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Investment Banker

How to start your career as an Investment Banker – Skills and salary explained

October 14, 2021

How to start your career as an Investment Banker

I guess you’re wondering what exactly an investment banker does? Well, they are financial advisers who help their clients invest in the stock market. Now that’s not all they do; however, they are experts in how to invest and they do it for a living.

Some of the types of investments that people with this job make include stocks, bonds, futures contracts, commodities, and real estate.

Requirements to be an investment banker

There are a large number of skills that an individual should have to be hired as a financial banker.

  • They must have the ability to communicate effectively, possess analytical abilities, technical knowledge, and business acumen.
  • Knowledge in valuation, modeling, and forecasting.
  • Proven experience as an Investment Banker or Underwriter.
  • Knowledge of regulations for securities and M&As.
  • Strong analytical and quantitative skills.
  • Finance, business administration, or similar field; graduate degree is a plus.

What is the role of an investment banker?

An investment banker is a type of job that includes management, supervision, sales work, tax planning, investment records, and investment planning. Investment bankers are primarily responsible for facilitating mergers and acquisitions. They work with corporations, governments, and other large financial institutions to help them develop strategies that will lead to the best possible outcomes.

Investment bankers are highly ambitious, competitive, detail-oriented individuals who thrive on quantitative analysis. They raise capital for corporations, governments, or other large financial institutions.

Their roles and responsibilities include but are not limited to

Manage relations

An investment banker is someone who manages relations with clients and prospects, such as arranging meetings and negotiating contracts. They are also responsible for collecting information about a customer’s borrowing and repayment activity, which will help determine their risk score. The score determines if a person should or should not be approved by an investment bank.

Investment planning

An investment banker helps companies and clients manage their assets. They have a high financial aptitude, are knowledgeable about the market, and help mediate between two parties or facilitate mergers and acquisitions. They guide a client into making better decisions when it comes to investing money in the market.

Act as financial advisor

The role of an investment banker is to act as a financial advisor for their clients. Investment bankers often advise corporations on the best way to take them public or raise capital through other means. Investment banks are also responsible for handling IPOs, which are when corporations go public by selling shares in the stock market.

Underwriting services for new stock issues

The role of an investment banker is to provide underwriting services for new stock issues, as well as determining a reasonable price for shares. Investment bankers also act as underwriters for corporate bond issues.

The primary role of an underwriter is to be the intermediary between corporations and investors. It involves purchasing shares of a new stock issue, which are then resold through a stock exchange. This way, the risk of underwriting is spread across several banks.

How to become an investment banker

Investment bankers often start their careers at the analyst level and with experience and additional education, advance into associate positions. And to land a job as one you must concentrate on networking while still in school and also do summer Internships and after college.

  • Bachelor’s degree in finance, accounting, economics, or mathematics.
  • Entry-level investment banking analyst positions require only a bachelor’s degree. Graduate degrees in financial mathematics are not necessary for entry-level.
  • MBAs and CFAs are common for higher levels of jobs. Graduate degrees and voluntary certifications offer a good chance of getting a job in investment banking.
  • 3 years of experience in finance.
  • Registration with FINRA is mandatory when employed as an Investment banker.
  • Ability to work in a team-based environment with fast-paced events.
  • Working knowledge of deal structuring and closing principals.
  • Proven proficiency in Microsoft Office products, especially Excel.
  • Ability to organize and track overlapping tasks.

How to enter the industry

An investment banker’s job is to provide capital and strategic advice to businesses. There are three main ways for people to get into the industry: education, ambition, and networks. After getting school right, aspirants must work on networking while still in school so they can land a job as an investment banker.

Central banks recruit from top business schools and interns who have worked with them. The only other option if you’re not from a prestigious college is relying on connections. Connections are of enormous relevance while thinking of Investment Banking as a career choice.

What are the entrance exams?

Many courses can be pursued to become an investment banker. Anyone with a love of Mathematics and an analytical mind can aspire to become one. Some of the most popular and successful courses include Diploma in Financial Analysis, Financial Control, Portfolio Management & Security Analysis, and BCom Hons.

What does an investment banker do with stocks and bonds?

An investment banker provides his expertise to companies looking to issue stocks and bonds. The bank does this by finding buyers for these securities or investors who are willing, at a given price point, to buy shares of the company.

The firm also prepares prospectuses that list information about its clients’ businesses as well as any risks involved in investing with them before they go public on an exchange like NASDAQ or NYSE.

What is the work environment of an Investment Banker like?

Becoming an Investment Banker is a rewarding career that offers many benefits. So, what is it like to work as an investment banker? Well, the job is very exciting and creative. It is important that you have the skills and personality for this type of work. You should be able to work in a fast-paced environment with minimal supervision and manage your workload while still being able to contribute to some large projects. It can also be stressful at times with all-night work sessions and frequent travel.

Investment banker jobs and salaries

Investment banking is a highly paid job with working long hours sometimes up to 15 hours a day. It is kind of an international career where you work with people from all over the world.

