Investment banking roles are among the most sought after of any careers in the wider field of finance.
The large investment banks have an ongoing cachet that most companies can only aspire to — endowing on their employees an alluring mixture of intellectual prowess and prestige.
But investment banking isn’t just restricted to Wall Street alone. There are now thousands of investment banks of various sizes and niches operating across the United States.
DealRoom deals with dozens of investment banks every year giving it some insight into this industry.
In this article, we look at some of the specifics of this career, the pros and cons, and what you can expect from a career in investment banking.
Is a career in investment banking a good career?
The high number of candidates applying for investment banking roles every year points to a career that most view as being a rewarding one.
In 2019, the last time that it revealed figures on job applications, Goldman Sachs received 270,000 applications for its graduate and internship programmes. Given that it ended up hiring 2,790 in total, you’re looking at a little under 100 applications for every role.
By this crude measure, one would assume a career in investment banking to be one of the best around. And it is, for a certain personality trait (see section below).
The salaries in investment banking can be extraordinarily attractive. But the industry is also notorious for employee burnouts and breakdowns owing to the notoriously poor work life balance.
So, is it a good career?
On balance, yes. But it’s certainly not an easy career. At least not at the high end.
How to prepare for work in investment banking
The three main components to investment banking are:
- Pitchbook writing
- Financial modelling
- Sales and negotiations
To succeed, you’ll need strong and proven abilities in all three.
The first two are largely the work of junior investment bankers (analysts) and the further into your career in investment banking that you progress, the more time you’ll spend on sales and negotiations. Showing a strength for all three is important.
It also helps to have good business acumen. Blue chip investment banks often use group interview techniques, where they’re looking at how you interact with other people and get your point across.
For example, they could present a few investments and ask the group to decide which one to forward to the investment committee.
Their HR managers will simply sit and observe what’s happening as the interviewees argue their points with people they met just minutes before.
Education needed for IB
There is no specific career path for investment banking, but investment banks do have a preference for numerative degrees.
Increasingly, that means engineering and physics graduates find their way into the profession, but most commonly, they hire from the traditional fields of economics, finance, business, and management.
And of course, it’s no harm to be from a prestigious school (in fact, it’s a distinct advantage) but not an absolute necessity.
‘Personality’ is not usually a subheading you expect to find in a guide to a career in a career field, but few would argue that it doesn’t deserve a place in a guide to careers in investment banking.
The demands of the career — outlined above — are so taxing that it’s simply not a career for everyone. In short, investment banks are looking for ambitious, high-achievers willing to work impossibly long hours, often under intense pressure.
In the past, this meant (unofficially) that women were a rarity in investment banking.
Thankfully, this is changing and not before time. Having said that, Women already hold senior positions in most of the blue chip investment banks, with Suni Harford being President at UBS Asset Management, for example.
There’s still a long way to go, of course, and this is another indication of the macho personality, traditionally prevalent in investment banking, that still lingers in some corners of the industry.
Experience needed for IB
The best proof that you have what it takes for a career in investment banking is experience in investment banking.
That’s why the blue chip investment banks offer (gruelling) internships to check the chops of those that want to join their ranks.
For the many that are not called to this stage, there are plenty of other routes into investment banking, with experience in small investment banks (lower entry barriers) and management consulting being among the most common.
Again, proven numerical ability is a big plus.
What investment banks love more than anything — across the board — is dealmaking ability. That means the ability to originate deals and to close them.
That is their bread and butter. When you see high-profile appointments being announced in the financial press, the description of those being hired usually talks about the deals they closed in the previous years.
In summary, the best experience of all for investment banking is to show that you can originate and close deals.
How to get a job in IB
In the case that you’re reading this and still in university or at the beginning of your career, you will no doubt be familiar with the calibre of student being called to interview by investment banks.
But even if you don’t get that call, as the outset of this article mentioned, there are thousands of boutique investment banks that are constantly on the lookout for new recruits to add to their team.
Most don’t even require experience, even if it is an advantage.
If you’re further up the career ladder, this can still hold true — there is a way into investment banking through smaller investment banks.
And if there’s one quality of investment banking that nobody can dispute, it’s that it is a meritocracy, where the merit is based on the amount of money that you generate for the business.
If you keep ‘making hay’, there’s nothing to stop you climbing into better positions and more prestigious banks. Watch the hours climb as you do, though.
A final word on how to land a job in investment banking. Some of the biggest deals over the past few years have been in areas that demand highly technical skill sets — microchips, semiconductors and pharmaceuticals.
If you have expertise (and you can walk the walk, as it were) in areas like these, it will be a distinct advantage.in some banks (most banks are called onto less technical deals).
Likewise, a good knowledge of computer science is also a plus, right across the investment banking spectrum.
Gaining an edge
In a field as competitive as investment banking, it pays to have an edge over the field in some way. Anything that can help to give you a few extra points is worthwhile.
Take stock of these three solid improvements that can give you an edge right now:
- Take a course in M&A/financial modelling: Most of these can be done within a short period of time, and DealRoom has already published an article on the best M&A courses and certifications available on the market.
- Close some deals: Wherever you are in your search, it pays to have some deal closing experience behind you. If the last deal you closed was last week, your hand is already strengthened. It doesn’t have to be a mega-deal. It just needs to show your competence.
- Leverage LinkedIn: Ensure that there are keywords on your LinkedIn profile that reflect your job search. Make sure you use keywords like “financial modelling,” “investment banking” and “finance,” to ensure your profile climbs up the rankings when HR managers are searching for new hires.
Salaries in investment banking
It’s not controversial to suggest that investment banking could pay more than any other industry out there.
The size of transactions — even the ones at the lower end of the market — means that by taking just a few percentage points, investment banks are generating significant amounts of money, most of which is divided generously among their bankers.
Again, much will depend on your output: Investment banking is meritocratic for the most part.
Regardless of the size of the investment bank, positions tend to fall into one of four categories. In ascending order of responsibility, these are analyst, associate, vice president and managing director.
Inevitably, the salaries for these positions differ from bank to bank, and the higher the profile the investment bank, the higher the salary will be.
But as a general rule, salaries follow a pattern similar to the following:
- Analyst: $90–100k; bonus up to $100k;
- Associate: $100–125k; bonus up to $150k;
- Vice President: $150–200k; bonus up to $250k;
- Managing Director: $250-$1M; bonus of $2M+
Bonuses really depend on how many deals are being closed by the investment bank.
There is a technical limit here, it’s not difficult to see how it quickly adds up, but also how it’s difficult to pin down exact numbers.
Safe to say that you’ll comfortably be enjoying a six-figure sum within a year or two. From there, it depends on your dealmaking capabilities.
Best investment banks to work for
Vault.com is a careers site focused on investment banking. They conduct a survey every year of the best investment banks to work for based on criteria such as compensation, hours, firm culture, training and work/life balance. The results of their 2020 survey are as follows:
- Centerview Partners
- Goldman Sachs
- Morgan Stanley
- Guggenheim Securities
- Bank of America
- Perella Weinberg Partners
- PJT Partners
- Moelis & Company
Investment banking is not for everyone. The hours are long, the work can be gruelling and competitive, the industry is competitive (not to mention macho), and the higher you go, the more ruthless it becomes. It’s not for the faint-hearted.
But the monetary benefits are unrivalled. If you can take high pressure, tight deadlines and unforgiving hours, all while delivering high-quality work (and maybe even some insights), you should definitely consider investment banking.
Originally published at https://dealroom.net.