You've heard about the legendary long hours, the big bonuses, and the megabillion-dollar deals. You can recite the names of the big firms by heart. You like to imagine yourself a pinstripe-wearing, jetsetting investment banker. But suddenly it dawns on you. What the heck is investment banking? You panic. What do investment bankers do? What's the difference between sales and trading and corporate finance? More to the point, why do you want to be a banker?
What I-Banking Is Traditionally, commercial banks and investment banks performed completely distinct functions. When Joe on Main Street needed a loan to buy a car, he visited a commercial bank. When Sprint needed to raise cash to fund an acquisition or build its fiber-optic network, it called on its investment bank. Paychecks and lifestyles reflected this division too, with investment bankers reveling in their large bonuses and glamorous ways while commercial bankers worked nine-to-five and then went home to their families. Today, as the laws requiring the separation of investment and commercial banking are reformed, more and more firms are making sure they have a foot in both camps, thus blurring the lines and the cultures.
Investment banking isn't one specific service or function. It is an umbrella term for a range of activities: underwriting, selling, and trading securities (stocks and bonds); providing financial advisory services, such as mergers and acquisition advice; and managing assets. Investment banks offer these services to companies, governments, non-profit institutions, and individuals.
The action and players in investment banking are still centered in New York City and a few other money centers around the world, but the list of players is getting smaller as the industry consolidates. Today, leading banks include Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup's Corporate and Investment Bank (whose investment banking arm was until recently known as Salomon Smith Barney), Credit Suisse First Boston, and JPMorgan Chase. These and other firms are regular visitors to campus career centers.
What You'll Do The intensely competitive, action-oriented, profit-hungry world of investment banking can seem like a bigger-than-life place where deals are done and fortunes are made. In fact, it's a great place to learn the ins and outs of corporate finance and pick up analytical skills that will remain useful throughout your business career. But investment banking has a very steep learning curve, and chances are you'll start off in a job whose duties are more Working Girl than Wall Street.
Wall Street is filled with high-energy, hardworking young hotshots. Some are investment bankers who spend hours hunched behind computers, poring over financial statements and churning out spreadsheets by the pound. Others are traders who keep one eye on their Bloomberg screen, a phone over each ear, and a buyer or seller on hold every minute the market's in session. Traders work hand in hand with the institutional sales group, whose members hop from airport to airport trying to sell big institutions a piece of the new stock offering they have coming down the pipeline. Then there are the analytically minded research analysts, who read, write, live, and breathe whichever industry they follow, 24/7.
Who Does Well You shouldn't go into banking just for the money — the lifestyle is too demanding. To survive in investment banking, much less to do well, you'll need to like the work itself. And, quite honestly, even if you love the work, an investment banking career can still be a tough road. If the market or your industry group is in a slump (or if your firm suddenly decides to get out of a certain segment of the business), there's always the chance that you may find a pink slip on your desk Monday morning.
But, if you like fast-paced, deal-oriented work, are at ease with numbers and analysis, have a tolerance for risk, and don't mind putting your personal life on hold for the sake of your job, then investment banking may be a great career choice. But if this doesn't sound like you, a job in investment banking could turn out to be a bad dream come true.
Requirements First, if you're an undergraduate, you'll want to try to get an internship — it's the best way to secure an eventual offer. If you're an undergraduate from an Ivy League school with a great GPA, bidding recruiting points is still a favorable option — however, college recruiters are usually sent from the prestigious bulge-bracket firms, and not the smaller, specialized niche firms, or boutiques. It's important to discern the type of bank for which you are best suited, so conduct your own independent research.
If you're not an Ivy League graduate, and recruiters haven't been breaking down your door, networking is your best bet. Use your school's alumni and your neighbors and acquaintances to get in touch with someone at the I-bank of your choice. If you're a good student who is truly interested, you've got a shot.
If you have an MBA or other advanced business certification, you'll be paid more for a position than someone with a fresh BA. But those with prior experience always get first shot, so be sure to get an internship. Industry expertise and prior corporate finance work can also be a way in, but you'll have to be patient.
If your degree isn't in business, take heart in the knowledge that banks are increasingly encouraging applications from candidates with specialized resumes in order to better appeal to a growing client base.
Career Tracks
Corporate Finance
Mergers and Acquisitions
Public Finance
Sales and Trading
Trading
Research
Controlling
Information Technology
Operations
Compensation
Base salary ranges for undergrads, MBAs, and summer hires
Different methods used to calculate bonuses and how these affect your salary
How the economy has affected signing and year-end bonuses
How current events have changed the compensation structure of some investment banking positions
