Becoming an investment banker is a sought-after career goal for those interested in finance, mergers, acquisitions, and high-stakes deal-making. The U.S. Bureau of Labor Statistics (BLS) predicts that the financial sectors that include investment banking are going to grow by about 7% from 2022 to 2032, meaning it’s a field that will continue to hire on new talent as the 2020s roll onward.

Investment bankers help companies, governments, and other entities raise capital, manage financial assets, and advise on major financial transactions. This field is known for offering lucrative pay and high levels of responsibility, making it competitive to enter. Here’s what investment bankers do, the steps to become one, the expected salary and a breakdown of the pros and cons.

What Does An Investment Banker Do?

Investment bankers are financial advisors who help their clients raise money through public or private markets, advise on mergers and acquisitions, and develop strategies to grow their business or enter new markets. Many successful entrepreneurs worked with investment bankers to help leverage their financial goals.

A typical day may involve financial analysis, market research, creating pitch books for clients, helping those clients facilitate IPOs, and negotiating complex deals. They also ‘build books,’ or help estimate a company’s value before it hits the public stock market. Investment bankers often work for major investment banks, private equity firms, or boutique financial firms. Given the complexity of these transactions, strong analytical skills, a deep understanding of markets, and the ability to handle high-pressure situations are essential.

The Path To Becoming An Investment Banker

To become an investment banker, you’ll generally need at least a bachelor’s degree in finance, economics, business, or a related field. Many aspiring investment bankers pursue an MBA or other advanced degrees, especially if they’re aiming for top positions. Additionally, internships at banks or financial firms are crucial for gaining experience and networking. After completing an internship, many are offered entry-level roles as analysts, where they can further build the technical skills needed in investment banking, including financial modeling and valuation techniques.

Networking is vital in this industry, as investment banking jobs are highly competitive. Beyond formal education and internships, making connections with professionals in the field, attending financial conferences, or joining finance-related student organizations can help in securing a role. After several years, analysts can advance to associate positions and, with more experience, potentially become vice presidents or directors.

Types Of Investment Banking

If you’re just learning how to become an investment banker, you’ll need to decide what type of investment banking you’d like to branch off into. There are numerous subtypes, but two major ones are corporate finance and industry coverage.

Corporate Finance

Investment bankers with a focus on corporate finance deal with business organizations and their various financial matters. They’re dedicated to helping companies grow, make acquisitions, and plan industry and company scale. In 2022, corporate and investment banking (CIB) organizations generated $2.9 trillion in revenue, according to McKinsey & Company.

Industry Coverage

When investment bankers are specified as ‘industry coverage,’ that means they work for one particular industry. They are experts in specific fields, like tech, healthcare, or other large verticals that need financial advisory services.

Salary Expectations

Investment banking is known for high earnings, though pay varies based on experience, location, and the size of the firm. The average salary for an investment banker is $118,200 according to data from Payscale.

Entry-level analysts can expect to make between $85,000 and $120,000 per year, not including bonuses, which can sometimes match or exceed base salaries. Associates typically earn between $150,000 and $300,000, and at the higher levels, such as vice presidents or managing directors, compensation packages often exceed $1 million per year, combining salary and bonuses.

Pros And Cons Of Being An Investment Banker

One of the most attractive aspects of investment banking is the high earning potential. The industry also offers the opportunity to work with influential clients, gain advanced financial skills, and potentially fast-track one’s career within finance or related industries. Additionally, the work is often intellectually challenging, requiring investment bankers to stay up-to-date with market trends and economic conditions, which can be fulfilling for those passionate about finance.

However, the career also comes with its downsides. Long working hours are the norm, often exceeding 80 hours a week, and work-life balance can be challenging to maintain, especially at large firms. The high-stress environment can also be demanding, with frequent deadlines and pressure to deliver results for clients. Furthermore, the job market is highly competitive, and there can be less job security compared to other fields due to the cyclical nature of financial markets.

Skills To Have As An Investment Banker

Learning how to become an investment banker includes honing the skills that will prove the most valuable in this competitive field.

Math Skills

Having a significant grasp of mathematics and the ability to do quick calculations will give any investment banker a leg up. While many calculations will be done by machine once they’ve reached a high enough scale, you’ll save yourself a few steps and provide important estimates by being able to run numbers in your head.

Attention To Detail

Investment banker hopefuls should prepare themselves to handle massive amounts of complex financial data every single day, especially if they work in volatile industries. A keen attention to detail will ensure that nothing is missed, whether that be an opportunity for new growth or a potential problem. Providing accurate information is tantamount to the success of an investment banker.

Decision-Making

The fast-paced environment of finance and investment banking relies heavily on spontaneous, on-your-feet decision-making. Banking clients rely on educated, firm decisions that will be able to help their organization grow.

Is Investment Banking Right For You?

Investment banking offers significant financial rewards, learning opportunities, and career growth for those willing to meet its demands. It’s an ideal path if you thrive in a competitive environment, are driven by high-stakes finance, and can manage long hours. However, if work-life balance is a high priority, or if you prefer a less intense career, you might want to consider alternative paths within finance.