Careers in Investment Banking
One of the biggest attractions motivating thousands of students down the yellow brick road towards MBA Oz is a degree and a career in Finance. And the crowning glory in the industry is a career in investment banking.
Definition
What is Investment Banking?
Investment Banking is all about providing a valuable financial service to investing individuals and organizations, helping them create and grow their wealth through key investment strategies and risk management.
And what’s in it for the investment bankers? Returns. Not just for their investors but a considerable compensation for the bankers themselves.
The combined net revenue and profit of the top global investment banks range well over $2 trillion, surpassing the GDP of many countries. And Investment Banking services contribute a significant fraction towards these large revenues.
Corporations rely on the financial wizardry of I-Bankers and I-Banks rely on the sound business education of MBA and related graduates to fill their talent pool.
Is Investment Banking wandering in and about your future career plan? We present here a window into what entails to be a successful Investment Banker – education and skill requirements, best schools, compensations, job prospects, best firms, etc.
But in the interest of completeness, we will also help you understand the demands and the drawbacks of life as an investment banker. So, cruise along with us as you gather information and prepare for the warnings that lurk behind this glitzy career.
Why choose an Investment Banking career?
Investment banking (IB) denotes a financial service that creates capital for individuals and organizations by counselling on market strategies that can minimize their risks and maximize their returns. They provide assistance for mergers, acquisitions, and restructuring.
That being said, the reason why IB draws some of the best brains in finance is not just the huge compensation that grows wildly with hierarchy within the firms. Of course it is a major attraction, but there are other very important and yet more humble reasons as well.
One being the ability to face analytical tools and learn them on the job very early on in an IB career. Financial modelling is a big part of an investment banker’s job, to perform valuations of investments and risks within the constraints of the knowns and unknowns.
IB’ers get to soil their hands through this system while getting close and personal with the second advantage of being an I-banker – the ability to learn from real and big corporate transactions.
The end result is a wholesome learning experience that can at the same time propel you to bigger better roles within the investment banking realm or branch out into other paths like private equity, hedge funds, or even your own enterprise.
– Career in Investment Banking vs Management Consulting
Types of Investment Banks
As with most industries, there are small to big investment banks that cater to the needs of specific, or many, financial areas of corporations.
They also vary in their scope and services that span investment banking, lending, treasury and securities, asset management, trading, brokerage, commercial or private banking, mergers & acquisitions, mortgage, etc.
Bulge Bracket
These are highly ubiquitous investment banks like Goldman Sachs, Credit Suisse and such other names that are synonymous with big money big corporation transactions. They can have services across the globe and typically employ fresh graduates who are trained to become part of their large employee body.
Read more: Bulge bracket banks
Regional and Mid-Market Banks
There are regional banks that provide selected services to certain selected areas. They tend to hire experienced IB’ers. A slightly expanded version, in the mid-market range, may even explore different areas or larger corporations with broader services. Example: William Blair & Co., Robert W. Baird & Co., KPMG Corporate Finance, etc.
Boutique Market
Finally, there are the boutique investment banks that provide specialized services and operate in various regions with a relatively small staff of highly experienced IB’ers. Example Roth Capital, Cowen Group, Allen & Co., etc.
Salaries and career growth in Investment Banking
Investment banking is a top career choice for individuals seeking the challenges of an analytical job profile and the rewards that come with it, namely compensation. It is demanding, hectic, stressful, and still manages to lure business and quant graduates around the globe.
Entry level analysts in i-banks usually handle excel and power point work, track buying and selling, manage documentation and correspond with clients.
You could be spending anywhere between 2 to over 5 years as an analyst, sometimes making close to $200,000 if you are successful. Very long hop skip and leaps later you can be ushered into the position of VP, Director or even higher.
The career progression from being an analyst to a managing director in an investment bank can take more than 12 years.
Here’s a look at the typical career progression as an investment banker, if you meet all the excelling standards of performance.
Career Growth in Investment Banking
| From | To | Average Period |
|---|---|---|
| Analyst | Associate with MBA | 2 years |
| Associate (typically MBA) | Vice President | 3 years |
| Vice President | Senior Vice President | 3-4 years |
| Senior Vice President | Managing Director | 2-3 years |
Salaries are, by far, one of the best in the post-MBA career choices. In the US, the average starting base salary for analysts is between $75,000 and $96,000 a year. If you add various bonuses like signing and stub bonus earnings, along the way, these salaries can shoot up to around $150,000 or more, even for first year analysts.
