How to hire for a Investment Banker

Investment banking is one of the most prestigious professions on Wall Street. Although it features some of the most coveted and financially rewarding positions in the banking industry, investment banking is also one of the most challenging and difficult career paths, noted for being characterized by long working hours and high levels of stress.

It’s not unusual for investment banking analysts or associates to put in 80 to 100 hours of work a week. (Of course, it’s not quite as horrific as some might lead you to believe – it’s not like investment bankers work 80 to 100 hours every week).

There’s quite a bit of confusion – combined with not much actual information – regarding the field of investment banking. Most people are probably at least familiar with, have at least heard the phrase “investment banking”, but don’t really have a clear idea in their minds of what investment banking entails.

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What do investment bankers do – Stock and Bond Offerings

Investment banks exist primarily to facilitate capital funding through investment in either corporations or government entities such as municipalities or states. Investment banks work to provide such organizations with financing through activities such as underwriting (which basically just means finding buyers or investors) the issuance of stock or bonds. When you hear that a company is going public and offering stock shares to investors for the first time through an “initial public offering” (IPO), an investment bank is typically the entity handling the IPO.

Determining IPO stock prices can be a tricky business, as the investment bank has to strike a delicate balance in pegging an optimal price that will provide maximum funding for their client company while also attracting a maximum number of investors. Price the stock too high and it may fail to attract sufficient investors; price the stock too low and it may fail to provide a sufficient amount of capital.

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What do investment bankers do – Mergers and Acquisitions

Investment banks also assist clients in transactions such as mergers and acquisitions (M&A) where one company seeks to acquire another or when a company is offered for sale. The company valuations that investment banks produce typically determine what one company is willing to pay for another.

For companies looking to make an acquisition, investment banks advise their client on both the value of the company being acquired and about the most favorable way to structure the offer.

What do Investment Bankers do – Jobs and titles in Investment Banking

It’s probably already easy to see that investment banking is not just a single job. Rather, it is a business, within the banking industry, that includes a number of jobs.  Looking at job titles will further answer the question of, “what do investment bankers do?”

There are two ways to look at what investment bankers do. One is by their job title, which basically determines what type of tasks they handle. The other is by the division of the investment bank they work in, which determines the types of projects they work on.

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#1 Analysts and Associates

Analysts and Associates are both considered entry-level positions at an investment bank, with associates occupying a slightly higher rung on the corporate ladder, usually by virtue of possessing an MBA or substantial prior experience in the financial industry.

Analysts are typically recent college graduates or individuals who may have some financial industry work experience, but who are new to investment banking. Analysts can usually work their way up to becoming associates within three or four years, although doing so may require not only gaining work experience but additional education as well. Most investment banks prefer their associates to have an MBA or other graduate degree related to finance.

An analyst’s day is typically occupied with doing research and writing reports. Investment banking analysts usually become world-class experts at generating spreadsheets in Excel. They are also often responsible for handling their supervisors’ schedules and fielding phone calls from clients.

Associates are counted on to possess all the skills of analysts and to additionally be able to generate solid discounted cash flow (DCF) valuations of companies, arrange meetings with clients, price new offerings, and produce (with the help of analysts doing all the hard work) weekly newsletters.

#2 Vice Presidents, Directors, and Managing Directors

Vice presidents are middle management personnel at an investment bank, who usually directly supervise the analysts and associates. They have more direct contact with clients than the analysts and associates, who are typically hidden away in the back of the office.

Directors represent the next rung up the ladder. In addition to supervising teams in their area of specialization, they are more actively involved in soliciting clients and handling client relationships. Directors are often responsible for deciding on the structure for a specific capital funding deal, such as whether it will be pursued through an equity or a debt offering.

At the top of the investment banking hierarchy are managing directors. Managing directors are the firm’s principal “salespeople”, tasked primarily with attracting new clients. They also serve as the main contact person for key existing clients. In that capacity, their job is to (A) keep existing clients happy, so as to retain their business, and (B) suggest possible new undertakings to clients, such as an acquisition, that will generate additional revenues for the investment bank.

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Investment banking skills

1. Research and analysis

Investment bankers spend hours analyzing market reports and databases to get relevant information to aid in decision-making. The research may range from finding and comparing stock performances for several companies to building company profiles for reports.

2. Financial modeling & valuation

Doing company valuations, performing financial modeling, and calculating financial metrics requires people who are good with numbers, and this is one of the responsibilities that investment bankers should expect to fulfill on a daily basis.

An investment banker needs to be an Excel Poweruser, and know his or her way around valuation multiples to predict company performance.

3. Preparing Investment Presentations

New investment bankers are required to prepare pitch book presentations that outline proposals, benefits, risks, and timelines. They are required to do the majority of the work, from preparing slides to making presentations, after factoring in comments and markups from the seniors. Investment analysts should be prepared for sudden and unreasonable deadlines for the pitches and presentation materials.

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Summary of what investment bankers do

Investment banks play a key role in helping companies and government entities obtain capital financing. As financial advisors to their clients, they help to price capital, allocate resources, and manage investments. Although investment banks have been scrutinized and criticized from many different angles in recent years, they are virtually an indispensable element for the smooth, successful operation of a free market economy. 

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