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Careers in Investment Banking

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Careers in Investment Banking

Post  MBAstudent on Tue Feb 23, 2010 1:03 am

A career in the securities industry can offer exciting work if you enjoy
working in a competitive and demanding atmosphere. Investment bankers, stock
brokers, and stock traders all make up the securities industry providing
services to each other, as well as the general public. All of people involved in
this field deal with stocks, bonds, and other financial material in some way or
another, but they all have their own specific objectives and duties. The primary
differences between the three are the services they provide and who they provide
these services to. Investment banking seems to be the most interesting of the
three, as well as the most rewarding. This is due to the nature of the job an
investment banker must perform. A career as an investment banker has its pros
and cons just as any career does, but if you're looking for a high-demanding,
high-risk career that at times is very rewarding financially, investment banking
could be the career.
Investment banking has been around since stocks have been issued and
bonds sold, but the field demanded little, if any new jobs before the 1980's.
This was due to the low complexity of the financial markets. Since then,
investment banking jobs have been significantly growing due to the availability
of complex securities and high-yield bonds, also known as junk
bonds.(Investment Banking,12) Now that the financial market has become more
complex, companies that didn't require and investment bankers now need their
advice to effectively help their company sell stocks and bonds, and to make
financial plans for the future. This shows the growing need for investment
bankers in the securities industry.
Investment bankers serve a major part in shaping our nation's economy as
well as the world's. This is done by devising financial plans and putting them
into effect. The process of doing this is very time consuming but doesn't seem a
bit boring. Investment bankers also spend a lot of time traveling to various
clients to present ideas and when at home, investment bankers work on developing
financial plans and strategies for clients. All this work can appear to be very
time consuming, and it is. According to Linda C. (So You Want To Be, 2) a
typical day for an investment banker out of school is to start at nine in the
morning and work fairly consistently until midnight, five days a week.
To be considered for a job in the securities industry one must be
content living in or near a large city, and have at least, a four year degree
in some type of business field, typically finance or accounting. Working summer
internships in your chosen field also aids in job finding. If these requirements
are met an investment banking firm will consider hiring the graduate into their
two-year financial analyst programs at starting salaries of $25,000-
30,000.(Morgan, 12) The competition to get into an analyst position is extremely
hard and competitive. The competition to get into the trainee classes at the top
investment banking firms is tougher than becoming an astronaut, according to
Preston Pumphrey. (Pumphrey,2) The typical analyst works mainly on analytical
work and also does a fair amount of writing.(So You Want to Be A,4) From here
an analyst has the option to either go back to school and pursue an MBA, or try
to advance to the position of a junior associate, which basically has the job of
supervising the analytical work done by the analysts. Junior associates are
basically trying to learn the business and acquire the skills they need to
develop financial plans rather than to execute them. Their main responsibilities,
according to Rich W., a vice president of a large investment firm, include
running computer analyses, preparing the financial reports which accompany stock
issues, and putting together the documents used by senior bankers to pitch
ideas.(So You Want To Be. 4) Junior associates are primarily watched over by the
senior associates. Senior associates, or vice presidents, depending on the
investment firm's structure, oversee the preparation of documents that leave the
firm, and they begin to be involved in the more creative side of business,
working with senior bankers and clients to develop financial strategies. Senior
associates are basically more specialized in a specific type of transaction, and
have established banking skills that will help them in the future. Normally, the
only step up from a vice president is a senior banker who has ownership
interests in the firm he or she works at. To become a senior banker it usually
takes about ten years of experience and a lot of hard work.
By now it's obvious to see that investment banking offers many
opportunities to move up on the corporate ladder, and as one moves up so does
his or her salary. The amount of increase in salary is quite significant.
According to investment banking(Investment Banking,7) the average starting
salary for a junior associate is around $100,000, while a vice president makes
around $300,000 a year, and a ten to fifteen year experienced banker makes
around one million dollars a year. These figures sound really great, but there
are some catches. First off, investment bankers are guaranteed a relatively low
base pay for the year, and the rest of their earnings are compensations
determined by their job performance for the year. So in a given year one junior
associate could make $65,000 while another of the same education and background
could make $120,000, because he or she continuously had better job performance.
Because investment firms determine salaries by job performance and base
compensation on performance, employees of that firm work under extreme pressure
to produce successful results. To many, this method of rewarding bankers is a
positive, but others feel it is way too stressful not to be guaranteed a fixed
income. Another drawback to working in the securities industry is a lack of job
security. Poor performance or non-performance, being too conservative, can be a
large factor determining whether a firm should keep its employees or
not.(Investment Banking,3)
When deciding whether a career in this particular field is right for
someone looking into investment banking, one must first consider the advantages
and the disadvantages of this particular career, and then decide whether the job
will suit his or her individual needs. In general, a career in the securities
industry seems extremely hard and very time consuming, and from time to time,
has had me contemplating whether or not to major in finance. The type of work
demanded is very diverse and seems very interesting, with very high compensation
for individual performance. With that in mind, choosing to go into the
securities industry could be very rewarding.

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