What is Investment Banking?

If you’re a business or finance major, chances are you’ve considered a career in investment banking. Even if you’re not currently majoring in a related discipline, you might be interested in finding out more about investment banking and the types of career options available for recent grads.

Here are some of the key things you need to know about working in investment banking.

What is investment banking?

Investment banking is an area of the financial services industry that focuses on managing and increasing the financial assets of clients. What does this really mean? It means that investment bankers help companies invest their assets with a view towards increasing the value of their portfolios. Investment bankers essentially act as advisors and brokers, helping their clients identify and capitalize on great opportunities.

What do investment bankers do?

The primary responsibility of investment bankers is to advise their clients on investments and help facilitate those investments. This means that investment bankers essentially act as advisors and brokers, assessing the needs of their clients and then finding the right solutions to meet those needs. Once the client has decided how they would like to proceed, it’s up to the bankers to negotiate deals and mergers, ensuring that they are keeping their client’s best interests in mind.

What are the challenges of working in investment banking?

Investment banking is constantly in flux and deeply impacted by changes in financial markets. This can be quite challenging for those who work in the field because it requires them to be quick on their feet and adapt as needed. In addition to fluctuations in the markets, investment banking also presents other challenges such as the ability to manage client assets effectively and to ensure that the worth of those assets increases over time. As a result of the many demands of the industry, investment banking often requires long hours, particularly for those who are just starting out as financial analysts. However, by knowing what to expect and learning how to handle the challenges that arise, this field can be a very exciting one to work in.

What are some of the benefits of working in investment banking?

Although working in investment banking presents many challenges, it also presents many opportunities, particularly for recent grads. For example, because of the fast pace of the industry, employees can build their knowledge bases and skill sets quickly. This will help them advance quickly in their careers and develop transferrable skills. Another great benefit of working in investment banking is being able to build a solid and long-lasting professional network, an invaluable asset which will be useful throughout one’s career.

What is a typical investment banking salary?

Investment banking salaries are some of the highest in the world and this holds true even for entry-level positions. For example, entry-level financial analyst roles typically start at $100,000-$125,000 (including bonuses), while associates with two to three years of experience can earn anywhere from $150,000 to $250,000. Investment banking salaries increase significantly with each year of additional experience, with more senior bankers such as vice presidents and managing directors earning upwards of $650,000 and above.

Although investment banking is certainly a challenging field, it’s also an exciting one that presents many opportunities for recent graduates. The best way to find out if working in investment banking is a good fit for you is to intern at a bank and get a hands-on feel for the role and the culture of the industry.

Next, get more career tips for internships and entry-level jobs such as 6 Things to Do in Your First Week at a New Job and find answers to common interview questions such as If You Could Invest in One Stock, Which Stock Would it Be?

How to Become an Investment Banker

If you’re a business or finance major who is interested in investment banking, then you probably already know what investment banking is and are curious to find out how you can get your foot in the door of this exciting industry. Although investment banking is certainly competitive, it’s also filled with rewarding opportunities, especially for those who are curious about market trends and passionate about helping clients meet their financial goals.

Here are the steps you need to follow in order to become an investment banker.

1. Know the investment banking career track

One of the keys to developing a successful career in investment banking is knowing the path to follow and making the most of each step along the way. Although most entry-level investment bankers start as financial analysts, the investment banking career track really begins with an internship. In fact, both large banks and smaller boutique banks recruit entry-level employees from their yearly crop of interns, so securing an internship during college is key to setting yourself up for success. This will typically be a summer internship during your junior or senior year and (if successful) will lead to an offer for a full-time financial analyst role. Financial analyst roles are typically two-year positions that provide you the with the bulk of your investment banking training. During this time, you’ll learn about financial markets and the factors involved with advising clients about potential investments. After this two-year period is up, you will likely move on to an associate role for another two to three years before becoming a VP and eventually a managing director.

Pro Tip: In addition to knowing the career track you’ll be following, it’s also important to know the timeframe for hiring in this industry. For those not going directly from an internship into a full-time position, the application process for a full-time role typically starts in early September of your senior year and takes anywhere from six weeks to two months. Throughout this time, you’ll be invited for a few different rounds of interviews (between two and three) and, if successful, you’ll receive your offer by the end of October.

2. Develop your knowledge of the financial services industry

Having a solid understanding of the financial services industry will benefit you not only at the start of your career but also as you move up the ladder into your next role. This means knowing all about past and present market trends and also having more specialized knowledge such as understanding how new generations of investors differ from previous ones. For example, having some great insights into investment trends for millennials is likely to impress potential employers and show that you’re well-informed about changes in the industry. The best way to develop this knowledge is by reading trade publications like DealBook and MarketWatch and keeping up-to-date on emerging trends.

