Merchant, or investment, bankers work to advise companies on how to increase their financial profits through a range of processes such as mergers and acquisitions, restructuring and refinancing debt, and advising clients on where to raise capital and how much. Investment bankers specialize in different business areas known as mergers and acquisitions (M&A), debt capital markets and equity capital markets. Typical day-to-day activities of an investment banker include researching the conditions and developments of the market and then developing appropriate financial solutions for clients. An investment banker also liaises with her client companies, communicating financial solutions with the chief executives.
A merchant or investment banker needs a bachelor’s degree in a related subject such as business, finance, accounting or economics. Many banks now require their employees to have a master’s in business administration (MBA) if they want to reach the higher levels of the company hierarchy. An MBA also leads to better compensation and larger signing on bonuses. University undergraduates should try to get into an summer internship as those who are successful are often offered jobs at the end of it.
Merchant bankers work notoriously long hours and 15-hour days are not uncommon. Weekend work is also common, especially when deadlines are approaching or a deal needs to be completed. This means that working conditions can often be extremely stressful. Travel is also part of the job for higher level bankers who have more face-to-face contact with clients. Jobs are centered around financial hubs such as New York, London, Frankfurt, Hong Kong and Shanghai.
According to the U.S. Bureau of Labor Statistics, the financial services sector is set to grow by 9 percent up to 2018. This is about as fast as the national average for all jobs. A tide of consolidation within the financial industry, as a result of the financial crisis of 2008, has led to a number of layoffs within the sector meaning it will take longer for the industry to recover.
Investment bankers work long hours, but they are rewarded with big wages. In 2008 the average salary for an investment banker in the United States was $94,960, according to the U.S. Bureau of Labor Statistics. However, investment bankers also get large bonuses, which at higher levels often considerably exceed the employee’s base salary. In addition they get benefits such as paid vacation and private health and dental insurance
Investment bankers at associate level spend a lot of time traveling to various clients to present ideas and work on developing financial plans i.e proposing and negotiating deals etc and strategies for clients. Also the analysts and associates are required to work a lot on presentation material. All this work can appear to be very time consuming.
A typical day for an investment banker is to start at nine in the morning and he needs to work fairly consistently until midnight. Though it may be a five day workweek but you must be prepared to work on the weekends as well. When the deal is on you may be required to work all nights, sometimes a couple of nights on a go. Working upto 2 or 3 a.m. is quite usual. Thus the schedule is demanding and work comes before the personal life.
The major firms in investment banking like Goldman Sachs, JP Morgan Chase, Lehman Brothers, Merril Lynch and Morgan Stanley to name a few. GS is considered to be the best I-bank and its rigorous recruitment process which involves more than 9-10 interview rounds.
What the interviewers’ look for in the candidate:
For mainstream banking positions these firms hire at both undergraduate as well as graduate level and a few Ph.D. holders as well. Undergrads are typically from Engineering or law background. Most of the hires are from top school. Large number of people are hired from top MBA programs. Thus, a degree from a top school is a must with extraordinary academic achievement and excellence in communication skills.
Moreover, you should have a track record of proven leadership qualities and ability for great team work. People are also tested for their ability handle stress during the several rounds of interviews. The interviews also focus on high level of analyticity. The awareness about equity markets and stocks is a must. Fluency in foreign languages is always an asset. Firms generally looks for creative and highly energetic people, who can fit into the culture of company. Certifications like CFA and FRM are a huge plus.
Summer internship is almost a must these days and candidates who have interned with the firm are almost sure of getting a permanent position at the firm. Ethics are also put to test during the interview since you would be handling somebody else’s money.
Salary and Bonus:
The investment banking career is highly paying. The starting salaries can differ among investment banks and the working day is often long. However, candidates with the necessary skills and abilities can rise quickly to positions carrying considerable responsibility, where they will be rewarded accordingly. Increasingly a major element of remuneration is related to performance or profits and paid as an annual bonus. The starting salary on an average for an analyst is about 6 Lpa. But a huge component of compensation comes from the bonuses which may be as high as 100% of the base salary.
Huge salaries. Opportunity to work with top management of the client company. Opportunities to travel during road shows.
Very long working hours specially during the time of the deal, work pressure, personal life suffers.
- Analyst: Generally undergraduates are recruited at this level. Typically they work mainly on analytical work and do a fair amount of writing, and on the job training. Most of the work involves relaying orders among dealers, clients and traders. Researching new financial products and market trends. reviewing financial statements of issuing companies, developing valuation and financial models. Tracking client’s portfolio, preparing presentation material etc.
- Junior associate: Job of supervising the analytical work done by an analyst. Their job includes running computer analyses, preparing the financial reports which accompany stock issues, and putting together the documents used by senior bankers to pitch ideas. Employees with more than 2 years of work experience as analyst are recruited for this position. Mostly this post is filled by MBA graduates.
- Senior associate: Depending on the investment firm’s structure, their work involves overseeing the preparation of documents that leave the firm, and they are involved in the more creative side of business, working with senior bankers and clients to develop financial strategies. Senior associates are basically more specialized in a specific type of transaction, and they should have established banking skills that will help them in the future. Approximately it takes 4 years to reach next level.
- Managing directors and Vice President: They have the ownership interests in the firm he or she works at. To become a senior banker it usually takes about ten years of experience and a lot of hard work and then another 6 years or so to reach the next level.