Career in

Investment
Banking

Find what is Investment banking? What are the various roles it

offers? What qualities they need? How should you prepare for a
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career in Investment Banking Program 2012-13
 Career in Investment Banking

Career in Investment Banking

Investment Banking Overview
The primary focus of this guide is to familiarize you with the investment banking career search.
Much of the information also applies to those interested in research and sales & trading careers,
although there are many aspects of sales and trading that are not covered here. Some of the
information presented has been pulled from A Comprehensive Guide to the Investment Banking Job
Search written by Joseph Hyde, BBA 1996.

The business of most large investment banks can generally be divided into two categories:
Investment Banking (sometimes referred to as Corporate Finance) and Sales & Trading. Investment
Banking divisions are involved in debt and equity capital raising, financial advisory services (including
mergers and acquisitions) and occasionally merchant banking activities, while Sales & Trading
divisions engage in the research, brokerage and distribution of securities. In many transactions, both
are required, for example, while Investment Banking may convince a corporation to use the
investment bank to underwrite their bonds, it is Sales & Trading who actually finds investors for
these bonds. Investment banks generally work with four client groups: corporations, municipalities
(governments, hospitals, universities, etc.), financial institutions (insurance companies, money
managers, venture capital and LBO firms, banks, etc.), and wealthy individuals.

The subprime mortgage crisis of 2008, coupled with extremely high and risky leverage ratios
employed at some investment banks (such as Lehman Brothers), put an end to the independent
investment banking model, at least as far as bulge bracket investment banks went. These investment
banks either merged with or were purchased by large commercial banks (such as Merrill Lynch and
Bank of America) or became bank holding companies such as Goldman Sachs and Morgan Stanley.
However, investment bankers still consider themselves and their industry to be very different from
commercial bankers and the commercial banking industry.

Knowing the distinction between the various functions of an investment bank is crucial during the
career search process. A good interview definition of an investment bank would generally require
mentioning both investment banking and sales & trading; however, a good interview definition of
investment banking would require mentioning capital raising and financial advisory, but would
exclude sales & trading. Merchant Banking is typically outside of the Corporate and Investment
Bank. Merchant Banking is similar to Private Equity and is considered “buy-side.” Credit Suisse is a
perfect example. Its merchant banking arm (now known as Alternative Investments) includes:
private equity, LBO, venture capital, mezzanine debt, secondary funds, hedge funds, fund of funds
and real estate, providing investment opportunities for both the firm‟s own capital as well as
client‟s capital.

The New Profession: Financial Derivatives and Risk Management

Monumental achievements in economic sciences combined with advances in computer and
information technology have transformed global financial markets and the theory and practice of

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finance over the last two decades. The combination of financial theory, mathematics and computer
technology has led to the emergence of a new profession in financial derivatives and risk
management. The spectacular growth and development of the global derivatives market is one
remarkable example. The total value of all unregulated derivatives is estimated to be $127 trillion –
up from $3 trillion in 1990.

In an increasingly complex and interdependent world of financial markets and products, only those
organizations which are able to effectively manage and control their risks will have the ability to
succeed. Corporations, funds, municipalities, and other institutions rely on risk management
professionals such as treasurers, risk analysts, and portfolio managers to make decisions which can
determine the fate of the organization and its investors in periods of distress in the financial
markets.

As the use of derivatives has grown exponentially in recent years, demand for competent derivatives
professionals is especially strong among Wall Street firms. According to Carolyn Jackson, Executive
Director of the International Swaps and Derivatives Association (ISDA), financial engineers are
needed now more than ever on Wall Street. A demand for derivatives professionals and risk
managers is also increasing rapidly within the treasury departments of non-financial corporations
and public institutions.

Therefore, a wide range of career opportunities is available to students with expertise in financial
derivatives and risk management:

 commercial and investment banks

 brokerage and investment firms
 insurance companies
 consulting and accounting firms
 treasury departments of non-financial corporations
 public institutions, such as federal government agencies, state and local governments,
municipalities and international organizations
 software and technology vendors providing products and services to financial industry

MBA graduates are offered positions as risk managers, investment bankers, derivative traders,
designers of specialized securities, and financial engineers. Employers include investment banks,
commercial banks, financial consultants, financial and database software suppliers, financial
regulators, exchanges, and large non-financial corporations.

Furthermore, whether your career aspiration is to become an institutional salesperson/trader, a

portfolio manager, an investment banker, a corporate finance analyst, or a private banker, you will
find that financial derivatives is becoming a more and more important part of your skill set.
Knowledge in this fast-growing area will provide you with the finance acumen necessary to excel.

