How to Become an Investment Banker
When corporations and municipalities want to raise capital to fund their operation, they go to an investment bank for assistance. An investment banker works with these entities to underwrite, or find buyers for, securities like bonds or stock to raise the capital the organization needs.
In addition to underwriting securities, investment bankers can usher corporations through complex processes like initial public offerings or mergers and acquisitions. To do this successfully, they must be well-versed in the behavior of financial markets and in the legal requirements that investment banks and their clients must meet for each process.
What kind of training is required to become an investment banker?
Investment bankers come from a variety of backgrounds, but a strong foundation in mathematics is important. Prospective investment bankers may have bachelor’s degrees in finance, accounting, or mathematics, for example, but may come from other fields like computer science or physics as well.
Investment bankers receive a great deal of their training through their employer. Recent graduates of bachelor’s degree programs typically start in analyst roles and complete a training program before they begin their job. These training programs can last several weeks and introduce new analysts to principles of accounting, risk, markets, financial statement analysis, and financial modeling. Analysts also learn negotiation, communication, and presentation skills. After they complete their initial training, analysts often take part in continuing education that is also provided by their employer.
A good way for those interested in the field to gain experience and make professional contacts before landing a job is to complete an internship. Investment banks regularly take on undergraduate and graduate interns and provide them with training and mentorship. Interns typically perform the same kinds of duties that analysts and associates perform, including gathering data, working with financial models, and interacting with clients.
While entry-level investment banking analyst positions require only a bachelor’s degree, many investment bankers pursue graduate degrees. Master of Business Administration degrees (MBAs) are most common among investment bankers, but other graduate degrees, like law degrees, can be useful as well. Many schools offer graduate programs in financial mathematics, and a master’s degree in this field can also be valuable for investment bankers.
Are there any certification or licensure requirements?
Once they are employed, investment bankers must register as a representative of their bank with the Financial Industry Regulatory Authority (FINRA). Depending on their job responsibilities, investment bankers must pass an examination on a specific “series” in order to qualify for registration.
Investment bankers can also pursue voluntary certifications like the Chartered Financial Analyst (CFA) credential offered by the CFA Institute. To become a CFA “charterholder,” one must have four years of investment work experience and complete the CFA program, which is a three-part course of study that covers investment valuation, company analysis, and portfolio management. CFA candidates must pass an examination at the end of each of the three levels of the program. The CFA program takes two to five years to complete.
How long does it take to become an investment banker?
One can become an investment banking analyst directly after earning a bachelor’s degree, but it can take two or more years of working experience plus a graduate degree to advance to associate status at an investment bank.
What does an investment banker earn?
The US Bureau of Labor Statistics groups investment bankers with securities, commodities, and financial services sales agents, and this group earned a median yearly salary of $71,720 in 2012. Investment bankers’ base salaries are often supplemented with bonuses from their employer, so one’s earnings in this field can be quite high, reaching past $100,000 within a few years as an analyst.
What are the job prospects?
The Bureau of Labor Statistics projects that employment of securities, commodities, and financial services sales agents, including investment bankers, will grow 11 percent between 2012 and 2020, which matches the average growth for all occupations over that time.
The BLS expects that, while there will be additional jobs, competition for positions will be strong, and that candidates with graduate degrees and voluntary certifications like the Chartered Financial Analyst certification offered by the CFA Institute will have the best prospects.
What are the long term career prospects for investment bankers?
Investment bankers often start their careers at the analyst level and, with experience and additional education, advance into associate positions. Others enter the field as associates after working in another industry and earning a graduate degree such as an MBA.
With experience, associates can become vice presidents at their banks, supervising analysts and associates and interacting more directly with clients. After some time as a vice president, investment bankers may then become directors or principals at their bank and further focus on building relationships with new and existing clients. One of the highest positions an investment banker can reach is managing director, and at this level they work almost exclusively on bringing in new business.
As investment bankers move up the hierarchy of their bank, their base salary increases, but their potential for bonus earnings increases much more.
How can I find a job as an investment banker?
To land a job as an investment banker, you must concentrate heavily on networking while still in school. Large investment banks recruit prospective analysts and associates from top business schools, and often fill these positions with interns who have worked with them as summer analysts or associates.
If you do not attend a highly-rated business school, you will need to work hard to build a network on your own by reaching out to family members, friends, acquaintances, professional associations, and your school’s alumni. As your network grows, you will increase your chances of meeting someone who can offer you an opportunity to interview for a position.
How can I learn more about becoming an investment banker?
You can learn more about the requirements and training process to become an investment banker by visiting the websites of large investment banks like Goldman-Sachs and J.P. Morgan. These companies detail the various programs they offer for undergraduate students, graduate students, recent graduates, and experienced professionals.
If you are currently in college, you may be able to find someone in your school’s alumni network who can talk to you about becoming an investment banker. Learning more through this process can also be a good way to build your professional network.