How to Start a Career as an Investment Banker

There are 30.2 million small businesses in the United States. A recent survey by Small Business Survey found that over 70% of the small and medium enterprises are struggling with bad debts. Most will require the guidance of financial professionals such as investment bankers to turn the tide.

Investment banking analysts help companies, organizations, and clients to generate funds and grow their financial assets. They advise their clients on how to raise money by selling equity or issuing debt. Investment banking is a highly competitive field, demanding intense work-ethic, quick thinking, and paying exquisite attention to detail. Here is a detailed investment banking career guide that covers how to breakthrough in the industry.

What is an Investment Banker?

Investment bankers are individuals or firms that help other companies and the government raise capital by issuing and selling securities. They provide a detailed analysis of the financial health of their clients while trading equities and debt securities. Investment bankers can also have a hand in business mergers and acquisitions, public offerings, and other large financial transactions.

Investment banks develop strategies for gaining access to funds by leveraging on their extensive networks. The analysts will often create a private placement memorandum that accurately analyzes the value proposition of their clients. This investment banking career guide intends to help you learn the different strategies you can use to break into the financial industry.

What Does an Investment Banker Do?

The primary job description for investment bankers is to find qualified investors for their clients. They determine the value of business enterprises by conducting due diligence on the financial stability of the companies. They may also represent organizations seeking mergers or acquisition of another company.

They also have other functional responsibilities, such as liaising with regulatory bodies and intermediation during securities litigation. Investment bankers can also advise their clients on how to do business with the federal government.

The Allure of Investment Banking Jobs

Investment banking is one of the few industries in which a graduate with only a degree at hand can earn up to six figures within the first year out of school. The high salaries and bonuses make young, ambitious, finance students lean towards the IB field. With the right investment banking career guide, you can use the job as a springboard to more lucrative career options such as venture capital and private equity.

Investment Banking Career Path

This investment banking career guide would be incomplete without detailing the career track. Every investment bank has a unique organizational structure. Since experience is a major determining factor, most companies generally utilize a hierarchical model with added responsibilities at each level.

  • Interns: Most entry-level investment bankers start as interns during their junior year or senior year summer breaks. If successful, the investment bank may make your position permanent as a full-time analyst. You can set yourself up for success by securing an internship program at reputable firms during your college years.
  • Analysts: Most recruiters source their analysts from the crop of interns. Candidates can also apply for the job directly and may be required to have 1-2 years’ experience within the industry. The position may involve mundane tasks such as creating presentations, preparing financial excel models, etc.
  • Associate: After 3-4 years, the analyst may get a promotion to an associate in charge of the analysts. Earning an MBA may increase your chances of promotion. The associate’s responsibilities may lie in pitching investment ideas, finding investors, and bring in new clientele.
  • Vice President: As a VP, you may spend time speaking to the investment bank’s directors and translating the targets to the lower cadres. The VP is in charge of the associates and verifies their work product before handing over to directors.
  • Managing Director: In charge of the entire group, the MD commands all lower tiers, and all staff does their bidding. They may be involved in high-level deal negotiations, especially for larger financial transactions.

How to Become an Investment Banker

At a glance, the job entry levels may seem easy and navigable. However, high demands and expectations throughout the industry make the job market highly competitive. It is not unusual for applicants to overwhelmingly exceed the available job openings. You may need to build yourself up right from the start. Having an investment banking career guide can help you fast-track your IB profession.

1. Education Requirements: Undergraduate Degree

A bachelor’s degree is the bare minimum. You may have to demonstrate outstanding performance for your undergraduate to set yourself apart from the crowd. Most investment banking firms pick candidates with academic backgrounds in finance, business administration, and accounting. Some diversify their hiring process and accept graduates from more technical fields such as mathematics, physics, and economics.

Traditional recruitment processes show that banks headhunt from the best schools. Getting a slot in prestigious colleges may improve your prospects of working with global and well-known investment banks. Can you get a job while studying at less prestigious schools? Yes, but an Ivy League institution may increase the odds to your favor.

Most job seekers tend to pursue a Master of Business Administration degree to spruce up their professional credentials. The master’s degree is common in the mid-level tiers and may fast-track your career advancement. Grades are essential factors to consider during your job search. Graduating top of your class may draw attention to campus recruiters and hiring managers that may wish to bring in the top students.

2. Internship Positions

Every investment banking career guide emphasizes the importance of seeking an internship while still in college. An internship position can be your entry point to your IB career. It can provide real-world experience of the intricacies and nuances of being an investment banker. Most firms are looking for analysts that can hit the ground running. The internship can acclimatize you to the life and culture of the organization. Think of the position as a long-form job interview.

It will also equip you with practical skills that make you attractive to other investment banking firms. You can also benefit from valuable connections and networking opportunities that can help you further your career.

