Education, certification, and experience are all required to become an investment banker. These professionals offer financial advice to private and public organizations, assisting them in increasing capital through investments and stock portfolios.
Despite working in high-stress situations and environments, investment bankers can earn above-average salaries and frequently find their work rewarding. This guide explains how to become an investment banker, including key skills, typical career path, salary and certification requirements.
What Is an Investment Banker?
An investment banker is an investment professional that use their knowledge of the financial services industry, analytical skills, and effective persuasive communication skills to assist institutional clients with activities such as capital raising and mergers and acquisitions.
Investment bankers provide corporate finance services to a diverse range of clients, including startups, established organizations, and, in some cases, governments. They are key players in the financial growth and development of a business, organization, or other corporate entity, whether they work for an investment bank or the investment banking division of another organization.
An investment banker is a broad term that encompasses positions ranging from entry-level investment banker to executive vice president.
Types of Investment Banking
Corporate finance and industry coverage are two subsets of investment banking. Companies assign investment bankers to work in these subsets within brokerages. This section delves into two kinds of investment banking.
#1. Corporate Finance
Investment bankers in corporate finance assist individuals and organizations in raising capital through the purchase of stocks, bonds, and other investments. They are in charge of mergers, acquisitions, and the preparation for initial public offerings (IPOs).
#2. Industry Coverage
This branch of investment banking focuses on specific industries or types of commerce. Professionals must stay informed about any changes or trends in their assigned business sector. Professionals in the industry coverage field frequently report their findings to stakeholders.
What Is the Role of an Investment Banker?
This is a popular career path because a successful investment banker can earn a high salary, have numerous networking opportunities, and play a prominent role in company success stories. Nonetheless, an investment banker’s day-to-day work is typically demanding, fast-paced, and may be considered stressful by those who prefer a more relaxed work-life balance. If you want to work a typical 40-hour week with flexible scheduling, investment banking may not be the right path for you.
Important Investment Banking Skills
#1. Analytical Capabilities
Investment bankers must be analytical in order to analyze large amounts of economic data and draw conclusions from their findings.
Attention to Detail In this high-stress work environment, even minor errors can mean the difference between a company thriving after receiving capital and a company going bankrupt. To match the high stakes of their work, investment bankers must pay close attention to detail.
#2. Confidence
Investment bankers must convey confidence to clients who provide or require large sums of money. Professionals in this field can benefit from remaining calm and assured in high-pressure situations.
#3. Communication
On a daily basis, these professionals interact with a wide range of stakeholders, including coworkers, managers, and clients. All investment bankers must be able to communicate clearly to a variety of audiences.
#4. Decision-Making
Investment bankers must make difficult decisions on behalf of their clients. Individuals and businesses seek the advice of investment bankers, who must be able to analyze trends and forecasts in order to make sound investment decisions.
#5. Math Abilities
To crunch the numbers for funding opportunities in investment banking, sharp math skills are required. These professionals must also have a solid understanding of economics.
#6. Understanding of Ethics and Compliance
These professionals must be well-versed in the regulations and laws that govern investments. Some clients may prefer more ethical investments, so these bankers can benefit by spotting long-term opportunities and striking while the iron is hot.
Job Prospects for Investment Bankers
This demanding position long requires 12-hour or longer workdays, totaling 100-hour work weeks. It does, however, pay well—even entry-level investment bankers can earn six figures per year.
The future of the career appears to be bright as well. The Bureau of Labor Statistics (BLS) predicts a 10% increase in employment for securities, commodities, and financial services sales agents between 2021 and 2031. Investment bankers fall into this category. This is faster than the national projected growth rate of 5% for all occupations.
According to the BLS, this strong projected growth is due to an aging population and the resulting decline in traditional pensions. However, the agency warns that financial services industry consolidation, as well as automated trading systems, may slow growth for investment bankers as the decade progresses.
What Is the Salary of an Investment Banker?
In the United States, an investment banker earn an average salary of $162,715 per year or $78.23 per hour. The bottom 10% of investment banker salary is approximately $95,000 per year, while the top 10% earn $276,000.
The salary of an investment banker is affected by his or her location. Alaska, Vermont, Maine, New Hampshire, and Massachusetts has the highest salary for an investment banker.
How to Become an Investment Banker
#1. Acquire a Bachelor’s Degree
A bachelor’s degree is the bare minimum for becoming an investment banker. Prospective professionals can pursue a bachelor’s degree in business administration or a bachelor’s degree in accounting. Finance and economics are two other relevant majors. Prospective investment bankers can also focus their electives on corporate finance.
Attending a school near a city with a thriving financial sector, such as New York City, can provide more internship and networking opportunities.