3. Take relevant classes

Taking a broad range of business, finance and even math classes during college can be a practical way to build your knowledge base. This is especially true if you’re coming to investment banking from a non-traditional major like English or history. To find out which classes would be most helpful for you, talk to your academic advisor and ask for recommendations based on your interests and your goals.

Pro Tip: Although doing a double major or minor in one of these subjects isn’t necessary, being able to show recruiters that you’re a well-rounded candidate is a great way to get noticed.

4. Know what recruiters look for

Although traditional recruiting for investment banking typically focused on business and finance majors from top-tier schools, in more recent years the recruitment process has become increasingly focused on diversity and on finding talented candidates from a broad range of schools and majors. That said, candidates still need to be able to demonstrate both a solid interest in financial services and a thorough understanding of the field, so your resume will need to reflect classes or projects you’ve worked on that would be relevant to an investment banking career.

Pro Tip: When talking to recruiters, don’t be afraid to highlight areas of your background that are unique and show that you have a well-rounded background. For example, if you don’t have internship experience in the financial services industry but you interned in the finance department of a startup, you can mention what you learned from the experience and how your skills could transfer to investment banking.

5. Take on an investment banking internship

Although knowledge and direction are both key parts of starting a career in investment banking, having experience on your resume is even better. This is where an internship comes in. An internship is a fantastic opportunity to build your skill set and get on-the-job training. This is especially important in a field like investment banking which is both technical and specific. By taking on one or more internships during your time in college, you’ll gain exposure to many facets of the industry and be able to find an entry-level investment banking job that’s right for you.

6. Build your network

Investment banking is as much about who you know as about what you know so building your professional network is crucial to landing a great job after graduation. An effective way to do this is through internships and networking events, particularly those aimed at college students and recent graduates. Attending recruiting events can also be particularly helpful since you’ll be able to meet with recruiters in person.

Pro Tip: Reaching out to members of your school’s alumni network is another effective way to build your network and this is an especially common networking strategy in the financial services industry. As an added bonus, you might come across a professional opportunity you weren’t even aware of or get a personal recommendation from someone already in the field.

Becoming an investment banker might seem a bit intimidating at first since the field is notoriously competitive and fast-paced. However, by following these tips and building up your experience and your network, you’ll be sure to find an opportunity that’s right for you.

Next, get more career tips for internships and entry-level jobs such as 7 Phone Interview Tips That Will Land You a Second Interview and find answers to common interview questions such as Where Do You See Yourself in 5 Years?

Top Investment Banking Interview Questions

If you’re interested in a career in investment banking, then you know that it’s a competitive field with plenty of challenges and opportunities. In order to prepare yourself to become an investment banker, it’s important to know not only what your career path will look like but also how to prepare for the interview process. The hiring process for investment banking typically consists of two to three rounds of interviews, with each round focusing on both technical questions and cultural fit questions.

Here are the top questions you’re likely to encounter during an entry-level investment banking interview.

1) Tell me about yourself.

This is often the first question in any interview and one you should always be prepared to answer. When interviewers ask this question during an investment banking interview, it’s because they want to know that you’re passionate about the field and that you can bring something unique to the table. The key to answering it well is to talk about your academic and personal background in a way that shows that you’d be a good fit for the position. For example, if you’ve been interested in finance for a long time and have been reading The Economist since middle school, you should mention that. Or, if you’re an English major with a newfound passion for financial markets and a minor in business, you should talk about how your diverse skill set can help you succeed in the industry. No matter what your background, being able to present yourself as a well-rounded individual with a genuine interest in finance will go a long way towards impressing the interviewer and helping you stand out from the crowd.

Pro Tip: Since banks are increasingly interested in hiring candidates with diverse backgrounds, don’t be intimidated if your background doesn’t include a business or finance major. Instead, focus on the skills and experience you can bring to the position and demonstrate how these will make you stand out.

2) Why do you want to work in investment banking?

When an interviewer asks this question it’s because they want to find out how passionate you are about becoming a banker. Since investment banking is a notoriously fast-paced and challenging industry, showing that you’ve done your homework and are truly interested in the field is a crucial part of convincing the interviewer that you’re aware of the challenges and willing to meet them. One of the keys to answering this question well is to show that you have a working knowledge of financial markets and a genuine interest in how deals get done. For example, if you recently read about an interesting technology merger in DealBook, be sure to mention why the merger piqued your interest and how that specific deal fits in with your more general interest in finance.

