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What Does an Investment Banker Do?

By: Kaplan Schweser
September 26, 2022
What Does an Investment Banker Do
Investment bankers are basically financial advisors that work for large and small firms to raise money for their clients. Their job descriptions often have broad responsibilities and require highly specific skills. Investment bankers are highly valued by their clients, and successful ones are extremely hard working and dedicated to thriving in the face-paced and demanding work environment of investment banking.

TABLE OF CONTENTS

What Is Investment Banking?

An investment bank is not the same as a bank where you set up your checking and savings accounts—those are called retail banks. In the simplest terms, investment banks help corporations raise money. When a corporation wants to buy or sell something, they work with an investment banker to figure out how to invest or attain the funds they need to get it done.

What is an Investment Banker?

Investment bankers help their corporate clients secure funds in the capital markets, act as financial advisors, and occasionally help companies navigate mergers and acquisitions. Investment banker positions vary from entry-level to high-level executive. 

Investment bankers are highly valued in the corporate world. Without them, it would be very difficult for companies to get the money they need to serve their customers and clients, or develop a solid competitive position in their market.


Is Being an Investment Banker Difficult?

Being an investment banker can be hard because the day-to-day operations are long and stressful. Getting enough sleep and reducing stress can be a challenge for investment bankers, especially at the beginning of their careers. Investment bankers who make it through the adjustment period early in their job will often have long and financially rewarding careers in the industry. 

Investment Banker Responsibilities

Investment bankers are ultimately responsible for the success of their clients. In some roles, they take on many responsibilities while others specialize in one or two specific areas. All positions are responsible for raising money for their clients primarily through issuing debt and selling equity in capital markets. 

Debt Capital Markets

When a company wants to raise capital by issuing debt in the form of bonds, it often has a hard time finding qualified investors with enough money to invest. Investment bankers will help these companies find qualified investors within their large network and structure how the bonds get issued.

Equity Capital Markets

When a company plans to hold an initial public offering (IPO) to sell stock to the public, investment bankers will help that company find large investors to ensure their IPOs are purchased for the highest price possible.

Mergers and Acquisitions

Investment bankers also help broker mergers and acquisitions. The process often involves them lending their expertise to make sure things go smoothly. Investment bankers will advise their clients by presenting their research with recommendations about the best opportunities.

Investment Banker Skills

Investment bankers need many skills to be successful in the investment banking industry. Learning how to make financial forecasts and develop relationships on both sides of the transaction is key to advancing throughout your career. 

Financial Modeling

Investment bankers often develop various types of financial models to value debt and equity for mergers, acquisitions, and capital-raising transactions. The process often involves using Excel or other software programs to make smarter investment decisions in an efficient manner.

Accelerate your career with Kaplan Schweser’s Financial Modeling Course 

Relationship Management

Knowing how to develop and maintain working relationships with clients is an important skill for investment bankers.  It’s common for investment bankers to work long hours and be available to their clients as needed when large deals are in process. Ultimately, investment bankers have a responsibility to expand their firm's book of business and meet the needs of their investors. 

How To Get Started in Investment Banking

Getting started as an investment banker should begin with having realistic expectations. The career is challenging, often demanding analysts or associates work over 80 hours per week. Most investment bankers are very ambitious and competitive because the jobs are prestigious and earnings have the potential to be enormous. 

It’s common for investment bankers to possess undergraduate and MBA degrees from competitive universities such as the  Wharton School of the University of Pennsylvania. Internships and entry-level positions are also fiercely competitive within investment banks, which often recruit individuals directly from school for analyst positions.

The interview process for entry-level investment banker positions usually goes quick and requires you to be prepared to answer common questions like “Why do you want to work in investment banking?” and demonstrate your technical skills like financial modeling

How Long Does It Take To Become an Investment Banker?

It can take 4-6 years to become an investment banker.  If you are currently pursuing a relevant undergraduate or graduate degree from a prestigious university you may be able to become an investment banker after graduation by being recruited. 

How To Become an Investment Banking Analyst >>

Top Investment Banking Companies

Top-rated firms that hire investment bankers to provide financial services around the world often pay them high salaries and expose them to global markets. Currently, there are over 100,000 investment bankers employed in the US however the amounts each year fluctuate based on market conditions. 

Investment Banker Salary Ranges

Investment banking positions are highly competitive in part because of their high salaries and bonus potential. The bonus is a large part of an investment banker’s total compensation package. Yearly bonuses have the potential to be over double that of the investment banker’s base salary and continue to rise with more responsibilities.

 

Investment Banking Role

Salary Range

Bonus Range

Total

Analyst$85,000 - $100,000$50,000 - $100,000$135,000 - $200,000
Associate$100,000 - $120,000$80,000 - $130,000$180,000 - $250,000
Vice President$120,000 - $150,000$100,000 - $250,000$220,000 - $400,000
Managing Director$300,000 - $1,000,000$200,000 - $10,000,000$500,000 - $11,000,000

 

Benefits of Becoming a CFA 

Investment bankers who pursue earning the CFA designation will gain in-depth, specialized knowledge, skills, and abilities in financial analysis and investment management. Other benefits of earning the CFA include

  • The CFA designation is recognized globally.
  • Some job descriptions for investment positions say “prefer CFA” or “CFA required.”
  • You become a member of a global organization and can optionally join a local CFA Society for networking and further learning opportunities.
  • CFA Institute and local CFA Societies Compensation surveys have found that CFA Charterholders have higher median compensation than non-CFA Charterholders.

How To Become a CFA Charterholder >>

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