A career in investment banking is the right career choice for people who take pleasure in analyzing financial data, interacting with people, managing financial transactions and negotiating. An investment banker can have various responsibilities such as locating buyers for firms, overseeing mergers or acquisitions, fund raising for a company or client, analysis of a firm’s financial health and valuation of a firm’s asset. In addition to these responsibilities, investment bankers are also required to raise funds for companies through the sale of stocks via the stock exchange and public offers or by finding the right set of private investors or buyers who are interested in what they have to offer. Investment bankers also play an important role during mergers and acquisitions. They become the reliable intermediary and have the ability to bring together two separate parties and help them co-exist and leverage each other’s strength for further growth. In the case of a distraught firm, investment bankers are also required to locate prospective buyers who can still use the assets of such a firm to either turn it around or utilize the employee’s talents to enhance their existing businesses.
This is by and large what an investment banker’s role entails, however various analysts and associates interested in reaching these level often start their careers by specializing in a particular area. The wages in the industry are generally much higher than average, but so are the expectations and job requirements. Analysts and associates are high stress positions that typically work long hours under a lot of pressure to meet tight deadlines. Initially, entry-level employees work in teams as analysts and start with data analysis and preparation of reports. Their job is to help senior associates and bankers deal with clients by providing all the information and support that they require. Senior investment bankers are the ones who deal directly with clients because in order to make sound high risk investment decisions, it is necessary to have significant experience in various areas of investment banking. Given the high level of commitment that is required from analysts and associates, it is advised that only individuals with an analytical frame of mind who have the willingness and ability to work through the numbers in addition to the ability to think critically and understand businesses, choose this area of work. Aspirants should also be able to work extended hours and lead a flexible lifestyle that can accommodate frequent travel. Additionally, they must be able to interact and connect with people from various personalities and cultural backgrounds.
The outlook for an investment banking career is steady because these professionals are in demand globally and the job market is growing at the same rate as the overall average for all occupations. The recent recession did reduce the demand for investment bankers temporarily, but even then there was a demand for in the emerging economies such as China, Brazil and India as they have been experiencing steady growth. There is always work available in this industry for individuals who do not mind being global citizens.
Required Education and Training
There is no tailor-made degree that guarantees you a career as an investment banker. Entry level analyst positions are normally open to graduates of any Bachelor’s degree that investment banking firms are looking for. While a degree is necessary, it is not sufficient. It is equally important to be knowledgeable in one or more of the following areas: finance, advanced mathematics, statistics, international business, accounting etc.
Well-known, reputable firms such as Goldman Sachs rarely hire candidates from anywhere other than the top business schools around the globe. This is because these institutions are known for the quality of their programs and the high level of expertise and experience that they require their graduates have. Each top level college or university provides the best investment banking firms with many candidates who have studied mathematics, accounting or finance in depth in addition to having industry experience in the financial sector. A Master’s in Business Administration (MBA) from a prestigious institute is probably the only degree that ensures the eligibility of a candidate for the position of an associate (which is a higher position than an analyst). That said, there are also cases where these firms have hired analysts with a background in non-traditional fields such as history, botany or liberal arts. This is because they have proved that they are fast learners and have already undergone some specialized training in finance or taken the required courses during their graduation.
Apart from a formal master’s degree from a top business school, there are various training and certification opportunities that are regarded well in the investment banking industry. For areas of the industry that deal with securities analysis, the Chartered Financial Analyst (CFA) certification is highly regarded and there are many students and professionals who pursue this certification while completing a Master’s/Bachelor’s degree or working full-time job. The Certified Management Accountant (CMA) certification is valued higher when a position involves financial analysis. There are specific training and certification requirements for each position in the industry and many of these positions require re-certification or re-testing every few years to affirm a candidate’s competency levels. Rigorous internal training is provided by firms to new analysts based on their particular job requirements and their current competency levels.
Investment Banking Salary Guide
A starting investment banking salary is typically directly proportional to an individual’s degree and educational background, so an extensive education can help an aspiring candidate secure a higher salary and a better starting position. The starting salary for an analyst position that requires a bachelor’s degree ranges from $70,000 to $120,000 (including bonuses). The salary for an associate position that requires a Master of Business Administration (MBA) degree can range from $90,000 to $180,000 (including bonuses). The salary an individual receives is based on their personal qualifications, educational background and past work experience. Bonuses are typically 10% to 20% of the base salary and are paid annually. These days stock options or other forms of equity are included as part of the salary. There is usually a clause included with the equity payments that states that takes a few years until the equity can be turned into cash. This is done to ensure employee retention. However, entry level jobs do not usually offer equity options.
The average salary for an investment banker working in the United States is $87,740 according the May 2011 report released by the Bureau of Labor Statistics (BLS). This corresponds to a mean hourly wage of $42.18. The salaries collected in the study ranged from the 10th percentile of $46,300 to the 90th percentile of $145,580. Around 226,340 are currently employed in the United States.
The three industries with the highest salaries were (in order):
• Advertising, Public Relations, and Related Services – $129,160 per year (employs 440)
• Securities and Commodity Exchanges – $114,430 per year (employs 450)
• Other Investment Pools and Funds – $109,440 per year (employs 2,190)
And here are the industries that employ the most forensic scientists:
• Management of Companies and Enterprises – $82,050 per year (employs 27,190)
• Depository Credit Intermediation – $81,580 per year (employs 18,630)
• Securities and Commodity Contracts Intermediation and Brokerage – $102,220 per year (employs 18,330)
Salary by Years Experience (United States)
Based on statistics collected by payscale.com, an average investment banker’s salary ranges from $44,966 to $202,998 (including profit sharing and bonuses). These statistics were collected from 637 investment professionals, most of whom had 1-4 years of experience. The reported average salary is around $85,000.
The key to success in the initial years of an aspiring investment banker’s career is to ensure that you are part of a good learning environment and that you have a supportive mentor. It is advised to overlook minor differences in the investment banking salary in order to be in this kind of environment as the knowledge you acquire will be extremely beneficial in the long run.