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Investment Banking

Investment Banking

Investment bankers advise governments and corporations on how to effectively raise capital by issuing securities and providing financial advice on mergers and acquisitions (M&A). Investment banks are typically divided into two main areas: corporate finance and capital markets. The corporate finance division helps companies raise capital and provides advice on M&A, while the capital markets sector helps companies and governments issue securities and provides liquidity to the financial markets. Investment bankers work with clients to identify their financial needs and develop strategies to meet those needs, such as by underwriting and selling securities or assisting with M&A transactions. Investment bankers also play a role in trading securities and providing liquidity to financial markets. Investment bankers command a significantly above average salary relative to other careers in the finance industry.

Many students go into investment banking with the plan to exit after a couple of years. For those that work up the ladder, the succession goes as follows:

  1. Investment banking analyst: Investment banking analysts are entry-level positions that typically last for two to three years. They work closely with senior bankers to provide financial analysis and support on a variety of transactions, including M&A deals and initial public offerings (IPOs).
  2. Investment banking associate: After completing the analyst program, many investment bankers become associates. Associates have more responsibility and work more independently than analysts, and they may lead smaller deals and work on more complex transactions.
  3. Vice president: After several years as an associate, investment bankers may be promoted to vice president (VP). VPs have significant responsibility and are typically in charge of leading deals and managing teams of analysts and associates.
  4. Director: Directors are senior-level investment bankers who have significant responsibility and are typically in charge of managing teams of VPs and associates. They may also be involved in business development and client relationship management.
  5. Managing director: Managing directors are the most senior level of investment bankers. They are responsible for leading teams of directors and VPs and are often involved in setting the overall strategy of the investment banking division.

Investment bankers enjoy the most flexibility upon leaving. They often leave the industry to pursue other career opportunities after several years of experience. Some common exit opportunities for investment bankers include:

  • Private equity: Private equity firms buy and sell companies, often with the goal of improving their operations and profitability. Investment bankers with M&A experience may be well-suited for careers in private equity.
  • Hedge funds: Hedge funds are investment vehicles that use a variety of strategies to generate returns for their investors. Investment bankers with a background in finance and investment may be interested in careers in hedge funds.
  • Management consulting: Management consulting firms advise companies on a variety of business and operational issues. Investment bankers with analytical skills and an interest in business strategy may be well-suited for careers in management consulting.
  • Corporate finance: Investment bankers with an interest in corporate finance may transition to roles in the finance departments of companies, where they can work on financial planning, budgeting, and other financial tasks.
  • Entrepreneurship: Investment bankers with an entrepreneurial spirit may choose to start their own businesses. Their financial skills and business acumen can be useful in starting and running a company.
  • Teaching and academia: Investment bankers with an interest in teaching and research may choose to pursue careers in academia.
  • Other financial services: Investment bankers may also transition to other financial services roles, such as wealth management or sales and trading.