What Is an Investment Banker?
Working as an investment banker is an excellent way to use your passion for finance and strong analytical skills. Investment bankers enjoy challenging, fast-paced careers with lucrative salaries and bonuses. If you want to be an investment banker, understanding what these professionals do and how to become one can help you make a more informed decision. In this article, we define what investment banking is, explain the role of investment bankers, provide salary information, highlight useful skills and offer steps for how to secure a career in investment banking.
What is investment banking in simple terms?
Investment banking is the business of providing financial services to corporate clients. These customers may be governments or businesses, including other financial institutions. Investment banking is a small but lucrative part of the banking industry compared to commercial banking. There are two types of investment banks:
Full-service investment banks: offer a complete service range including underwriting, trading, securities services, merchant banking and mergers and acquisitions
Boutique investment banks: specialise in one or two areas delivered in a specific location, such as advisory services in Sydney
What does an investment banker do?
Investment bankers have different duties, depending on their area of specialty. Some common responsibilities of investment bankers include:
Finding investors for corporate clients seeking capital
Assisting corporate clients making initial public offerings (IPOs) and issuing and selling securities or underwriting
Advising corporate clients how to invest their money safely and efficiently
Helping corporate clients secure the best investments such as bonds, stocks and foreign exchange trades
Supporting corporate clients merging or acquiring other companies or selling their own businesses to other corporate entities
Driving proprietary trading efforts, where investment banks invest to grow their own wealth
Researching and predicting financial trends and investment opportunities
What does a day in the life of an investment banker look like?
As investment bankers usually specialise in areas such as foreign exchange and commodities, the days of different investment bankers can look very different. However, the day of an investment banker may look like this:
6:30 a.m.: Wakes up early to make phone calls with colleagues in international offices, then checks emails and scans the finance news over breakfast.
8:00 a.m.: Catches the train into the office and listens to financial podcasts on the way.
8:30 a.m.: Arrives in the office and starts preparing for an upcoming meeting.
9:00 a.m.: Participates in a video conference call to discuss the current bidders for a sell-side transaction.
10:00 a.m.: Checks Australian Stock Exchange (ASX) on opening and assesses stocks for corporate customers.
10:15 a.m.: Engages team of analysts, associates and executives for a strategy meeting to help a corporate customer with falling stocks.
Midday: Attends lunchtime due diligence committee meeting with board members and managers from a client preparing for an IPO.
3:00 p.m.: Briefs colleagues about a recent conference.
4:00 p.m.: Updates valuation models, reads analyses, readies a presentation for management and replies to phone messages and emails.
8:00 p.m.: Goes to dinner and socialises at a fundraising event held by a corporate customer.
10:00 p.m.: Back home to pack bags for an early morning flight for a meeting with a potential new client.
How do investment bankers make money?
Investment bankers earn a yearly salary, like most employees. They also receive a performance-based bonus. The bonus's size depends on the amount of commissions, trading income and underwriting, asset management and advisory fees the banker has brought into the bank. Some banks give their investment bankers commissions instead of bonuses, but this is less common.
How much does an investment banker make?
The average salary for an investment banker is $79,935 per year. However, a successful investment banker can substantially increase their yearly earnings through bonuses. Experience, education, employer and location also help influence yearly earnings.
What skills do investment bankers need?
Investment bankers use the following skills and qualifications to succeed in their careers:
Strong financial literacy helps investment bankers understand how to help their clients. They should feel confident with fundamental financial concepts and systems. They should also understand relevant financial regulations, including the ASX regulatory framework and Australian Securities and Investments Commission guidelines.
Investment bankers are analytical thinkers who can assess markets and businesses and determine how to help their clients maximise their earning potential. If challenges arise, they can change their approach to find another solution that helps the client. They can also quickly digest new information and complex concepts and apply them to their work.
Read more: Definition and Examples of Analytical Skills
Some of the most successful investment bankers are innovative. Their creative thinking helps set them apart from others in their industry. Their employers and clients may love their unique perspectives, which can help them improve their processes and grow their wealth in unexpected ways.
Investment bankers use computers to communicate with colleagues and clients, perform financial modelling and research markets. They required advanced Microsoft Excel skills, including using pivot tables and coding macros. They use presentation software such as Microsoft PowerPoint and Keynote, to create presentations for clients and management. Investment bankers should also understand modern tech concepts that should impact their industry including blockchain, cryptocurrencies and artificial intelligence.
Investment bankers spend a lot of time working with their team members and clients. Their expert communication skills help them use financial terms with their colleagues and use more accessible language with clients. Their strong, professional communication skills help their clients trust them with their financial future.
Investment bankers might work in environments that expect quick work completion. Their decisions can also substantially affect their clients, so they have a lot of responsibility. Self-management skills help them be reliable and resilient employees who can deliver what's expected of them at all times. Their resilience helps them accept feedback and use it to become better employees.
Global and cultural awareness
Working in investment banking often requires working with people based around the world. Understanding other countries, their markets and their customs help investment bankers collaborate and serve international clients better. Speaking other languages can also help investment bankers gain an advantage over others in their sector.
Leadership skills can help investment bankers progress in their careers. Investment bankers with leadership skills may initially lead project teams for clients. Over time, they may lead departments, investment bank branches or organisations.
How do you become an investment banker?
Consider following these steps to gain the qualifications and experience you need to become an investment banker:
1. Complete your secondary school certificate
Completing your secondary school certificate with a strong Australian Tertiary Admission Rank (ATAR) helps you access high-quality university programs. Consider studying advanced mathematics, business studies and economics at high school. These subjects directly relate to your university studies so they'll give you a good foundation of knowledge.
2. Achieve at least a bachelor's degree in a relevant field
Investment banking is a competitive field so most companies only hire applicants with at least a relevant bachelor's degree. Bachelor's degrees in business, commerce, accounting and economics, with major studies in banking or finance, are the most beneficial. Many students choose a dual degree, such as a Bachelor of Commerce and Business or a Bachelor of Commerce and Law.
The Bachelor of Commerce/Law is one of the most desirable degrees for applicants. While investment bankers have a limited need for legal training, entry into this degree requires a very high ATAR. Gaining entry and completing this degree suggests you are hard-working and intelligent. You could also pursue further study with an honours year or a master's degree in business administration or a finance field.
3. Participate in an internship
While not essential, joining an investment bank's internship program can deepen your understanding of this area of finance. Major investment banks run internship programs over the summer holidays. Entry is open to students in their second-last year of a relevant bachelor's degree and students at any stage of their master's degree.
4. Gain a junior investment banking role
After graduating with an undergraduate degree, you'll enter a two-year graduate program. During this program, you'll have the junior title of investment banking analyst. You'll prepare presentations for clients, analyse financial records and markets and perform administrative duties. This experience provides practical experience working in this sector. If you're one of the best analysts in the program, you'll get invited to stay another year and get promoted to an investment banking associate role. If you graduated from university with a master's degree, you can apply directly for one of the associate roles.
5. Advance to a senior role
After gaining experience, you may advance to a senior role with your existing employer or a different investment bank. Your skills and proven track record of helping clients may help you become a vice president, senior vice president, director or managing director. People in these roles require more responsibility, but they also have more lucrative salaries than junior positions.
Please note that none of the companies mentioned in this article are affiliated with Indeed.
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