However, USA and other banking hubs like London (UK), housing some of the banking elites like JPMorgan Chase, Goldman Sachs, Citi, Wells Fargo, Bank of America, and more, pay some of the highest salaries in the industry.
Others like India and Canada have a much smaller industry and pay substantially lower than USA and UK. So, here’s a look at some of the typical “total compensations” for investment bankers in different countries.
– How much do investment bankers make around the world?
Median Salary by experience
| Levels & years | USA (USD) | UK (British Pound) | Canada (Canadian Dollar) | India (INR) |
|---|---|---|---|---|
| Analyst (<5 years) | $135,000-$200,000 | £80,000-£110,000 | C$73,000 | ₹8,30,000 |
| Associate (5-10 years) | $180,000-$250,000 | £120,000-£220,000 | C$87,000 | ₹20,00,000 |
| VP (10-20 years) | $220,000-$400,000 | £250,000-£350,000 | C$105,000 | ₹20,00,000 – ₹60,00,000 |
| Director/MD (>20 years) | $200,000-$10,000,000 | £1.1 million> | C$120,000 | NA |
In addition to salary and bonus, bankers benefit from health insurance, vacation, and profit-sharing or retirement packages.
It is important to bear in mind that the above representative salaries are for front office (M&A, capital markets, sales and trading, equity research, etc) investment banking only and do not reflect other job roles in the industry.
Also, there is a high chance that the glamour may evade you while you struggle to make your name in the banking industry. That being said, Goldman Sachs paid its top 700 bankers over a million pounds in 2016.
So, while we are on topic, let us take a look at some of the top banks in the world and how do they typically pay their entry level employees.
Also read about Technology jobs and salaries in investment banking after MBA.
Top Investment Banks
These are among some of the most renowned names that have the juice to move and shake economies around the world. Investment banking services are often a part of the variety of financial services offered by these institutions.
Bulge bracket (9 worldwide), mid-market, or boutique investment banks offer a variety of solutions to corporates and individuals, employing the smartest and some of the most hard-working business professionals. Let us take a look at a few in this representative list.
| Investment Bank | Services | Revenue (parent company) / No. of staff (approx) | Average Associate Salary (First year incl bonus) |
|---|---|---|---|
| Goldman Sachs (USA) | Bulge Bracket – Financial advisory, M&A, underwriting, financial portfolios, investment management, etc. | $37 billion/
40,000 employees worldwide |
$140,000 |
| JP Morgan Chase (USA) | Bulge Bracket – Investment management, asset management, trading, securities, pension, investment portfolios, etc. | $116 billion/
260,000 worldwide |
$139,000 |
| Morgan Stanley (USA) | Bulge Bracket – Financial advisory, M&A, stockbrokerage, real estate investment, private equity, investment management, etc. | $42 billion/ 61,000 worldwide | $120,000 |
| Credit Suisse (Switzerland) | Bulge Bracket – Securities, equity, M&A, fixed income, mutual funds, hedge funds, investment advisory, etc. | $24 billion/ 48,000 | $160,000 |
| Bank of America Merrill Lynch (USA)
|
Bulge Bracket – M&A, equity and debt capital markets, lending, trading, risk management, liquidity and payments management, etc. | $92 billion/ 205,000 | $144,000 |
| Barclays Capital (UK) | Bulge Bracket – Financial advisory, risk management, equity and debt capital markets, risk management, research, and liquidity and payments management, etc. | $27 billion/ 85,000 | <$200,000 |
| Citigroup (USA) | Bulge Bracket – Financial advisory, M&A, underwriting, investment management, etc. | $20 billion/ 204,000 | $141,000 |
| Deutsche Bank (Germany) | Bulge Bracket – Sales, trading, research of debt and equity, risk management, M&A, corporate finance, wealth management, retail banking, fund management, etc. | $25 billion/ 88,000 | $163,000 |
| UBS (Switzerland) | Bulge Bracket – Investment banking and wealth and asset management services, securities and other financial products and research, advisory and underwriting services, and private placement of equity, debt, and derivatives. | $31 billion/ 67,000 | <$200,000 |
| Allen & Company (USA) | Boutique – Global M&A advisory focused on Media & Entertainment | Undisclosed/ 170 | $111,000 + bonus |
| Cowen Group (USA) | Boutique – Global M&A advisory, research, asset management, etc. | $16 million/ 1,100 | $225,000 |
| Baird (USA) | Mid Market – Private wealth management, asset management, equity capital markets, fixed income, private equity, etc. | $1.2 billion/ 3,100 | $120,000 |
| KPMG Corporate Finance (Netherlands) | Mid Market – Accounting, tax and audit. | $30 billion/ 220,000 | $127,000 |
Sources: Dartmouth Partners, Glassdoor & Wall Street Oasis
Other names include Perella Weinberg Partners, Rothschild, Blackstone and Houlihan Lokey among boutique investment banks and Lincoln International, Harris William & Co, and Lazard in mid-market, among others we have not included but are just as successful.
