A Guide to Investment Banking
When considering the role investment banking plays in the banking sector and global economy, many people conjure an image of city fat cats or Wall Street wolves. To some extent, the finance sector is yet to shake off this image, but in reality investment banking is integral to the success of our economy, and thus when done with the right checks and accountability can have a significantly positive impact on wider society.
Financial Services 101
The variety of financial requirements individuals and businesses have is wide ranging. There are many reasons behind why we save and borrow money at different points in our life cycle, and broadly speaking, the life cycle of our banking needs is the same no matter which corner of the world you are located.
The financial institutions which facilitate these requirements operate within a monetary framework which is designed and implemented by the world’s central banks, such as the European Central Bank, the Bank of England and the Federal Reserve in the USA. In addition to the monetary framework, the central banks also handle the exchange rate policy and the supervision of the banking sector.
What does an investment banker do?
By explaining the different functions within Investment banking and highlighting the differing roles it is easier to understand how these functions relate to our own day to day lives. It may also help shake off the image many people have of investment bankers and make you consider a career in this complex yet fascinating function of the banking world!
Traditionally the investment bank, or merchant bank as it is was known, specialised in trade arrangements between different countries. They now have a wide range of services they offer to the corporate sector.
For example, they provide advice on corporate finance, identifying and securing privatisation, mergers and acquisitions, invest and manage large monetary funds, arrange corporate bonds and handle equity issues. They also have considerable expertise in dealing with foreign exchange.
An investment banker is adept at analysing and interpreting complex numerical information, as well as assessing and forecasting financial risks and returns in order to make investment recommendations to clients.
In addition, investment bankers will build extensive knowledge of the global market place simply due to the nature of their business. They will be connected with all financial centres worldwide and will find themselves dealing with clients and counterparts in London, Sydney, New York, Tokyo to name a few.
Key skills of an investment banker
It goes without saying that an investment banker needs to have excellent analytical and numerical skills. In addition, anybody working in the investment banking environment needs to be able to work under pressure and have the drive, determination and perseverance to have a successful career in this field - it is important to be aware that in this particular line of work the hours can be long and unpredictable at times. This is partly as a result of being connected to the global markets and operating within different time zones. Above all, you must have a high level of stamina!
Degree or MBA qualifications are required and subjects such as law, business studies, mathematics, economics and management would be advantageous. Language skills are extremely beneficial while working in investment banking, due to the international nature of the work.
Where could an investment banking career take you?
Typically the employers of investment bankers are banks or other financial institutions. Currently the top five largest investment banks are JP Morgan & Co, Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley and Citigroup, all of which are long established firms.
Other opportunities for investment bankers include public sector work, assisting with economic development projects, or perhaps managing wealthy individuals’ financial affairs or working within a bank’s business strategy team.
It’s a job which can give you an international career in a competitive industry, and there are many opportunities off the beaten track as well as within recognised global financial centres.
Investment bankers are rewarded extremely well, especially if you’re prepared to continue learning and assist the business move forward in an ever changing world. Financial security can be attained in this line of work and many aim for early retirement which is within reach of anyone prepared to put in the hard work throughout their career.
Launching your career in investment banking
If a career in investment banking sounds appealing, then why not investigate it further?
Most banks recruit graduates from summer internships and grad schemes. If you’re an experienced professional looking for a move into this area then banks and other financial institutions will value your experience, so long as you are an innovative thinker who seizes intellectual challenge. It’s a steep learning curve for anyone who is considering entering into this area of banking.
Training and development will normally see candidates cover topics such as market economics, accounting, applied corporate finance, financial modelling, mergers and acquisitions, fund valuation, capital market products and credit analysis.
Many banks will send investment banking trainees to another global location for their training in order to give them a true experience of the global marketplace. Leading financial centres globally are New York, London, Hong Kong and Singapore. The growth area since 2008 has been within the Asia Pacific market with investment banking revenues increasing by approximately 10%.
Locations to consider
There are numerous cities throughout the world which are able to offer excellent prospects for a career in finance. Depending on the role you wish to have there are certain locations which will have advantages over others:
- Dubai – fast becoming the finance capital of the Middle East, with many global financial institutions having a presence there. Whilst speaking Arabic is beneficial, it is not essential in order to find a job and relocate to this part of the world. The cost of living is reasonable.
- Frankfurt – the financial capital of Europe, with many international firms having their headquarters there. A career in Frankfurt gives great access to the rest of Europe. Speaking German would be advantageous, and the cost of living is reasonable.
- Hong Kong – a rapidly growing market with a variety of investment banking opportunities. Due to its bustling and crowded nature, living costs are higher than average.
- New York/London – similar costs of living and both have seen heavy job losses since the financial crisis. Nearly all global financial institutions have a presence in these cities.
- San Francisco – now widely recognised as the venture capital headquarters of the world, there is a reasonable cost of living here.
- Zurich – viewed as a place with great overall quality of life, Zurich has a wide variety of finance jobs. Although you can get by with only English, it would be advantageous to have French or german. Costs of living can be high.
All of these cities offer great possibilities when considering a relocation and next career move.
The career path of an investment banker
There is no typical career path for an investment banker. Whereas operational bankers follow a linear career path, investment bankers most often will transition towards roles within Private Equity, Hedge Funds or Venture Capital companies where they would then work with firms who use their own capital in making investment decisions.
Many investment bankers will have experience of working internationally due to the nature of the job and most will be rewarded extremely well over the course of their career. Whilst it may be a high pressure environment to operate in, they are many ways in which a successful international career can be achieved and enjoyed.