Investment banking is a division of the financial services industry that manages and expands the financial assets of its clients. Businesses can invest their assets with the help of investment bankers to boost the value of their portfolios. They typically act as brokers and counsellors, supporting clients in spotting and seizing profitable opportunities. Investment banking is a division of financial institutions and banks that manages transactions for corporations, institutions, commercial and non-commercial banks, as well as state and federal governments. These financial firms provide reliable guidance on mutual funds and stocks. In essence, it is a financial advisory sector that gives investors recommendations on various investments.
Principal Purposes of Investment Banks
- Securities Research
Investment banks carry out a wide range of research and publish a large number of reports that give an in-depth analysis of the financial position and investment portfolio of the company using the “Buy,” “Sell,” and “Hold” rating systems.
- Proprietary Trading Activities
Investment banks engage in proprietary trading activities, such as the purchase and sale of financial instruments, which result in profits with each transaction. It is possible to buy stocks, bonds, derivatives, and a variety of other items.
- Investment Management
Investment banks frequently help businesses by providing sound guidance on making investments in a range of entities that are advantageous to both people and organisations.
What duties fall under the purview of investment bankers?
The main responsibility of investment bankers is to provide their clients with investment advice and support. This means that investment bankers primarily act as counsellors and brokers, determining the needs of their clients before making suitable recommendations. The bankers must negotiate agreements and mergers while making sure that their clients’ best interests are safeguarded once the customer has decided how they wish to proceed.
Careers in Investment Banking
Investment banking positions
The trajectory of an investment banker’s career is often predictable.
Analysts often have less than two years of experience and are fresh grads. They frequently work on data collection, making presentations, and simple financial data analysis. Because the majority of financial concepts are developed at this period, having this experience is essential for anyone who wants to be a successful investment banker.
After three to four years of experience, an analyst is promoted to the level of associate, which comes with additional duties like managing a group of 4-5 analysts and interacting with customers.
- 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 masters 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.
They are 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.
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.