What Is an Investment Banker?

What Is an Investment Banker? was originally published on Forage.

Investment bankers

An investment banker works for a banking institution to raise capital and guide economic decisions. While that may sound confusing, an investment banker’s job is relatively straightforward. 

According to Robert R. Johnson, professor of finance at Heider College of Business, Creighton University, “Investment bankers raise money by selling securities and transferring that money to people who need it to grow businesses or bring other costly projects to reality.”

In this guide, we’ll cover:

What Does an Investment Banker Do?

Investment bankers typically start as analysts, eventually becoming associates after a few years of experience and maybe an advanced degree. In these roles, investment bankers collect data, make financial models, and advise their vice presidents and managing directors based on their findings. 

Vice presidents and managing directors are the ultimate decision-makers in the investment banking industry. Still, they cannot do their job without the research and advising that analysts and associates do daily. 

Buy Side vs. Sell Side

Investment bankers work for many types of investment banking companies, ranging from bulge bracket global banks to boutique investing firms. These banks have two main functions: a sell side and a buy side. 

 “Investment bankers are best known for the part of their business that sells securities, or the sell-side,” says Johnson. “This function of the investment bank is responsible for finding investors to buy the securities being sold, which raises the money needed by businesses and governments to grow and prosper.” 

On the buy side, investment bankers assist in advising purchasing and transactions. Johnson continues, “Serving in its role on the buy side, the investment bank can offer suggestions to large institutional investors like mutual funds, pension plans, or endowments on which securities may be appropriate for it to buy in order to meet its return targets.” 

M&A Advising and Underwriting

These two sides of an investment bank manifest themselves in the two core responsibilities that an investment banker can undertake: mergers and acquisitions (M&A) advising or underwriting. 

Underwriting, a function of the sell side, involves raising money for investors and companies. On the other hand, M&A advising, a part of the buy side, is helping companies interested in buying another company and facilitating the transaction. 

M&A advising and underwriting include specific tasks such as:

  • IPO process: transitioning a private company into a publicly traded company
  • Book building: the process of determining how much an IPO will be priced at by asking investors to submit bids
  • Prospectus drafting: creating a document that details an investment offering, including the risks and objectives of the investment
  • Issuing and selling securities: creating and marketing tradeable assets, like bonds, stocks, and options 
  • Equity research: analyzing market information to better inform investor decisions
  • Asset management: controlling an institution or individual’s assets and advising them on financial decisions
  • Corporate restructuring: consulting a company on how to change their financial plan to increase capital 

Daily Life of an Investment Banker

Investment bankers lead notoriously busy lives, working anywhere from 60 to 100 hours per week! Analysts typically have longer hours, and as you gain seniority in the investment banking world, you earn more downtime at the expense of greater responsibility. 

The daily life of an investment banker depends heavily on what work they are handling at that moment. The busiest days are typically when the banker is involved in a live deal — meaning they have a client trying to find a buyer or seller. However, there are slower days, like when a banker is more focused on pitching to potential clients. 

Typical Day as an Investment Banking Analyst

7 a.m. to Noon
Respond to emails while heading to the office, then begin working on a PowerPoint for your first meeting of the day. Have a meeting with your client alongside your managing director, vice president, and associates. Take detailed notes and review the call with your associate after. 

Noon to 5 p.m. 
Create a financial model in Excel that shows how your client’s company would be affected if they were to buy Company A, Company B, or Company C. Once you’ve finished a draft, send it to your associate for feedback and corrections. 

5 p.m. to 8 p.m.
Begin creating a PowerPoint presentation about the model you created so you can show your client tomorrow. Make corrections to your model based on feedback from your associate. Once your model is revised, send it to your managing director and the rest of your team. 

After 8 p.m.
Make edits to your financial model, if needed, based on feedback from your managing director and finish the presentation for your meeting tomorrow. 

Want to learn more about a day in the life of an investment banker? Check out these free virtual experience programs: 

Investment Banker Salary

Investment bankers typically work long hours, but those long hours can pay off — even for an entry-level analyst, salaries can range from $80,000 to over $200,000 per year. 

Ultimately, big banks like JPMorgan and Goldman Sachs are willing to pay top dollar for great analysts because investment bankers also make their banks a lot of money. It’s hard work, but with a high base salary and big year-end bonuses, the busy days may seem a little more worthwhile. 

How to Become an Investment Banker

Education and Certifications

To gain an entry-level position as an investment banker, you’ll need at least a bachelor’s degree. Although a degree in finance or economics can be helpful, it isn’t always necessary — what matters is that you can prove you have the skills to do the job. 

Moving up in the ranks, though, may require some advanced degrees. While analysts typically have a bachelor’s degree, associates often have Master of Business Administration (MBA) degrees or master’s degrees in finance. 

Having specific certifications can also help you get ahead. For example, a chartered financial analyst (CFA) certification requires passing a rigorous program, but having this designation shows a strong knowledge of investment banking, economics, portfolio management, and equity research. 

There are also many other certifications available. Each shows a certain degree of expertise and specialization:

  • Certified Financial Planner (CFP) certification from the CFP Board of Standards
  • Financial Risk Manager (FRM) certification from the Global Association of Risk Professionals
  • Chartered Alternative Investment Analyst (CAIA) from the CAIA Association
  • Certified Public Accountant (CPA) from the American Institute of Certified Public Accountants 
  • Chartered Mutual Fund Counsellor (CMFC) from the College of Financial Planning

Skills for Investment Bankers

In addition to a strong work ethic and the ability to multitask and manage their time efficiently, investment bankers need a balance of hard versus soft skills to succeed. Since investment banking is a client-facing profession, investment bankers must have strong relationship management, interpersonal, and communication skills. 

They also need to be able to do the technical work required in banking, like financial modeling, business valuation, creating presentations, and filing transaction documents.

Ready to learn all the hard skills you need to work as an investment banker? Enroll in the Investment Banking Skills Passport to uplevel your core skills and give yourself a competitive advantage.

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