Insights /

Investment Banking

Career description

What is it

The investment banking arm (IB) of a bank helps governments, corporations, and institutions raise capital and complete mergers and acquisitions (M&A). An investment banking career is extremely demanding with analysts frequently working 100 hour weeks. The competition for advancement is intense, compensation is extremely high, and the work is very high profile. The tradeoff, however, is long hours, a military-like culture and a lot of grunt work.The IB arm of the bank is further divided into industry groups, such as the Consumer or Fin-tech investment banking groups.

Why interesting?

Many people are drawn to the investment banking career path for the money: even at the mid-levels, you’ll be in the top 1% of income earners in most states and countries. Others are attracted by the excitement of deals and high-stakes negotiations with important people such as CEOs and Board Chairs; some are fascinated by deal mechanics as well.And still others are attracted to investment banking careers because of the exit opportunities, particularly the ones available to junior bankers such as Analysts and Associates

What are the advantages?

Benefits / Advantages:

High salaries and bonuses at all levels.

Potential for quick advancement up the ladder if you perform well.

Access to top-notch exit opportunities, especially as an Analyst.

Industry is unlikely to be disrupted by technology because at the top levels, it’s a relationship-based sales role.

Exposure to many different companies, industries, and management teams.

You gain useful hard and soft skills that apply broadly to different industries and companies.

Advancement is directly linked to your performance and contributions, especially as you move up.

Career path tracks

The investment banking career path and corporate hierarchy is well-defined and hasn’t changed much over time (standard-fast track range):

Intern or Summer Intern:

Assistant to the Analyst (3-6 months)

Analyst:

Data miner (2-3 years)

Associate:

Text supervisor (4-5 years)

Vice President (VP) :

Manager of the Team (3-4 years)

Director or Senior VP (SVP) :

MD in-Training (2-3 years)

Managing Director (MD) :

Ultimate client owner

Entry points

General entry points

Summer internships or other kinds of internship experiences (3 and up to 6 months, sometimes more than one) are typically the most common way to get into Investment Banks, especially the most selective ones.

There are two main entry points into investment banking: analyst and associate. Analysts are recruited from undergraduate (B.Com or B.A.) programs at target schools or other highly regarded universities and after internships. An analyst is typically expected to stay at the position for two to three years, at which point they will either be promoted, go back to business school, or move on to something else. Associates are recruited from MBA and/or other graduate student programs. Strong analysts can be promoted to associate roles, but typically analysts are required to go back to school before being promoted. Associates have similar responsibilities as analysts but take on more responsibility quickly and are on the fast track for promotion. Both roles require extensive financial modelling and presentation building skills.

General requirements/course of studies

Major in business or business related field preferred (science and math majors included) with a minimum 3.5 GPA. Ivy League plays a definite role. Personal connections also.

Masters or advanced qualification in Finance and Statistics. Candidates with MBA degree have an upper edge. Strong hold on econometrics with knowledge of econometric modelling (candidates with undergraduates in STEM courses in their curriculum or engineering background have an advantage). Also here, Ivy League schools provide a definite plus as do personal connections.

Exit points

General exit points

Analysts or associates typically go on to work in private equity (“PE”), hedge funds, equity research, in-house at a corporation, VC, or, more rarely, do something entirely different like starting up a new business. Most investment bankers dream of “graduating” to PE, and the banks are natural feeder systems for these firms. Corporate development (“corp dev”) is a pleasant stepping stone from IB and provides exposure to similar transactions, on the client side.

At smaller banks, your opportunities will be more limited to other banks, corporate finance, and corporate development roles.

Generic personality fit

What are the typical traits of an Investment Banker?

The personality of someone suited to work as an analyst or associate in the IBD of an investment bank has the following character traits:

  • Highly ambitious
  • Competitive
  • Detail oriented
  • Quantitative
  • Polished and presentable

What are the magnets to an investment banking career?