#2. Think about Graduate School.
Investment bankers with MBAs or other master’s degrees are typically sought after for mid-level and advanced positions in the field. Though you can become an investment banker with only a bachelor’s degree, a master’s degree can help you stand out from the crowd and get more job opportunities.
#3. Acquire Experience
Along with gaining on-the-job professional experience, students can begin their careers by completing internships. Interns can establish long-term relationships with employers and mentors for future job opportunities. Experience is also important for advancing into more responsible investment banking roles.
#4. Become a member of FINRA.
To enter the investment banking world, each candidate must register with the Financial Industry Regulatory Authority (FINRA). All prospective securities professionals must pass the Series 7 exam. To register with FINRA, investment bankers must also pass the Series 79 exam.
The Series 7 exam has 125 questions and takes three hours and 45 minutes to complete. The Series 79 exam requires investment bankers to complete 75 questions in 2.5 hours. Prospective investment bankers typically prepare for the Series 79 exam for 60 to 100 hours.
The Path to a Career in Investment Banking
Many investment banking firms will offer paid internships to college students and recent graduates, which can count toward the required years of experience and help with networking. Some investment banking firms may prefer candidates with advanced degrees from business schools, but before devoting time and money to an advanced degree, make sure to research position requirements in your field of interest.
Entry-level investment bankers are sometimes referred to as “junior bankers,” but job titles will more likely use the term “analyst” to indicate a true entry-level position and “associate” to indicate a role that requires some experience. Those with significant investment banking experience, on the other hand, will be referred to as “senior bankers.” In this category, job titles may include “vice president (VP),” “senior vice president (SVP),” “director,” or “managing director.”
How Long Does It Take To Become an Investment Banker?
To become an investment banker, you must first complete a bachelor’s degree, followed by additional time spent preparing for and obtaining FINRA licensure. Master’s degrees, which can take an additional two years to complete, are typically earned by mid-level and advanced investment bankers.
Investment Banker Education and Training
A high level of education and skill is required for success in the investment banking field. Employers typically expect candidates to have a bachelor’s degree in finance, accounting, economics, or a related field. On-the-job training is typically required for entry-level positions. Individuals with advanced degrees may start at the associate level and may have more opportunities for advancement.
Enrolling in a Master of Business Administration with a specialization in Finance degree program is the first step toward becoming an investment banker. Portfolio analysis, financial markets and institutions, managerial accounting, and investment management are typical course topics.
Employers should expect MBA Finance program graduates to be able to:
- Solve real-world, corporate-level finance problems.
- Utilize the techniques, theories, and concepts underlying the development of investment policy and strategy.
- Examine interest rates and the factors that influence them.
- Assess portfolio performance
Is It Difficult to Work as an Investment Banker?
It is possible. Most investment firms prefer candidates from prestigious universities, which typically have high tuition costs, strict admission policies, and rigorous coursework. Individuals with bachelor’s degrees from any school, however, can still find entry-level investment banking jobs.
Do Investment Bankers Get a Good Salary?
In general, yes—investment bankers make a lot of money. Even entry-level professionals in this field can earn more than $100,000 per year. Investment bankers, on the other hand, work long days in high-stress environments.
Is a Career in Investment Banking Right for Me?
Before applying for an investment banking position, consider your answer to the question “Why investment banking?” which is asked at the start of many investment banking interviews. If you’re stumped on how to respond to this question, consider emphasizing some of these characteristics if they describe you well.
#1. Thinkers who are Data-Driven
As previously stated, investment bankers require analytical skills to assist them in advising organizations on critical financial decisions. Investment bankers do not have to be career mathematicians, but they do need math skills to perform pricing and financial model calculations.
#2. Communicators Who Are Sales-Oriented
Interpersonal skills and persuasive communication are essential for investment bankers who work in capital raising or help startup businesses secure funding. Investment bankers must be exceptional writers and public speakers on behalf of their clients. Furthermore, investment bankers must be skilled in developing and presenting “pitch books” in order to win new business from potential investors and clients.
#3. Leaders in Ethics and Compliance
Finally, skilled investment banker strives to gain knowledge and expertise about the markets in which their clients operate. They should pay close attention to the legal regulations that govern their clients’ industries and have a vested interest in guiding their clients to long-term profitable and ethical decisions.
Conclusion
The prestige of the job of an investment banker makes it a desirable and competitive field. If you have a financial aptitude, excellent communication skills, and sharp analytical and mathematical abilities, you may be qualified to pursue opportunities in the profession. When you combine this knowledge with what you can learn from an MBA in Finance degree program, you could be on your way to a rewarding career as an investment banker.
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