What is investment banking?
Investment banking is a branch of the financial services sector dedicated to managing and growing clients’ financial assets. Investment bankers assist businesses in investing their assets in order to increase the value of their portfolios. They primarily serve as counsellors and brokers, assisting clients in identifying and seizing lucrative possibilities. Investment banking is a section of financial institutions and banks that handles transactions for the state and federal governments, as well as corporations, institutions, commercial and non-commercial banks. These financial institutions offer sound advice on equities and mutual funds. It is essentially a financial advice industry that advises investors on various investments.
Main Functions of Investment Banks:
Securities research: Investment banks conduct many types of research and release numerous reports that provide a full report on the company’s status and investments using the “Buy,” “Sell,” and “Hold” rating systems.
Proprietary trading activities: Investment banks participate in proprietary trading activities, such as buying and selling financial instruments, which generate profits in each transaction. Stocks, bonds, derivatives, and many other products are available.
Investment management: Investment banks typically assist organisations by offering proper advice on investments in a variety of entities that benefit individuals or organisations.
What are the responsibilities of investment bankers?
Investment bankers’ principal role is to advise their clients on investments and to assist them in making those investments. This means that investment bankers primarily serve as advisors and brokers, assessing their clients’ needs and then recommending appropriate solutions. Once the customer has selected how they want to proceed, the bankers must negotiate deals and mergers while ensuring that their client’s best interests are protected.
A Career in Investment Banking:
Positions in Investment Banking
An investment banker’s career follows a reasonably predictable course.
Analyst: Analysts are typically recent graduates or employees with less than two years of experience. They are typically involved in data collecting, presentation creation, and basic financial data analysis. This experience is critical for any aspirant to be a good investment banker because it is during this time that most financial concepts are created.
Associate: An analyst is promoted to the status of associate after 3-4 years of experience, with extra responsibilities such as customer interaction and supervising a team of 4-5 analysts.
Vice President: A vice president is typically an investment banking expert with extensive project expertise. A vice president is in charge of maintaining client relationships and ensuring operational efficiency at all levels of the organisation.
The Managing Director or Director: It is a very senior position in investment banking that can only be attained after 15-20 years of expertise. An MD is typically in charge of increasing business and converting potential clients into actual clients.
A bachelor’s degree in accounting and finance is required for entry into the investment banking industry. Some of the world’s most prestigious investment banks seek master’s and MBA’s in finance with common courses including economics, marketing, mathematics, accounting, and financial reporting. Aspirants in this field should be licenced in a variety of stock exchange systems.
Analysts: Recruited from target schools’ undergraduate (B.Com or B.A.) programmes or other prestigious universities. An analyst is expected to stay for two to three years before being promoted, returning to business school, or moving on to something new.
Associates: MBA and/or other graduate student programmes are used to recruit associates. Strong analysts can be promoted to associate jobs, but most analysts will have to return to school to do chevalier. Associates have identical obligations to analysts, but they take on more responsibility more quickly and are promoted quickly. Both professions necessitate advanced financial modelling and presenting skills.
Chartered Financial Analysts with valid qualifications from CFA institutes are preferred by many investment banks. The CFA exam covers the whole investment banking process, including investment valuation, company analysis, and portfolio management.
Internships are crucial during your MBA
Although the majority of entry-level investment bankers begin their careers as financial analysts, the investment banking career path truly begins with an internship. In reality, both large and small boutique banks hire entry-level staff from their annual crop of interns, so landing an internship while still in college is critical to your career.
Investment Banking Careers and Job Domains:
The following is a broad classification of services provided by investment banking firms:
- Corporate Finance
The segment of a firm that deals with financial and investment choices is known as corporate finance. The primary goal of corporate finance is to maximise shareholder value through long- and short-term financial planning and the implementation of diverse methods. Capital investment decisions to investment banking are all part of corporate finance.
In a corporate finance position, you would assist the customer in raising funds to fund new initiatives or expand current operations. The team should have a solid understanding of applied finance and its ideas since it entails calculating the correct balance between equity, debt, and securities to achieve higher levels of profitability. This is the most widespread profile in the investment banking domain and is usually considered as a foundation of investment banking.
- Mergers and Acquisitions (M&A)
The team is in charge of providing strategic client service and acting as an advisor in the valuation, structuring, and negotiation of the agreement. This area is one of the most lucrative for investment bankers all over the world.
Starting a job in investment banking with this profile can be tough. Before being considered for this position, a candidate must have at least 4-5 years of hands-on experience in financial services, as the work entails a lot of strategy development and exposure to numerous aspects of financial management.
- Capital Markets
It encompasses both stock and debt markets, with the team advising the client on the best time, valuation, and issuance form. Investment banks frequently assist their clients in raising capital in the market. This necessitates a thorough knowledge of the capital market and its volatility.
The majority of investment bankers around the world start with this profile. In this profile, an aspirant can start as an analyst and subsequently progress through several investment banking streams. A candidate for this position should have strong financial, securities, and derivatives analytical skills.
- Trading and Sales
The team is in charge of executing transactions in shares, currencies, bonds, and other securities with other institutional investors and traders on behalf of the customers. It’s one of the most sought-after occupations in investment banks, and it necessitates a thorough knowledge of financial instruments, capital markets, options futures, and derivatives.
Interpersonal and communication skills are essential since they entail spoken and organised, written interactions at all levels. This is one of the most rapidly growing investment banking profiles. For an investment banker to rise up the hierarchy in this profile, consistency in performance is critical.
Because performance can be easily quantified in such a profile, an analyst can quickly advance to senior associate. Investment bankers provide a variety of services to their clients, including equity and debt research, financial restructuring, public financing, and project finance.