The investment banking career path attracts people who are:

  • Competitive, high achievers who are willing to work long, grinding hours
  • Interested in deals rather than simply following the markets or investing in public companies or other assets
  • Interested in a specific exit opportunity that normally has investment banking as a prerequisite, such as private equity or corporate development

Generic role

Typical IB role

Investment bankers advise companies on large, corporate-level transactions such as mergers and acquisitions and debt and equity issuances.“Advise companies” means “Work with management teams to market and sell companies, find potential targets to acquire, and make deals go through; or recommend the best terms and timing for a capital raise and then market that debt or equity issuance to investors.” The role is part advice, part sales and marketing, and part negotiation and deal-making – on a grand scale.


High level compensation

US reference

Below is a guideline of how much you can earn in IB. It should be noted that there can be a wide range based on the bank, the year, and the city you’re working in.

Analyst

$100,000 to $150,000 (base salary plus bonus)

Associate

$150,000 to $300,000 (base salary plus bonus)

VP/Director/MD

$300,000 to $1,000,000+

Here’s a summary of what to expect at each level:

Analyst

Typical Age Range: 22-27

Base Salary (USD): $85-$95K

Total Compensation (USD): $150-$200K

Timeframe for Promotion: 2-3 years

Associate

Typical Age Range: 25-35

Base Salary (USD): $140-$180K

Total Compensation (USD): $250-$400K

Timeframe for Promotion: 3-4 years

Vice President (VP)

Typical Age Range: 28-40

Base Salary (USD): $200-$300K

Total Compensation (USD): $450-$700K

Timeframe for Promotion: 3-4 years

Director / Senior Vice President (SVP) / Principal

Typical Age Range: 32-45

Base Salary (USD): $250-$350K

Total Compensation (USD): $500-$1,000K

Timeframe for Promotion: 2-3 years

Managing Director (MD)

Typical Age Range: 35-50

Base Salary (USD): $400-$600K

Total Compensation (USD): $1,000K+ (can be in the tens of millions)

Timeframe for Promotion: N/A

Specific roles & responsibilities

Intern
Responsibility:

Assistant to the analyst and more in general the deal team with day to day responsibilities

Role:

Research material for pitch books, monitor and update contact/deal database

Analyst (Entry level)
Responsibility:

Create financial models for pitch books

Role:

Performs company valuations, comparable comps, relative valuations, hardcore data punching, populate historical data, perform industry research, conduct due diligence, perform administrative work (virtual data room org & control, travel arrangements, call and meeting scheduling.

Associate (Amber level)
Responsibility:

Supervision of pitch production process

Role:

Check work of Analyst and write the text for the presentations. Some minor client interaction.

Vice president (Bronze level)
Responsibility:

Project Management

Role:

Handle structure of presentation.

Director/SVP (Silver level)

Responsibility:

Commercial

Role:

Leading client interaction, team management

Managing Director (Gold level)
Responsibility:

Commercial

Role:

Prospecting, networking, client meetings


Typical sacrifices

Specific sacrifices required in an IB career
Drawbacks / Disadvantages:

Terrible work/life balance and brutal hours; even at the top levels, the lifestyle isn’t great since you’ll have to travel a lot more. Often boring, repetitive work and lots of downtime where you’re waiting around for other people. Easy to get “stuck in the middle” and not be good enough to advance to the top. More limited exit opportunities if you try to leave the field in the mid-levels.

You do nothing useful for the world and make no positive social impact unless you get rich enough to donate to charities.

Its extremely tough to get into the industry if you get a late start, you’re a career changer, or you attend a non-target school. One or more internships are required to land a FT job.


Typical skills

Typical skills required to work in IB
Generic skills:

The investment banking career path fits people who are: Extremely attentive to detail. Solid in terms of reading/writing and math, though not necessarily amazing in either area, as little “real math” is required. Fast paced.

Specific skills:

MS Excel proficiency, Financial modelling, knowledge of Derivatives-Fixed Income-Securities-Corporate Finance, proficiency in discounted cash flow valuations.


Start your journey

Understand what career path best fits you.
Be honest, be thorough.