Investment bankers provide advisory, underwriting and financing services to help clients, which could be public or private companies and governments, to raise capital. Private companies may be seeking these services for an Initial Public Offering (IPO). Publicly traded companies may be seeking more capital by issuing additional securities or debt. Investment bankers also advise clients on mergers and acquisition, on both the sell-side (seeking a buyer) and the buy-side.
Investment banks also undertake related tasks including sales and trading, as well as equity research that supports sales and trading. Investment banking tasks, for the most part, are “sell-side” functions, seeking capital for institutional clients.
In addition to investment banking services, the biggest investment banks also perform functions such as asset management advisory (advising pension funds, for example), private wealth advisory (advising private clients rather than institutions) and some private equity (leveraged buy out, or LBO, and venture capital, or VC) investing.
Candidates who head into investment banking following business school will interact with C-level personnel at client firms, advising them on important corporate financing decisions. In addition, investment bankers receive both a base salary and a bonus which is tied to performance. The big bonus potential means that investment bankers can earn more than peers working in other organizations, including management consulting firms. Furthermore, career options after an investment banking stint for associates are strong, although not as structured as the pathways for investment banking analysts (pre-MBA). For example, a number of investment bankers join buy-side investment firms (private equity and hedge funds, for example), undertake business development roles or join corporate finance divisions at large corporations. They may even accept roles in tech firms and entrepreneurial ventures. The work environment is a meritocracy with high bonus compensation for top performers.
What Is Unattractive About Investment Banking
Long hours, where a 75-hour work week is quite typical and includes work during the weekends. In addition, there is little opportunity, early on, for real leadership. Furthermore, success is somewhat dependent on the current economic climate, rather than purely individual performance. Finally, there is typically a competitive environment at work, based on an “up and out” recruiting model that requires that employees get staffed on important deals and then excel on those deals—or risk being asked to leave.