Together, these facts make it unlikely a current banker will find the time to rite a detailed answer to this question. So, you’ll have to settle for me?a former very junior banker for a small boutique who lived the dream for a few years then skedaddled after getting the Associate promotion. Investment banks’ primary businesses are: Raising capital for corporations, governments or other financial institutions (Stock or bond offerings, loans for Lobos, e. G. ). Old powerful banks like Salomon Brows. , Comparing and Goldman Cash all got started doing this.
Making markets in all sorts of securities, from stocks and bonds to Cads and futures (so-called “Sales & trading”). Every bulge bracket plus hundreds of smaller firms in many countries do this. Advising on corporate restructurings, corporate finance and capital structure (Exactly what it sounds like). Most banks have groups dedicated to this, and some, like Rothschild and Lizard, are legendary for it. Advising on mergers and acquisitions (Providing negotiating, analytical and other support during deals).
Since all it takes is to do this well is a handful of bankers’ time, this is the most profitable BIG business. Former Morgan Stanley M god Paul Tabular is currently one of the world’s top advisors–and he doesn’t even have a secretary. Helping institutions manage financial risk (Derivatives structuring, e. G. ). In the recent past, some of this activity got a few very powerful banks in very deep trouble (looking’ at you, Merrill and Cit), but the biggest problem of them all, GIG, wasn’t even a bank.
The skill sets, qualifications, personalities and day-to-day work will vary widely from business to business. Someone who is very good at equity capital markets doesn’t necessarily have much credibility in M&A, for example, and conversely, expertise in the latter is by no means a guarantee of business in the former. Each of these fields is fairly specialized and in some cases, such as derivatives, a lot of the bankers have Pods in areas like physics, statistics or mathematics.
Paradoxically, the services that investment banks provide are quite commoditized, so competition between banks is ferocious. This competitive aspect is sharpened by the fact that companies often play the banks off against each other to obtain better pricing, for instance, or for other purposes. For example, you may wonder why on some headline-grabbing meagerness, Giant Corp.. A will be advised by Morgan Stanley, Evermore, Deutsche Bank, Cit, UBS, Barclay and RIB, and Giant Corp..
B will be advised by Lizard, Goldman Cash, Boa Merrill, Comparing, Credit Issue and BAN Paris. Why would you want to sign up that many advisors? Well, for one thing, to keep them from joining the other side, which, sure as the sun rises, any bank would gladly do for a nice chunk of a fat fee; and also because you would like lots of banks to participate in the syndicate for debt offerings that are sometimes done in conjunction with M&A. At the junior level, investment banking is actually quite simple (though not ass) and the qualifications for it are somewhat standardized.
But won’t go into that because frankly, there’s already an entire cottage industry devoted to helping recent college grads get into this set of absurdly lucrative jobs (name me another sector where the absolute lowest-paid 22-year-old employee who still has acne clears $1 ask a year and I’ll remove the word “absurdly”). So, moving on. The thing to remember about joining a bank as an analyst or associate is that you’re being brought in as a piece of a money-making operation over which you exert relatively little influence; it’s not as if negotiations for that $50 lions merger are going to grind to a halt if you quit tomorrow.
This isn’t to say that being a junior banker isn’t gratifying, value-adding or a terrific learning experience; it’s very often all three. But the point is that the truly important discussions, debates and agreements are hammered out in executive suites, at fundraising dinners, and on the links at Pebble Beach long before you ever open MS Excel. Most analysts realize this, take the practical skills, corporate connections or industry expertise they’ve gained in 2 or 3 short, well-paid years, and decamp to business school, investing or replanted (yours truly, e. . ). But some continue the Long March and try to become a master of the universe. It’s difficult to pin down how one accomplishes this. Successful careers in finance, in my observation, seem to be about how good you are at developing your own personal brand, be it through your track record, connections, charisma, etc, or some combination Of these. Just to be promoted out Of the bullpen, you of course need a type-A level of ambition, perseverance, aggressiveness, luck and financial knowledge.