3. Networking

Networking is a vital skill that every investment banker should have. The success of your career hinges on your ability to sell. Before learning how to best move equities and income debts, you must learn how to package and sell yourself. Creating healthy relationships within the industry will catapult you throughout your career. It is a long-term skill that is critical in opening doors for you in this career.

You can start growing your network when pursuing your undergraduate. You can consult the school administration to find out your school’s alumni that are active in the investment banking industry. Another important investment banking career guide is to use LinkedIn to pursue networking opportunities for your career growth. Your persistence will bear fruits when recruiters and investment banks become aware of you, your skills, and your experience.

4. Professional Certifications

The investment banking profession is built on trust, hard work, and results. You, therefore, need to prove your professional competency before any firm can hire you. As an investment banking career guide tip, you need to pick up professional certifications such as CFA on top of your academic qualifications.

Chartered Financial Analyst (CFA)

The CFA credential is the only certification program that carries significant weight within the investment banking industry. The CFA Institute offers the program to professionals that have completed independent graduate education. You need to pass three examinations focusing on investment valuation, company analysis, and portfolio management.

There are no formal classes, but candidates may take approximately 300 hours to prepare for an exam. Most professionals take about 18 months to 4 years to complete the program. The Charterholders can also network with like-minded individuals through the CFA Institute and local CFA societies.

FINRA Licensing Exams

As an investment banker, you need to acquire several licenses from regulatory bodies. The Financial Industry Regulatory Authority is an independent body mandated to offer competency examinations in association with the Securities and Exchange Commission. All investment bankers must pass the FINRA Examinations before getting the license.

I. Series 79 Sponsorship

You will need a Series 79 sponsorship. Series 79 is a licensing examination designed explicitly for investment banking. The test contains 185 questions covering a broad range of topics, including mergers and acquisitions, public investment banking, and financial restructuring. Candidates must attain 70% or higher to pass the exam.

To sit for the FINRA series 79 exam, you need sponsorship from an existing member of FINRA. The sponsor files your application by filling in your registration details and paying for your examination fee. Submission to the Central Registration Depository opens up a window of 120 days for you to sit for the exam.

II. Series 7

The FINRA Series 7 examinations evaluate competency for entry-level registered representatives on general securities. Some investment banking career guides may advise sitting for these examinations. It may be essential for professionals that may wish to prove their competency in areas outside investment banking. You may have to sit for a six-hour exam to acquire this license.

Salaries and Compensation

It is no secret that investment bankers are among the highest salaried professionals within the financial community. Even for low-level analysts, the compensation represents the top one percent when compared earnings in other industries. The payment may come in the form of base salary or bonuses pegged on business performance.

A first-year analyst may earn up to a base salary of $70,000, with third-year analysts taking home approximately $90,000. The earnings may increase with annual bonuses that may range from $50,000 to $100,000.

Associates earn a median salary of $144,000 and may be eligible for company bonuses that range from $80,000 to $130,000. The Vice president (VP) could earn approximately $400,000 to $1 million, with $260,000 being the median base salary. Directors and department heads may take home an average of $300,000 in base salary. However, annual company bonuses can hit $10 million depending on the firm’s performance during that year.

It is vital to note that this investment banking career guide figures are rough estimates and incomplete. The end-of-year bonus amounts depend on the performance bucket you fall into, which may vary from one firm to the next.

Additional Tips to Build a Successful Career

a. Craft a Catchy Resume

The investment banking job market is synonymous with cut-throat competition as candidates fight for the few available job openings. However, the open exit opportunities in the investment banking firms result in many staff changes every few years. It may open a tiny window of opportunity for you to get your foot into the industry.

Internships with prestigious banks can help you build a robust resume. You may also need to show accomplishments outside the academic environment. Stellar recommendations from your network can help you navigate the arduous interview processes.

b. In-depth Knowledge of the Financial Sector

Another tip is to have a solid understanding of the nature of the financial sector at all times. It will not only help you as you kick off your investment banking career but also fuel your career progression. It means keeping tabs with past and present market trends. You also need to become an avid reader to acquire specialized knowledge about new generation investors’ behaviors. Becoming a well-rounded candidate is an excellent way to get noticed.

c. Create a Good Impression

There is a common misconception that investment bankers must be math geniuses. While crunching the numbers may important, you also need to be persuasive, analytical, quick-witted, and with an unmatched work ethic. Most novice investment bankers may clock 70 hours per week. Associates may spend hours on the phone soliciting potential investors and pitching to new clients. You must be willing to give up a bit of your work-life balance as you start and tend to your demanding job.

Investment bankers help companies and governments raise money from the capital markets by issuing stocks or selling equities. The pay may be high, but with a lot demanded from the employee. We hope that this investment banking career guide points you in the right direction for a successful IB profession.

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