Investment banking is a financial industry segment which engages in money raising through issuing securities such as stocks or bonds, aiding corporations and municipalities raise capital financing. Investment bank firms usually divide themselves into Bulge Bracket Investment Banks, Middle Market Investment Banks, and Boutique Investment Banks.
Companies looking to go public often hire investment banks as part of the initial public offering (IPO) process in order to determine their business’ worth and price its shares accurately during an IPO, earning profits through markup while taking on some risks in return.
How does it work?
Investment banking is a division of larger banks that specializes in handling complex financial transactions for corporate clients. Oftentimes it’s kept separate from a company’s trading division in order to avoid conflicts of interest and provide clients with optimal services.
Investment bankers provide essential advice to companies seeking to expand by merging or buying another entity, or undertaking an initial public offering (IPO). They’re also there for private businesses considering taking this route – in cases like mergers, buyouts or even initial public offerings (IPO).
Investment bankers are among the highest-paid jobs on Wall Street. But to become one, you’ll require more than a bachelor’s degree; specialization training can lead to additional employment opportunities and higher pay. According to Payscale data, investment bankers earn an average base salary of $101,300 with bonuses and incentives expected to bring this total closer to six figures by midcareer – typically found in bulge-bracket banks such as JP Morgan, Goldman Sachs or Citibank.
What are the main tasks of an investment banker?
Talented and ambitious individuals can move quickly within investment banks. The minimum entry requirement is typically a degree in finance or economics with relevant work experience; many new investment bankers get their start through internships or summer roles at stockbrokers or venture capital firms; additional education and professional qualifications like the Chartered Institute for Securities & Investment (CISI) qualification can further their career opportunities.
Investment bankers dedicate hours each day to researching market reports and databases in order to gather the knowledge needed for making decisions for their clients, whether that means the latest healthcare innovations or oil fields in Africa.
Investment banks provide clients who wish to acquire businesses a service by finding investors willing to fund the deal and offering advice about the appropriate price to pay for target company, known as equity financing. They may also help clients raise money via debt financing by selling bonds or other instruments as an alternative way of raising cash.
What are the responsibilities of an investment banker?
Investment bankers who achieve success tend to possess both financial knowledge and persuasion skills. Their work often requires spending long hours on the phone soliciting investment deals from clients and soliciting investments themselves, so a strong work ethic with thick skin is needed for success in this industry. Anyone tiring easily or having thin skin won’t last very long in it.
Investment bankers devote a great deal of their time conducting research, building company profiles, and performing financial modeling. Excel skills are necessary for financial modeling work as is an understanding of multiple valuation methodologies; data may come from various sources like industry reports or databases when developing analyses.
Investment bankers with experience can work their way up through the corporate ranks to associates, vice presidents and ultimately managing directors. At each level they take on additional marketing and people-skill tasks while continuing research activities, producing reports and meeting with clients. A managing director serves as the firm’s main salesperson responsible for driving new business into their firm.
How does an investment banker earn a living?
Investment bankers attract many individuals due to the high salaries they can command as investment bankers. Investment bankers’ base pay is typically paid weekly, biweekly or monthly depending on which investment bank it works at; additional benefits often included with investment banking jobs include health insurance plans and 401(k).
Bonuses, which depend on performance, make up another part of compensation structures for investment bankers. Each year’s bonuses may range in size and can even include one-time signing bonuses when joining their respective firms.
To become successful in investment banking, one needs a bachelor’s degree as well as financial skills such as Excel modeling, spreadsheet calculations and market analysis. Majoring in finance or economics may help, as can soft skills like persuasion and tenacity – but soft skills alone won’t cut it – you also must be comfortable working long hours; investment bankers often put in 80 hour weeks at their offices and some offices even provide sleeping bunks for employees who stay late after coming in late from their home lives.