– Investment banking in Europe
How to become an Investment Banker?
The most common way to enter the world of investment banking is after graduation, preferably with an MBA or a Maths centric degree with a healthy sprinkle of finance knowledge. The grand entrance is usually made as a lowly intern. The light at the end of the internship tunnel is usually shorn with an offer letter to join the firm as an analyst.
While it is true that non-business majors without an MBA degree have been known to meander through the corridors of investment banks, it is a far rarer occurrence than the other end of the spectrum.
It is a highly competitive field with enough finance veterans lining up with experiences and courses adorning their resumes. To make it in without experience and no MBA, it is important to shine ample light on what you can offer as a rookie in the investment banking firm.
On the flip side, though it is easy to imagine that some of the top business schools are also feeders for a finance career, especially investment banks, it is not entirely true.
Making into a banking career after MBA is as much about utilizing the training and exposure in the MBA program itself as are the following that are gained outside of the program (Read Investment Banking from a non-target school).
Networking
Even before you use the skill to land clients in your job as an investment banker, you need to make the right moves to get recruited. Get connected to the right people in the industry. Seek out their advice and track how they made it into the industry when they did, learning from their experience.
Business and quantitative training
Investment bankers rely heavily on analytical tools and use them for finance. Getting a good handle on those skills can surely help you gain an edge over the other thousands who you will be competing with.
Internships
As students, internships can prove to be a powerful tool to understand the way the finance sector works. This insider’s look can transform the connections and knowledge to help get recruited. It can also serve to test whether your motivation to become an investment banker is resolute and can endure the hours and stress of the lifestyle.
An MBA, as we mentioned before, is the typical route to investment banking and some schools are generally known to perform better in i-banking placements than others.
According to recent data resourced by eFinancial Careers, these are some of the top feeder schools for investment banking. The particulars on the number of students employed in i-banks in recent years have been obtained from university employment reports.
| Business School | % Placement in Finance* | % Class in Investment Management & Banking |
|---|---|---|
| University of Pennsylvania Wharton | 35.8% | 16.4% |
| New York University Stern | 29.4% | 22.6% |
| Columbia Business School | 34.3% | 21.6% |
| London Business School | 26% | 12% |
| University of Chicago Booth | 31.3% | 16% |
| Harvard Business School | 29% | 7% |
| HEC Paris | 19% | NA |
| Stanford Graduate School of Business | 33% | 6% |
| Carnegie Mellon Tepper | 18.7% | 5.3% |
| Dartmouth College Tuck | 24% | 15% |
* Investment Banking + Investment Management + Hedge Funds + VC/PE +Others
Other b-schools known for their placements in i-banks are Cornell Johnson, Oxford Said, Cambridge Judge, Kellogg, Yale SOM, IESE, Virginia Darden. Berkeley Haas, Duke Fuqua, Imperial College, UCLA Anderson, IE, ESADE, Baruch College, IIMA and some more you will find here.
And some other stories that may help you make the transition.
– How to become an investment banker?
– From engineering to investment banking
– From strategy consulting at McKinsey to investment banking
Investment Banking Job Applications
We cover some of the basics of getting noticed and recruited into the top i-banking firms. Along with the education and skills, it is important to know how to market your candidacy for such coveted positions. So, here is a sneak peek into tips for cover letters, resumes and standard i-banking interviews.
Read MBA application tips for investment banking applicants
Investment Banking Cover Letter
Cover letters are usually not required for fresh out of school recruits in the big investment banks. They typically rely on resumes.