Beyond that, people who have made it to the upper levels seem to have the following qualities: Healthy ego: You need to instill confidence in your abilities with your clients. You also have to fight against your competitors’ and partners’ attempts to claim credit for your deals. Energy: It’s impossible to be a senior toolmaker if you require lots of sleep on a regular schedule, and if you do not have the ability to sleep at the oddest, most uncomfortable places. You must also be willing to not see your children and spouse very often.
Good speaking and explanatory skills: Good mental math and logical reasoning skills matter, but only insofar as you can convey ideas clearly and succinctly; also, you must be ere capable at talking your way out of sticky situations. Ability to read people: You need to divine interests and cultivate trust. In some ways, senior bankers are the world’s best-paid intelligence officers: they cultivate contacts, use those contacts and piece together bits of unrelated market and biz Intel into a big picture.
Good middleman: As the line from The Layer Cake goes, “The art of good business is being a good middleman. ” You need to somehow persuade people that they can trusty (at least for awhile) in spite of the fact that your firm may well find itself on the opposite side of a trade. You deed to reconcile competing constituencies internally, with some people wanting very different things out of a client than others. This is highly political, and it takes deft skill; its an art more than a science, which is why smooth practitioners of that art get paid so much.
Extracurricular: Being a good golfer, sailor or lacrosse player helps, as does going duck-hunting or playing squash with the COOP of G 2. If you want to learn more about investment banking, recommend the book Investment Banking by Joshua Pearl and Joshua Rosenberg. It leads you step-by-step through financial modeling (DC, L BOO, comparable), here to source all of the information you need, the basics of a sales process, and basic merger analysis.
The book can be pretty dry at times, but if you just set aside a week to sit down with the book, read it front to back once or twice (paying special attention to the figures throughout the book), and then try valuing a company on your own while using the book as a reference to get all to do the bulk of the work that banking analysts do. In my opinion, using a stock market simulator will not help you learn more about investment banking, as investment banking has little to do with investing (that would be investment management) and everything to do with financing and M&A advisory for companies.
However, learning to invest can help with your M&A career as you learn to dig deeply into filings and numbers, gain a deeper understanding of an industry, and learn to think about company strategy (including strategy) more from an owner’s perspective rather than just an analyst’s perspective. Work for an Investment Bank myself, I believe you can thus follow some of the advice here. Start with the zero-level basics like What is a share? What is Equity Value? What is a stock exchange?
How are shares traded? You can look it up in a website that is entirely dedicated to Investment Banking / Finance aspirants and it’s called ‘Investigated’. Shares Definition Investigated Having done that, you’ll have at least a start. From then on it is entirely up to you to move on: Continue reading Investigated, or read simple articles on Wisped, and generic Google search results – all Of the sources are good enough for a beginner. No specific sources to mention, really.
One you have done reading for 2-3 days, you yourself will begin to find these rods occurring repetitively: Balance Sheets’ / Derivatives’ / Futures’ / ‘Options’ / ‘Equity Value’ / etc. Just Google any new term you come across, and even if you don’t get it at first, don’t worry – it will start making sense after some time automatically. It is a bit abstract to start with, so you have to be patient, because with time it will become easy stuff. And I think just 5-6 days of daily reading (1-2 hours daily, with Faceable and Quorum tabs closed, of course) about Finance / Investment Banking will give you a substantial amount of knowledge!
For a quick start on Investment Baking here is the simplest definition I can make up from the top of my head: “It largely involves advising companies on Mergers & Acquisitions, Pip’s, Business Trust Listings, Equity and Debt issuance, etc. “. When you are able to appreciate this Greek-sounding sentence (Greek for first-timers, otherwise simple as ‘A for Apple’), then think you have a starting-idea about Investment Banking. Critically read one financial daily and a monthly magazine. For example if in India try reading the Economic Times daily along with Forbes India or Fortune India monthly issues.