Pro Tip: Knowledge of financial markets and trends is particularly important when answering this question so being up-to-date on industry news and having two to three examples of relevant deals will show that you’re genuinely curious about the industry and well-prepared for the interview.

3) Why do you want to work for our bank in particular?

This question is designed to test your knowledge of the company you’re interviewing with and its position within the industry. The key to answering it well is to show that you know general financial information about the firm such as where their stock price is trading and what industries they focus on. The best way to find out this information is by reading through marketing and press materials on the company’s website and then doing additional research in trade publications such as American Banker and MarketWatch. If you’re interviewing for a position within a specific division, such as the natural resources group, it’s also important to talk about past deals that the firm has done and to mention how these deals have impacted the industry as a whole. Trade publications like the ones mentioned above will also come in handy here, helping to spotlight relevant deals that you can use as examples.

4) Where do you see yourself in five years?

Another question you’re likely to encounter in almost any interview, this question aims to find out more about your career plans and to determine how committed you are to a long-term career in banking. When preparing to answer this question, focus on how the role you’re applying for aligns with your future goals and explain why becoming a banker is a crucial part of your career path. For example, if you want to continue on the investment banking track and become a VP or managing director, talk about how the entry-level role you’re applying for will offer you the opportunity to advance in your career and achieve your goal within five years.

5) What are the ways of valuing a company?

This is one of the most challenging questions you’re likely to encounter during the interview process because it’s designed to test your technical knowledge of the field. In order to answer this question successfully, it’s important that you have a working knowledge of banking and understand valuation methodologies. The best way to develop this knowledge is by taking a business or finance class during your time in college and doing additional reading on sites such as Investopedia. By showing the interviewer that you understand the technical side of the position, you’ll also be demonstrating a willingness to learn and to become an integral part of the industry.

6) How many golf balls can fit in a Boeing 747 jet?

Another type of question you’ll encounter during the interview process is a brain teaser.
These questions are designed to test your critical thinking and problem-solving abilities and are often unrelated to the actual field of banking. In order to ensure that you’re not stumped by any of the brain teasers a hiring manager might throw your way, it’s important to practice several of these as you prepare for the interview. Luckily, sites such as Investment Banking Brain Teasers offer sample brain teasers and tips for coming up with solutions.

Pro Tip: Hiring managers are less interested in the answer itself than they are in seeing how you think through a problem. To demonstrate that you approach problems thoughtfully, be sure to ask follow-up questions and to “show your work” as you come up with your answer. For example, when answering the golf ball question, you could ask the interviewer whether the 747 is empty or full, or whether the cabin is pressurized. By showing that you’re able to come up with thoughtful solutions to problems, you’ll also be demonstrating your ability to understand complex ideas and business models, a crucial skill in any investment banking position.

Although the interview process for investment banking can be a challenging one, it’s also a wonderful opportunity to show potential employers that you’re enthusiastic, curious and knowledgeable about the field. By knowing what questions to anticipate and preparing your answers, you’ll be sure to impress the hiring manager and get one step closer to landing the job.

Next, get more career tips for internships and entry-level jobs such as 6 Ways to Impress Your New Boss and find answers to common interview questions such as Tell Me About Yourself.

Investment Banking vs. Management Consulting: How to Decide

For ambitious college students who are interested in a challenging and exciting career, the choice often comes down to two industries: investment banking and management consulting. Why these industries? Beyond their high earning potential and their reputation as intriguing fields, the two share a number of traits such as the fact that they offer excellent exposure to different business models and a chance to learn about what makes companies profitable.

Here are some things to consider if you’re deciding between these two fields.

How do the investment banking and management consulting career paths compare?

Investment banking generally begins with a summer internship followed by a two-year entry-level role as a financial analyst. For those who stay in banking, this is typically followed by another two to three years as an associate before moving up the ladder to VP and managing director. Similarly, most consultants start out in a business analyst role for their first two to three years before moving on to an associate or senior consultant role.

Although the career tracks for banking and consulting follow a similar path, it’s important to note that investment bankers are much more likely to do an internship before applying for an entry-level role. This is because banks do the bulk of their recruiting during internships. Consulting firms, on the other hand, don’t put quite as much emphasis on internships, though an internship is definitely recommended for anyone interested in pursuing a consulting career.

What are the different skills you need in each industry?