The investment banking industry has been around for centuries and is highly competitive with large paychecks on offer for the right candidates.

As an Investment Banker, you will work in a hierarchical environment. The hierarchy ranges from the most junior level of analysts to the highest rank of Managing Directors and Directors. You will be paid based on your position and experience, as well as your salary range for each role:

– Analyst: $95k-$115k

– Associate: $135k-$165k

– VP: $200K+

– Director: $250K+

– Managing Director: $500K+

The pay scale is 5x to 1.0x your base salary. The salary for this position varies depending on your experience level but generally ranges from $90K-$250K annually or more.

Factors affecting the average investment banker salary in India

The average investment banker salary in India is 5 lakhs – 8 lakhs. It includes basic salaries, bonuses, and perks. The job profile of an Investment Banker varies from bank to bank and location to location. Investment banking analysts receive a bonus based on their performance and the performance of their employer. In such a highly hectic job, it is not uncommon to work 90-100 hour work weeks.

Factors that affect an investment banker’s compensation

The compensation of investment bankers is heavily impacted by the level of experience gained through years of experience. The higher an employed banker’s level, the more money they are likely to make. Additionally, the more experience a banker has, the more likely they are to make a higher salary per hour. Another factor that affects an investment banker’s compensation is the geographical location of their employer. Other factors include

  • Implementing long and short-term financial plans
  • Recognizing new business opportunities
  • Structuring and negotiating financial deals
  • Researching marketing conditions and developments

Factors that affect where to work

The factors that affect where to work are the cost of living, commute, and job satisfaction. Additionally, people want to find an area with a good quality of life. The average investment banker salary in India is usually determined by the size of the bank, where they are employed, and their skill set. Many people who work at large commercial banks have access to larger accounts and faster career progression than smaller independent banks or specialist divisions.

Pros and Cons of being an Investment Banker

Pros

  • High-paying salary with large Bonus
  • Lavish lifestyle for self and family
  • Quick promotions and leadership roles
  • Good professional knowledge about industries, markets, etc.
  • Unlimited and rapid growth for those with sound analytical and numerical abilities.

Cons

  • Risky job as dependence on capital market
  • Dependence on business sentiments and investors perception
  • Stress-related health issues
  • Challenges are faced by candidates who are able to overcome the initial hurdles.

Some quick facts about investment bankers

  • Investment banking is not just for finance majors, some bank opportunities are open to all majors.
  • Quant interview tests technical knowledge and you’ll need to pass them for these jobs.
  • World’s largest investment banks have noticed a decline in revenue and even the interest in IB is on the decline.

17 most common interview questions and answers for investment banking

There are 17 most common interview questions and answers for investment banking that you should know before going into an interview.

There are certain basic interview questions that you need to know the answer to irrespective of the job nature. Like,

1) What is your biggest strength?

2) Why do you want to work at this company?

3) What is your greatest weakness?

4) What is an example of a time when you had to make a difficult decision?

5) What is your greatest weakness?

6) Where in the world would you most like to live and why?

7) Why do you think you’re qualified for this job?

However, the job-specific questions are what you need to be prepared. Like,

1) What is the difference between trading and investing?

Traders seek short-term profits with a focus on technical factors. Traders have a shorter time horizon and are focused on the immediate future, while investors have a longer-term outlook and hold stocks through ups and downs. The starkest difference between traders and investors is that timing of investments is crucial for traders, while it’s less important to investors. Investors study the potential for growth or value in stocks of companies they want to invest in, which can take years of research before an investment decision is made.

2) How do you deal with risk as an IB?

Risk management is a way to protect your investments from loss. It is a risky behavior or strategy that must be identified and avoided. Two factors to take into consideration when it comes to risk management are the possibility and probability of something negative occurring. Risk management strategy helps curb financial blow to clients, but also good for the bank in terms of recovering payment by providing insurance against certain risks.

3) What is typically higher – debt or equity?

The cost of debt is typically more costly than the cost of equity because it is not tax-deductible. The last in line at liquidation is usually debt holders, so they have less value to the company.

4) What is meant by the Weighted Average Cost of Capital (WACC)?

The Weighted Average Cost of Capital (WACC) is the expected annualized return over a long duration. It takes into account all sources of capital, such as debt and equity. The WACC formula can be seen below:

Weighted average cost of capital = Cost of Equity + Risk-Free Rate – Cost Of Debt

And a few more. The inevitable question you will be posed with would be “Why do you want to work in investment banking?” to which there is no right or wrong answer. Irrespective of your current role, if you are a Non-Business Major or just rotating jobs, keep practicing your answers and you will improve. A little step ahead each day will sum up to big results.

Image credits:

  1. Gerd Altmann on Pixabay
  2. Pinkypills on Pixabay
  3. Chaichan Pramjit on Unsplash
  4. Geralt on Pixabay

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Tina

Helping professionals around the world explore and navigate their careers

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