So You Want to Work In... Investment BankingThere is a reason that top Investment Banks recruit Liberal Arts students: Liberal Arts students have the intelligence, cross-cultural competence and analytical and problem-solving skills needed to succeed in the business world. And on a daily basis, they do. Whether you’re familiar with the stock market and industry operations or not, investment banks may weigh your overall experience and strengths more heavily in the recruiting process and train you on the hard finance skills once you join the team. So, if you are interested in the world of finance, like working in teams, enjoy a fast-paced environment, and like the idea of meeting and communicating with people from across the globe, you might be well suited for a career in investment banking.
Commercial banks and investment banks (I-banks) have traditionally been separate institutions, but now that line is becoming more difficult to detect. Note that while some I-banks also provide commercial bank services (e.g. J.P.Morgan Chase & Co.), these two sides are largely separate, especially in the United States. Investment banking is different from commerical banking in that its main purpose is to advise clients (who can be high-net individuals, but are generally companies or other institutions) in various areas of capital management and generation, whereas commerical banks provide traditional banking services to individuals or institutions.
Investment banking is most easily broken down into six major areas: corporate finance, capital markets, sales, trading, research, and syndicate. These divisions are integral in advising clients and increasing their capital by investing in equities, trading securities and/or merging with or acquiring other institutions. Below is an introduction to these areas and the key skills required for each.
Corporate Finance: Corporate financers work in teams to analyze different sectors (e.g., the tech industry) to best advise clients on mergers and acquisitions (M&A) as well as underwriting (another word for raising capital either by selling equities or buying/selling securities). Organizational skills are vital, especially when handling M&A, which I-banks structure and implement for clients. In addition, corporate finance teams build powerful relationships between the investment bank and their clients, requiring excellent communication and interpersonal skills.
Capital Markets: This area is designed to structure transactions between clients and the investment bank (for example, when Company A is buying Company B) using data from corporate finance and research. These transaction models are then given to the sales and trading teams. Organizational skills are necessary when building these plans, and good communication skills help capital market members read and comprehend the information they get from other divisions.
Trading: Traders have two important roles in I-banking. Some traders put in orders to buy or sell securities or equities in markets around the world, managing the liquidity (how quickly an asset can be converted to cash) of a client's assets. Other traders, call proprietary traders, use the firm's capital to buy or sell assets, expecting that the enormous amount of money the firm wields will affect the value of those assets so that they will benefit the firm. Communication skills are a must for traders, who parlay the advice of investment bankers and investment managers into buys and sales with the contact brokers.
Sales: Investment banks generally have three kinds of salespeople. Retail brokers sell I-bank services to individual investors. Institutional salespersons focus their efforts on institutions (companies, governments, non-profit organizations, universities, etc.) Private client service representatives deal with extremely wealthy individuals. The most important skills needed in sales are interpersonal and relationship-building.
Research: Reserachers are invaluable to investment banks. The research side of I-banking is designed to forecast the successes of companies, industries, etc. Researchers follow the histories and activities of stocks and bonds in order to help the firm advise clients or, for example, to determine whether the firm should buy or sell shares of a particular stock. Investment banks generally put a lot of effort into ensuring their researchers have the best tools and resources available, and they hire candidates with strong analytical skills.
Syndicate: The syndicate team communicates internally between the sales and corporate finance teams. They also faciliate relationships between external buyers and the investment bank. Their responsiblity is to find a price to invest at (for example, how much one share of a stock will be at Iniital Public Offering) that will satisfy diverse interests: the company offering the stock, the I-bank salesperson who sells their product to this company, investors, and corporate finance bankers crunching the numbers behind the scenes. Syndicate needs individuals who can organize information, communicate between parties and manage conflicting interests.
I-BANK ON-CAMPUS RECRUITING
Investment banks are always recruiting, but their hiring processes are different from most. I-banks generally recruit students for full-time positions in the fall, though successful candidates will not begin employment until the following summer (post-graduation). So, be sure to have your resume ready by the first week of September of you senior year. I-banks generally recruit students for summer internships in the preceding winter, usually the December to January timeframe. However, sometimes internship opportunities arise outside of this time period, so it's good to keep your eyes open.
Before applying to an investment bank, it would benefit you to take a look at some resources about the industry and about breaking into this industry:
- VAULT's guides to Investment Banking and Middle Investment Banking (access Vault via your BTT Gateway account under the External Links tab)
- Investment Banking and Consulting guide, provided by LACS
- NY Times and Wall Street Journal articles related to Investment Banking
- Making Majors Work, provided by LACS
Next, consult with a career coach to discuss how to market yourself to recruiters in Investment Banking. Tailor your resume, participate in relevant internships and courses, and prepare for interviews with I-banks.
Explore I-bank opportunities. Consult with the VAULT guides to learn about the big players in I-banking as well as some lesser-known companies, and then browse their websites' career pages to see what possibilities could be in store for you with these opportunities. All this information will be useful in the future for writing cover letters or interviewing!