financial reports. To perform their role well, they need to have a strong grasp of financial modeling, financial statement analysis, and valuation methods.
- Industry knowledge: Since investment bankers specialize in a specific industry, they need to stay current with that sector’s trends, developments, and regulations.
- Attention to detail: Investment banking involves making high-stakes decisions based on complex data, so a keen eye and attention to detail are important to avoid costly mistakes.
- Communication skills: Whether they’re presenting complex financial information to clients or writing detailed financial reports, investment bankers need to be able to communicate clearly and effectively in both the written and verbal word.
While these skills and work demands might seem daunting at first, if you possess an intense drive to succeed in your chosen career, you have the base quantity you need to do well in investment banking.
Educational and Certification Requirements
Most entry-level investment banking positions require a bachelor’s degree, with a typical preference for degrees in finance, economics, or other related fields. While not always required, a master’s degree, such as a Master of Business Administration or a related field, can help candidates stand out in the competitive talent pool. It can also help when you’re trying to advance to a higher position.
Investment banking representatives must be registered with the Financial Industry Regulatory Authority (FINRA). This includes passing the Series 79 exam, as well as following continued education requirements to remain licensed. Certifications such as the Chartered Financial Analyst (CFA) can also be helpful to investment bankers, as well as financial analysts.
These credentials can be very helpful when you’re seeking employment, but they are only part of a well-rounded resume. Banking firms often want to see evidence of hard and soft skills, and some form of previous experience.
Career Path and Progression
In some regions or firms, progression may vary a bit with additional levels or different job titles, but the general progression of roles in investment banking remains similar.
- Analyst: This is the typical entry-level for investment bankers, and is often staffed by recent undergrads. Analysts handle more quantitative work like financial modeling and analysis, and due-diligence reviews. This role typically lasts two to three years before advancing to associate.
- Associate: After working as an analyst or obtaining an MBA, the next level is associate. This role involves more client interaction, as well as managing analysts. Associates have greater responsibility in deal-making processes and the more complex aspects of transactions and pitches.
- Vice president: Vice presidents manage associates and play a significant role in deal execution. They are responsible for ensuring all aspects of a deal progress smoothly.
- Director or senior vice president: These professionals are responsible for bringing in new business. They maintain relationships with clients and are heavily involved in negotiating deals.
- Managing director: At the highest level of the hierarchy, managing directors are involved with the bank’s key clients. They also make high-level strategic decisions for the bank.
The requirements for advancing may differ by firm as well. For example, you might advance from analyst to associate after a few years of experience, or after earning your MBA.
Work Environment
Investment banking can offer a high-pressure and fast-paced work environment. Due to the time-sensitive nature of finance, investment bankers often end up working more than a typical 40-hour work week. They also sometimes have to work weekends and holidays, especially when working on large deals, or during busy periods.
Since many large investment banks are located in New York City, many investment banking roles can be found there as well. However, these bankers frequently work with companies from other countries, so they may be required to travel extensively.
Investment Banker Salary
Investment banking is a bit of an expansive field, and as a result, the pay rate can fluctuate quite a bit by firm, location, and position. According to the U.S. Bureau of Labor Statistics, the median annual salary for a financial services sales agent, such as an investment banker, was $62,910 as of 2021, with the upper 10% earning upwards of $205,440, and the lower 10% earning $37,970.
Pay will also increase according to the position. For instance, Investopedia says managing directors can make more than $400,000 annually. Higher positions often receive annual bonuses as well, which can exceed the amount of their salary.
Pros and Cons of a Career in Investment Banking
A career as an investment banker is fast-paced and can offer some big financial rewards for those who thrive in that type of work environment. However, due to the long hours and stressful days, it can be difficult to maintain a healthy life/work balance.
Sources:
FINRA, “Series 79 Investment Banking Representative Exam”
Investopedia, “The Hierarchy of an Investment Bank”
BLS, “Securities, Commodities, and Financial Services Sales Agents”
Investopedia, “Investment Banking vs Corporate Finance: What’s the Difference?”