How to Become an Investment Banker

Hi, everyone. In this video, we'll discuss one of the most exciting careers in the finance world, investment banking. Disclaimer, we'll try to depict this job opportunity in a more realistic way than Hollywood movies. Believe it or not, this isn't the typical day at the office in most Wall Street firms. Instead, we'll consider what investment bankers do on the job, how they fare in terms of salaries, what skills and academic backgrounds are necessary to become an investment banker, and how to get a job in the field. But before we begin, please note the following notable entry-level career opportunities in the field of finance, including Financial Analyst, Financial Controller, Investment Analyst, Big Four Advisor or Auditor, VC Analyst, Private Equity Analyst, and Investment Banker. We'll make a video for each of these other career opportunities, so please subscribe to our channel to check them out. Alright, so what do investment bankers do? The four primary areas of investment banking include Capital Markets, Advisory, Trading and Brokerage, and Asset Management. Your job description will significantly vary depending on the specific area of employment. The Capital Markets division helps companies raise funding by selling equity or debt to the public. In the case of equity, we speak about Equity Capital Markets, ECMs, and when an investment bank helps a company sell the debt to the public, we talk about Debt Capital Markets, DCM. The focus of advisory are M&A deals and debt restructuring. M&A stands for Mergers and Acquisitions, when companies wish to merge or acquire each other. Investment bankers assist in this process. Sometimes they're even the engineers behind the deal, advising clients on which companies would make good acquisition targets. Besides M&A, investment banks' other advisory services are related to corporate distress. A restructuring process is when a firm cannot service its existing debt and is in danger of going bankrupt. Trading and brokerage is an investment banking business line that involves purchasing and selling securities by using the bank's money or conducting it on behalf of clients. And lastly, the fourth investment banking area includes Asset Management, helping clients with investment management and strategic advice. The aim is to support clients in achieving their financial goals. We'll discuss these investment banking business lines in our comprehensive investment banking course. Okay, great. Let's pick one of these areas, for example, M&A, and describe what an M&A investment banker does on the job. An M&A investment banker would be expected to analyze companies, understand their financials, research potential M&A opportunities in a given sector, and create pitch books, which are then presented to clients. They will spend significant time in Excel working on multiples and DCF valuation models, which are then discussed with clients who are advised whether a particular M&A deal makes sense from a financial perspective. And when a deal does make sense, clients will engage in an M&A process, which is relatively technical and complex. This is when investment bankers coordinate different work streams and help their clients execute the deal. So, investment bankers don't simply work on spreadsheets and value companies. They also build relationships with diverse stakeholders and manage different activities in the M&A process. This is a demanding job that assists individuals to grow professionally quickly. Let's see if such high requirements are rewarded well in salary. We can use Glassdoor data to gain an idea. The total entry-level pay of an investment banking analyst in the U.S. is $141,689, of which $97,716 is base pay, with a bonus of $43,974. End-of-the-year bonuses are typical for the industry because they allow employees to share the upside when the economy is strong and the bank performs well. Investment bankers' income grows at a breakneck pace when they reach the associate and VP levels. In seven or eight years in the field, one can become a VP and earn around $350,000 annually. In general, the compensation in this field is much higher than the one finance graduates can expect from other finance roles. Still, significant dedication in time and willingness to perform is also required. Let's address the elephant in the room and discuss how to become an investment banker. The skills you need to get hired are multidisciplinary, encompassing technical, practical, and soft skills. You'll need to be proficient in Microsoft Excel and PowerPoint. Much of your work will involve creating valuation models, working with financial figures, and analyzing performance, all done in Excel. The other tool you'll need the most is PowerPoint. Creating documents for clients and company presentations. It's also how you present your progress when working on M&A deals. You must be proficient and quick in Excel and PowerPoint. Sometimes you'll need to learn how to use a Bloomberg terminal or extract data from such providers as Thomson Reuters. You pick up these technical skills on the job because learning these tools at home is challenging. With Excel and PowerPoint, you don't have that problem, so make sure you're prepared. You also need to know how to value a company. To build good DCF models, you'll need solid financial modeling skills and a good understanding of foundational corporate finance. Moreover, you need to create stunning slides. This sounds superficial, but it's an essential requirement. Regarding soft skills, investment bankers must be prepared. Work is frequently client-facing and requires an excellent ability to build personal relationships, communicate well, and navigate through complexity. Moreover, the dynamic nature of M&A processes, IPOs, and financial markets requires investment bankers to operate under time pressure. So, to perform successfully in investment banking, you need to be job ready from day one. Otherwise, you might feel overwhelmed. The good news is you can learn the technical and practical skills needed by subscribing to our 365 Financial Analyst program and taking the dedicated investment banking career track. It teaches you the necessary skills required to become a top performer. Okay, good. Let's say a few words about the academic background needed to become an investment banker. To get into this field, you need a bachelor's or master's degree, and it certainly helps to have a solid, well-written resume showing proactivity and motivation. Traditionally, many people can break into investment banking after an internship, but getting hired directly is possible if you are a strong candidate. There are on- and off-cycle internships. You typically apply between October and January to acquire an on-cycle internship. The sooner you send out your applications, the better. Then, you'll get invited to screening tests, a phone interview, and if you get to the final assessment center, a day when you get interviewed by three or more people and take several more tests. If your application is successful, you'll receive an offer for a paid nine- to ten-week internship in the summer. Sometimes, off-cycle internships appear throughout the year, an excellent way to enter the industry. These can be listed at any time throughout the year. The main idea of internships is that you get an opportunity to showcase your abilities and prove you'd fit well in the bank's culture and work dynamic. But the key to doing all that is preparation. Okay, let's wrap it up here. Please be sure to like the video, subscribe to the channel, and activate notifications. We'll share several beneficial career videos to help you on your journey to landing your dream job. If you're looking for a way to get prepared in an excellent way and be job-ready, then you will certainly benefit from subscribing to the 365 Financial Analyst platform. We have a great offer for you in the video description.