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Terminology

Investment Banking
Individuals working in investment banking often refer to themselves as bankers. They often refer to
their job as banking or I-banking. Within the investment banking division, groups are divided into
two broad classifications: industry (also known as “coverage”) or product groups. Examples of
industry groups are: consumer products, TMT (telecom, media, and technology), banks and financial
services, health care, industrials and energy. Industry groups typically act the front line relationship
managers between the bank and large clients. Examples of product groups are leveraged finance,
DCM (debt capital markets), ECM (equity capital markets) and M&A (mergers and acquisitions).
However, slight variations exist from bank to bank, for example at Goldman Sachs, there is no
separate M&A group and M&A activities are covered by each of the industry groups. Therefore, it is
important to research each bank to find out how they divide their groups and what groups they have
(and don‟t have). What‟s more, understanding each bank‟s groups and their training program
becomes critical during the interview process and decision-making time – as this is a key way to
distinguish the banks from each other. Much of this information is available on company-specific
websites and general career search websites such as Hoovers.com and Vault.com. Also, these are
great questions to ask bankers during networking events.

The role of a banker can vary depending on their experience level. Junior bankers, such as analysts
or associates spend a lot of time working on financial modeling, company research, preparing
presentations, and deal execution. Senior bankers, such as directors, or managing directors, spend
more time cultivating client relations, providing strategic advice, and winning new business.

Sales & Trading

Individuals working in a sales & trading department of an investment bank are not investment
bankers, nor do they work in investment banking. Instead, they are either sales brokers or traders
who work in sales & trading.

Private Banking
This function is often referred to as Private Wealth Management (PWM). This role varies widely by
firm so it is important to look into the responsibilities and roles within each firm. Individuals working
in a private banking role need to demonstrate a passion for the capital markets and for teaching
others about sophisticated debt and equity products. The primary difference between private
banking and sales and trading is the intimate relationships that one must establish with clients. Also,
typically PWM will deal more with high net worth individuals, and S&T will deal more with
institutional investors. This is due to the nature of dealing with that individual‟s personal balance
sheet. Broadly speaking, you will need to be more of a generalist covering debt and equity products.
This role can also be very entrepreneurial but this depends on the firm‟s business model. Sales skills
and relationship management are key for PWM.

Research
Researchers refer to themselves as analysts. This is not to be confused with the analyst position
available in investment banking for student’s right out of college. A research position usually implies
following one field/industry and developing expert knowledge on it and the companies within it. It is

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important to know that there is a division or “Chinese Wall” between banking and sales &
trading/research, where information flow is minimized to promote and protect.

Before You Begin

The individuals in each of the above areas generally have different skill sets, career goals, and
personalities. For instance, people in investment banking are typically very thorough and detail-
oriented and are willing to work strenuous hours. Those interested in sales & trading are typically
fast thinkers and strong in mental math. Recently, the industry has come under fire for mixing
research and investment banking. Knowing which area appeals to you and what skills you excel in
will help you focus on your job search more effectively.

The Investment Banking/Sales & Trading/Private Banking Career

Search
Career Search Step #1: Conduct Self-Assessment
The nature of an investment banking career makes careful self-assessment very important. The job
search itself can be difficult and frustrating, and competition for summer and full-time Associate
positions is fierce. Before you make the decision to pursue the industry, you should understand the
Associate role, the skills and interests required, and the lifestyle and work environment.

Based on the CareerLeader profile, professionals in investment banking are oriented strongly toward
analysis and enterprise control rather than managing people. They enjoy abstract financial analysis
and the ownership of the „deal‟ process. Almost all recruiters look for the following specific
qualities:

Skills and abilities:

 knowledge of financial services and corporate finance

 strong quantitative and analytical skills
 ability to apply advanced oral and written communication skills to create a positive
impression and professional rapport
 solid sales and marketing skills
 ability to work independently while functioning as part of a team

Personal traits:

 a high degree of initiative and motivation

 keen attention to detail
 client focused
 composure and confidence to juggle conflicting priorities
 strong analytical and quantitative skills
 assertive and entrepreneurial nature
 ability to learn, think, and react quickly
 ability to work well in a team environment
 strong interpersonal skills
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 ability to multi-task
 ability to communicate clearly and amiably knowledge of industry trends, history, and the
major participants
 strong interest and academic excellence in finance, accounting, and corporate strategy
 ability to read, understand, and use financial statements
 strong familiarity with business computer applications, particularly Excel

Recruiters also want people who have high stamina levels and a hunger for learning, and who are
confident, poised, energetic, and willing to make personal sacrifices due to the demanding schedule.

The investment banking work environment is often described as fast-paced, stressful, competitive,
and generally unbearable over the long term. It has also been described as collegial, cooperative,
friendly, and enjoyable. Why the contradictions? The reason is that the work environment, lifestyle,
and expectations can differ substantially from bank to bank, and even from group to group within a
bank. Too many uncontrollable factors are involved to make a consistently accurate generalization.
However, it is well known that 80 to 100 hour work-weeks are common, with more time required
during crucial periods. Based on this estimate, obvious lifestyle sacrifices are part of this career
choice.

On the plus side, a career at an investment bank will provide you with incredible knowledge,
information and insight about corporate finance and the financial markets, the challenge to take on
significant responsibility, and an arsenal of skills that are valuable in a variety of different business
settings.

