What Is an Investment Banker? Definition and Career Advice
Updated 12 August 2022
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Investment banking can be a rewarding career for those who have the right skills and background training to be successful in this field. It is a high-profile career that requires good analytical and mathematical skills. Knowing how to prepare for this profession is the first step to becoming a successful investment banker.
In this article, we will define investment banking and its different types, and cover what an investment banker does, the skills required for this profession and how you can become one.
What Is An Investment Banker?
An investment banker is a finance professional who works with companies, individuals and governments to help them raise capital by issuing stocks or borrowing money. They provide financial advice during critical financial transactions like mergers and acquisitions. They also provide consultation on when to issue financial securities like bonds or stocks, how many securities should be issued and what price should be set for each security. An investment banker also helps to save time and money for their clients by identifying the risks associated with a project.
What Does An Investment Banker Do?
An investment banker handles many of the financial processes within investment ventures that companies undertake. Profits are based on the amount of fees paid by your clients. Investment banking is an international career, so you may work with clients around the world. You may be expected to vary your work schedule according to different time zones. Investment bankers often work long hours in a high-pressure environment. The work can be stressful, but its high earning potential is often worth the stress.
Several job duties investment bankers perform include:
Coordinating mergers and acquisitions, including building financial models to analyse and support the merger or acquisition
Fixing stock pricing to enable investors to invest in the stocks and raise funds for the growth of the company
Ensuring compliance with financial regulatory institutions, including the Securities and Exchange Board of India (SEBI)
Managing IPOs (Initial Public Offerings) and creating supporting documentation
Helping clients with pricing their financial instruments
Consulting with companies and advising on which securities to issue to investors
Working with companies, firms or other entities to raise private or public funds by issuing securities, underwriting municipal bonds or through equity and debt offerings
Types Of Investment Banking
There are two types of investment banking that you should consider when choosing investment banking as your career:
1. Industry coverage
Investment banks that do industry coverage work usually divide their staff into distinct groups and assign them a specific market or industry segment. The industry coverage team is headed by the managing director, and their responsibility is to stay updated with current news, trends and competitors in their sector. These groups usually form smaller teams to handle different projects for specific clients. The primary purpose of these groups is to look for new clients and manage existing clients within their designated market segment. They handle presentation pitches and ideas to clients, prepare industry reports and execute transactions.
2. Corporate finance
This type of investment banking focuses on arranging finance for their client's new or ongoing projects. Investment bankers specialising in corporate finance often look for innovative ways to raise capital for their clients. For instance, they may help companies obtain capital through securities underwriting. They are also responsible for issuing securities between companies, managing IPOs and executing mergers and acquisitions.
Top 5 Skills Of Investment Banker
An investment banker must have certain characteristics or skills to be successful in this highly competitive field. Here is a list of top skills investment bankers need to succeed in this career:
There is more to this than just understanding analytics, mathematics, finances and economics. You need to understand your role but also how your colleagues' efforts or other factors fit into the overall goal. Investment bankers need intellectual curiosity to solve complex problems and create innovative solutions.
In order to succeed as an investment banker, you should have diligence, self-discipline and patience to spend long hours at work. You also should have the ability to work and perform well under a high-pressure work environment. In order to develop self-discipline, set goals and then achieve them. For instance, accomplish a hard task. Learn a sport, then play at your best as part of a team.
Investment bankers must follow regulations and rules, but they are also challenged to find innovative solutions and to approach situations from a different angle. An investment banker often needs to think creatively in order to obtain capital for new projects. They should have the ability to think innovatively according to different situations and the industry they are working in. You can consider taking entrepreneurial-related classes in college to sharpen this skill.
Cultural competence is the ability of an individual to effectively interact, work and develop relationships with people from varied cultural backgrounds. As a culturally competent banker, you should be broad-minded enough to understand different cultures and societies, a necessity to work with and for international businesses. That knowledge and understanding, combined with being able to communicate in more than one language, is a sought-after skill in investment banking. While in college, consider learning a second language or taking part in a study-abroad program.
Strong social and relationship building skills can help an investment banker deal with difficult clients in stressful situations, maintain a positive attitude and develop and support client relationships. In order to be strong at relationship building with your clients, you should have active listening skills, good analytical skills and the ability to meet or exceed expectations.
How To Become An Investment Banker
Here are the steps that you need to take to become an investment banker:
1. Earn a bachelor's degree in finance or a related field
You should have at least a bachelor's degree in finance to enter this field. There are different entrance exams via which you can take admission to an accredited college or university and earn your bachelor's degree in finance or a related field. For instance, you can choose to pursue your bachelor's degree in accounting, corporate finance, economics, business administration, mathematics or data analytics.
No matter the field of study you choose, you should have strong mathematical skills with a firm understanding of economics and how it is used in corporate finance.
2. Consider a post-graduate degree or MBA
To progress in your career, you can get a post-graduate degree in your majors or pursue an MBA (master's in business administration). Many firms prefer post-graduate degree holders for a position of an analyst or an associate.
It is advisable that you should do your research while choosing a college to pursue your post-graduate degree. Look for a college that offers internships and full-time job opportunities in investment banks. A lesser-known program may still provide you with an MBA or post-graduate degree, but it might not be as impressive for your potential employers.
3. Obtain certification
In order to grow in your career, you can pursue certifications in your field as per industry demands. You can check job portals, blogs or consult with an experienced investment banker about what certification you should do. For instance, you can consider doing the Chartered Accountancy (CA) course governed by the ICAI or the Institute of Charter Accountants of India.
4. Take part in internships or on-the-job training
When pursuing your bachelor's or master's degree, you can do internships during your semester breaks. It will help you enhance your skills, and it is also a chance for you to get first-hand experience working as an investment banker.
You can also get on-the-job training once you join a firm at an entry-level position. You need to complete your training before starting your regular job. Your on-the-job training will mostly cover principles of accounting, markets, risk, financial analysis, statement analysis and financial modelling. The training will also help you develop your presentation and communication skills.
Related: Investment Banking Interview Questions and Answers
5. Advance your career
You should always work to advance your career to be successful in your field. If you have entered your career as an investment banker with a bachelor's degree, you may choose to complete a master's degree or additional certifications. Many firms help their employees to pursue higher education or do on-the-job certifications to develop and enhance their skills.
As you gain more experience in the investment banking field, you will also get opportunities to advance into management roles, where you will manage analysts and associates under your leadership.
Please note that none of the companies, institutions or organisations mentioned in this article are associated with Indeed.
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