The skills needed for these industries are also quite similar though there are some notable differences. For example, although both industries rely on analytical, numbers-driven approaches to problem-solving, investment banking focuses on the financial side of business and therefore requires strong Excel skills and a solid understanding of financial modeling. Consulting, on the other hand, focuses on the operational aspects of business and requires strong PowerPoint skills as well as the ability to communicate effectively.

Pro Tip: Because of the huge overlap in skillsets, we recommend focusing less on your specific skills and more on your interests. For example, if you’re interested in the financial aspects of business, then banking is probably the industry for you. On the other hand, if you’re interested in the operational side of business, then consulting is most likely a better fit.

What does work-life balance look like in these industries?

If there’s one thing consulting and banking have in common, it’s their reputation for long hours. In fact, both industries are known for having some of the hardest-working people around. So what do those hours really look like and which industry offers more of a work-life balance? It depends. Although investment banking is generally considered to have longer hours (with 75+ hour weeks being common), it typically involves very little travel. Consulting, on the other hand, generally has more reasonable hours (typically around 60 hours a week) but can involve as much as four days of weekly travel. When deciding between these industries, it’s important to determine your comfort level with traveling and also your willingness to trade shorter hours for less time at home.

How do investment banking salaries compare to consulting salaries?

Investment banking and consulting are both lucrative fields, but when it comes to earning potential (at least in the first decade), banking comes out on top. This is because entry-level salaries for management consultants typically start at $63,000 (including bonuses), whereas entry-level roles for bankers typically start at $100,000-$125,000 (including bonuses). Although significant salary increases are standard in both fields with each year of additional experience, it’s not until consultants and bankers reach partner/managing director levels that their salaries start to even out at the $500,000 and above mark.

With exciting opportunities for learning and advancement, investment banking and management consulting are both great career paths. The only way to know which one is right for you is by taking on an internship and experiencing these fields firsthand.

Next, get more career tips for internships and entry-level jobs such as How to Write a Resume That Stands Out and find answers to common interview questions such as Tell Me About Yourself.

Why Investment Banking is a Great Field for Recent Graduates

Investment banking is a popular field for recent graduates, particularly among business and finance majors. Although it’s definitely a competitive field, a lot of its appeal comes from the fact that it’s also a field with a lot of opportunities and a high earning potential. If you’ve already gotten a general idea of what investment banking is and how you can become an investment banker, then you’re probably interested in what you can get out of it and how this can shape your career path in the long term.

Here are some of the reasons why investment banking is a great field for recent graduates.

You’ll learn a lot very quickly

Due to its fast-paced nature, investment banking offers a lot of opportunities for learning and skill building, particularly in the areas of business and finance. From the moment you start your first entry-level job (or internship) you’ll be exposed to a lot of information about financial trends and markets, as well as information about what makes businesses sustainable. Beyond that, you’ll also be able to learn soft skills like communication, self-confidence and the ability to handle critical feedback. These are skills that can take years to develop in other professional industries and learning them quickly means that you’re likely to advance much faster in your career as a result of having these experiences.

Your earning potential will be among the highest of any recent graduate

If you’ve done your research on investment banking, then you know that it’s a field with a very high earning potential. In fact, as an entry-level financial analyst, you’ll start off earning anywhere from $100,000-$125,000 (including bonuses) in your first year. After two years in a financial analyst role, your earning potential will go up to $150,000 to $250,000 and will increase significantly with each year of additional experience. By the time you become a vice president or managing director, you’ll be earning upwards of $650,000.

You’ll develop transferrable skills that you can use in any profession

Although many investment bankers choose to stay in the industry and progress through the career track from financial analyst to managing director, other bankers decide to move into related areas of finance like private hedge funds or they choose to leave finance entirely to run or advise startups. Regardless of what you decide to do later on in your career, the skills and business savvy you develop as an investment banker will help you transition into almost any other professional industry. This is great news for entrepreneurs who are interested in running their own businesses but want to build up their knowledge and skill set first.

You’ll develop a strong professional network

Having a strong professional network is incredibly important as you move through your career, and being able to build that network early on will serve you well for years to come. As an added bonus, because investment bankers often move into other fields as they advance in their careers, you’re likely to come across former colleagues no matter where you end up.

Starting an investment banking career as a recent graduate is a great way to develop general business knowledge and skills that can transfer to any other professional industry. So whether you’re a business major or a history major, there’s likely to be an entry-level opportunity that’s right for you.

Next, get more career tips for internships and entry-level jobs such as How to Get a Mentor at Work and find answers to common interview questions such as What Are Your Strengths?