Investment banking / sales and trading jobs generally pay larger total compensation packages for
several reasons. First, the work environment is hectic and fast-paced. Second, there is constant
stress and you will be required to work long hours, including weekends. Third, there are more risks
in a career in investment banking. The success of the company, and ultimately your success, is based
on the ability to generate business and keep clients satisfied, as well as the strength of the economy
and financial markets. Finally, investment banks tend to “over-hire” due to natural attrition rate in
good times and “over-fire” in bad times.

Career Search Step #2: Investigate Possible Career Opportunities

The general career path for MBAs in investment banking is as follows:

 Associate (3-4 years)

 Vice-President (3-4 years)
 Associate Director / Director / Senior VP (2-4 years)
 Managing Director / Partner / Senior Managing Director

Almost every MBA starts at the Associate level, where the emphasis is on financial analysis and
valuation, “quarterbacking” the transaction process, and the development of new business. While
globally the majority of associate opportunities are in New York, there are some opportunities to
work in regional cities such as Chicago, San Francisco, Houston and Los Angeles, as well as in
international financial centers, such as London, Hong Kong, Paris and Tokyo. For Asia Pacific Hong
Kong, Singapore, Tokyo & Mumbai are major financial centers.

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Career Search Step #3: Research and Target Potential Companies

Investment banks may be loosely classified according to size, function, and focus. On one end of the
spectrum are the full-service firms that are normally involved in most or all investment banking and
sales & trading activities. Examples of full-service firms are J.P.Morgan and Credit Suisse. Positioned
at the other end of the spectrum, boutique firms specialize in only one or a few industry and
functional areas. Examples of such firms are Lazard and Moelis & Co.

The advantages of working at a larger bank include well-developed training programs, generally
better firm-name recognition (although not always), possibility for lateral or geographical
movement, numerous other entry-level Associates with whom to forge relationships, strong
research and support services, and ample networking opportunities. The disadvantages of larger
banks include the difficulty of gaining distinction in a large associate class, the risk of getting
“pigeonholed” in one functional or industry group, and less exposure to senior bankers and clients.

The advantages of working at a smaller bank include significantly greater exposure to senior bankers
and clients, a more unique work experience, a broader transactional experience, usually a greater
share of the responsibility, occasionally less hours, and a less competitive work environment. The
disadvantages include possibly limited training programs, the risk of lesser firm-name recognition,
less opportunity to work at a regional office, weaker support services, and the limitation of the
bank‟s area of specialization.

Students interested in international career opportunities with investment banks should visit the
banks' websites, speak with the recruiters during the campus presentations or send an email to
alumni who are working in overseas offices of these banks to obtain more information on the
recruiting process and the job requirements which may include additional language requirements.

Career Search Step #4: Develop a Career Search Strategy

For both on-campus and off-campus recruiting, networking and preparation will be essential to your
success.

Several key steps should be included in your search strategy:

 Strengthen your profile: Grades (primary) and extracurricular activities (secondary) are
important to Investment bank recruiters whereas they are not as important for Sales and
Trading recruiters. You are often asked on a cursory basis how you are doing but your
overall fit in the firm is much more important than grades, especially in a sales role. Attempt
to secure leadership positions in your affiliations (but not as a trade-off to grades).
 Attend all on-campus investment banking presentations and receptions that follow.
Indicate your interest level and research the differences between each firm to better help
you during the interview process.
 Conduct research. Start learning as much as possible about the investment banking industry
and about the differences among the major investment banks. Do this by attending all
informational investment banking presentations, by reading the Wall Street Journal and
other business periodicals, by listening to the financial market reports on CNBC, by reading
the Wet Feet Press publications, Vault.com‟s guide to Investment Banking and Finance

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Interviews and by reading investment banking-related books. An excellent overview to

investment banking can be found in Investment Banking & Brokerage, by John F. Marshall
and M.E. Ellis, The Business of Investment Banking by K. Thomas Liaw, and Monkey
Business. If you are interested in learning the intricacies of valuation, read Valuation:
Measuring and Managing the Value of Companies by McKinsey & Company Inc. Other
worthwhile books are Barbarians at the Gate and Den of Thieves. These two books involve
the major banks, players, and events of the 1980s on Wall Street. Two other books are Liars
Poker and The Money Culture both written by Michael Lewis. These last two books pertain
more to sales & trading.

Bibliography of Information resources

 CareerLeader™ online program

 So You Want to be an Investment Banker, by Wet Feet Press, Kresge Library.
 A Comprehensive Guide to the Investment Banking Job Search, by Joe Hyde, BBA „96
 Investment Dealers Digest, an important Wall Street trade magazine
 Barron‟s, good reference for equities
 The Economist, especially important for FX and international bonds and equities.

And a very special thanks to the investment banking career guide by Office of Career Development in
Michigan Ross School of Business for the valuable content and ideas which has been adapted to
create this document