However, it is a good practice to invest some time in crafting a “good” cover letter that leaves a positive impression and eggs the recruiters to be interested in the candidate.
We have covered the various aspects of an investment banking cover letter for both the experienced and inexperienced applicant here in this article – Investment Banking Cover Letter tips and samples.
To summarize though, inexperienced candidates should cover these four aspects in their cover letters –
– Introduction: Who are you. Where are you studying, interning. How did you find us, etc.
– Background: What is your relevant internship or education experience. What skills do you have to offer?
– Fit: Why do you consider this to be a good fit to your career?
– Conclusion: Summarize, thank and direct them towards your resume. Also provide contact information for future correspondence.
For the experienced, the cover letter should be like narrative story telling, emphasizing achievements and relevant skills gained thus far and how they would translate into a successful career in the recruiting firm.
Investment Banking Resume
The experienced typically have a good insider’s knowledge on what is it that would make their resume desirable –past background achievements or training.
The inexperienced investment banking applicant need to make their resume appealing, despite their apparent lack of i-banking achievements. In other words, they need to “bankify” their resume to be worth the recruiter’s time.
We have covered just how that can be done in this article – How to create an investment banking resume with no experience?
Here are some of the key factors that can push your resume ahead.
– Give the resume an i-banking spin by emphasizing achievements or engagements that highlight skills relevant to the job. For example, participation in a case competition conducted by a leading IB, management of an investment fund at college, or work related to finance modeling or valuation. This is better than mentioning any experience in a non-finance field.
– Stand out with initiatives that can help your case as someone passionate about finance. Talk about your experience pioneering a finance related newsletter or blog to show your know-how, preparing a “pitch book” or a “deal model” with your job application, or any form of favourable differentiation that can put your resume on the IB staffer’s radar. It can also be helpful to emphasize your education and skills pertaining to your future as an I-banker such as courses or certifications or a general experience in the analytical tools employed by financial analysts.
And finally, talk about your education, skills and personality that can make you a perfect fit in the i-banking culture.
Investment Banking interview tips
With a job as competitive as investment banking, interviews are meant to not just size up the relevant skills, but also the mettle needed to survive the job. Interviews test candidates on the following:
– Technical & cultural fit
– Analytical and critical thinking abilities
– Problem-solving and the ability to think on your feet
– The capacity to work under pressure
– The ability to communicate and structure your thoughts
These articles will help you get a good grip on investment banking and consulting interview preparation.
– Interview questions for investment banking jobs with tips
– How to answer brain teasers in interviews for consulting and investment banking jobs?
– Market sizing questions, examples and answers
Is an Investment Banking career worth it?
The rewards of a career in investment banking may not be enough for the ones facing hard personal compromises along the way. Regarded by experts as one of the most work-life imbalanced jobs with high levels of stress, i-banking can prove to be a harsh career choice for many.
In fact, this article on the dark side of investment banking lays down the many shortcomings behind the scenes, usually well hidden by the high salaries and rocketing growth on the job.
Lack of sustainability and consistency in performance, monotony, high competition, lack of personal time and too much adrenaline can make for a very isolating lifestyle. It is also typically much harsher on women in investment banking, facing an unhealthy amount of sexism and harassment in a highly dog-eat-dog working environment.
A considerable number of investment bankers choose to leave their career for either related fields or a clean break into other unrelated options. Some end up in other finance-services areas with the same routine as their IB jobs.
The new jobs all involve taxing hours that leave very little time for a fulfilling personal life. While some make efforts to make their IB experience a stepping stone to a different career. Some manage to create gainful opportunities using their client and industry exposure to become entrepreneurs or volunteer for social service.
Here are some typical exit options for investment bankers and From Investment Banking to CleanTech after MBA.
If you love the challenge of dealing with significant financial decisions, live and breathe analytically, feel the passion for taking on risks and love the exhilaration of big rewards notwithstanding the pressures and stress involved, investment banking could be the right career path.
Check out our articles here on investment banking and explore how your situation now can help you land a future there. And if you need any professional help getting into the best business schools for investment banking, you can come knocking on our virtual door here at: info [at] mbacrystalball [dot] com.
Sources: 1, 2, 3, 4, 5, 6, 7, 8, 9