As one of the top career choices for new professionals, investment banking tends to tempt many. The allure of a six-figure salary in your early 20s and being immersed in Wall Street culture can be enticing when you’re fresh out of CMA,CA and Business School. Investment banking is an exciting and lucrative career, but it isn’t right for everyone. You may have a desire to earn over $100,000 a year as a first-year analyst in New York City, but you need to remember is that investment banking is not just high-paying, but a high-stakes, high-pressure job. This guide will help you assess if investment banking is a good fit for you.
What is Investment Banking ?
First and foremost, please note that investment banking is different from traditional or commercial banking . So investment banking doesn’t take your deposits like the way banks (like State Bank of India, HDFC bank, Barclays, JP Morgan Chase Bank, HSBC etc.) do. Neither do they provide loans to clients like commercial banks. So let’s see what investment banks actually do?
Let us first take an analogy of a property broker in order to understand Investment Banking in an easier way.
A property broker’s job is primarily two folds –
- Help buyers find clients and interested sellers to buy the flat, negotiate the lowest price, do the supporting paper work, ensure that the title is clear
- Help sellers find the clients and interested buyers to sell their flat, negotiate the highest price, do the paper work, get the registration done etc
So how does property broker’s earn – commissions (maybe 1% to 10% of the transaction value).
Now in this context think about Investment Bankers as “Financial brokers”. Investment Bankers help companies raise capital for projects, expansion etc and companies may look at various channels like Initial Public Offerings (IPOs), Follow-on Public Offering (FPO), Private Placements etc. In addition, Investment Banking job also includes Mergers and Acquisition Activities where they play the role of Financial Brokers and help companies find suitable acquisition targets or suitable buyers for their companies.
So how does Investment Bankers earn – obviously commissions (maybe 1% to 10% of the transaction value)? The above analogy is very simplified and in technical terms, Investment Banking involves the following
- Equity Research
- Raising Capital through IPO, FPO, Private Placements, Bond Placements 3. Underwriting and Market Making activities
- Mergers and Acquisitions
- Restructuring and reorganization
- Pitch Book Preparation ((why you should sell your company to ABC Corp. at Rs.240/share),
- Sales and Trading
Why You are not a fit candidate for investment banking Job
But even if you possess the rare combination of education, experience and enthusiasm that could land you a coveted investment banking gig at a reputed firm, below are eight reasons why this may not be the right path for you.
1. You Look for a Work-Life Balance
Investment banks are notorious for their demanding hours, with 100-hour work weeks being the norm for entry-level investment banking analysts. Nevertheless, in a competitive culture where putting in extra-long hours is regarded as a badge of honour, a 9-to-5 routine is pretty much unheard of. If you strive for a work-life balance, investment banking is not the field for you.
2. You yield Under Stress
Here’s a typical work day for an investment banking analyst: the analyst works frantically into the night and wee hours of the morning to complete a pitch book, rushes home in the morning to shower and change, and then heads straight back to the office for the meeting.In such high-pressure situations where there are multiple competing deadlines, the ability to not just cope, but thrive under pressure, is extremely important. If you can not handle such situations, you may need to consider a less stressful field than investment banking.
3. No leniency for errors
As an investment banking analyst, you would be expected to learn your job quickly and perform to a very high standard. You would have to ensure the responsibilities are completed on time paying close attention to detail as there would be no room for mistakes. If you feel that you can not do it. This job is not for you.
4. You Have a Relaxed Approach to Life
If you don’t believe in getting needlessly stressed about anything and that includes not getting stressed about work — investment banking is not the career for you. If you’re not OK with working tirelessly without complaint, no matter how massive the task, this field is not for you.
5. You Possess a Rebellious Streak
You speak your mind and have a somewhat rebellious streak that prevents you from following orders without question. This may not be welcomed by your investment banking superiors, who are used to unquestioning obedience from their subordinates.
6. You Do Not Have the Right Skill Set
You managed to bluff your way through several rounds of interviews and a test or two on financial modeling, but you are far from being a wizard at Excel. Time management is also not your forte, and you have been guilty of procrastination on a few occasions. This means that investment banking is not for you.
7. You Do Not Want to Be a Career Investment Banker
Perhaps, you do not wish to spend the next 10 years climbing the investment banking ladder. The thought of preparing endless pitch books and presentations for at least the next two years as an investment banking analyst — all for the reward of becoming an investment banking associate — is not one you find very appealing.
8. Money Isn’t Everything
While this is not meant to imply that all investment bankers only care about money, the ability to eventually make a lot of it is one of the primary motivators for those who are able to ride out the harsh working conditions. If making money isn’t a key driver for you, look to another career
The Bottom Line
If you possess even one of the above traits, investment banking may be a poor career choice for you. But there are plenty of other choices that will be suitable for you — careers that won’t come at the expense of your social life or sanity. Conduct an honest self assessment to find a more fulfilling and rewarding career path.
If Somehow You are In investment banking,When To Quit?
Investment bankers do consider leaving their jobs for various reasons which you could have already learnt from the above discussions in the article. Although there is nothing wrong in quitting what matters is quitting graciously at the right time for the right reason.
Quit because you are having bad day at work?
No, never quit because of this reason. You will have plenty of those in investment banking. It is very normal to have a bad day when your decisions fail or you somehow do not deliver up to the expectations. It is better to learn from such situations give it some time and see if there is an improvement. If it doesn’t then go for it!
Do you see yourself as an investment banker for the rest of your life?
Let’s consider a situation that you have spent approximately 2 years in this profession. Observing the Managing Directors at your firm (who make millions, delegate the work and leave the office at 6pm) and think that you want to be that person then this is one indication that perhaps you would want to continue as a banker.
Have you spent enough time to exit investment banking?
You need to make yourself marketable enough before you decide to quit investment banking. It is hence always recommended that you must finish at least two years before you quit. It is better to gain anywhere between 2 and 5 years’ experience as anything less than 2 would be tagged ‘lack of experience’ and more than 5 as ‘too experienced’.
Does quitting mean you are failing?
You might feel as a banker that you have urge to quit because you are unable to handle the job well. And you continue working hard day in day out but never satisfied. Don’t think that you have failed when you decide to quit. You have learnt a great deal in the times you have survived and it is more like working out what you want to do with your life rather than continuing something which you don’t believe in.
Money is no longer a motivation
We know that you would be paid really well as an investment banker. But there could be a point where you realize that money no longer motivates you to stay as an investment banker especially if you are not enjoying the kind of work you are doing. You could consider a quit if you think you can earn something less but take up a job which is not as demanding as investment banking.
It is always better to think what is important to you and what you wish to do ahead that will decide your decision to move on with something else but investment banking. Ensure you have planned what next? Once you have decided to call it quits.
We can say that investment banking is an industry which can provides loads of opportunities to learn, but you will have to find ways to survive with all that aspects we have discussed. You would surely earn enough but discovering time to spend it is the hard part. The life as an investment banker is going to be hectic but those who wish to live through dedication, competition, risks and perform well then investment banking is the right choice for them.
Hope this article provided you with necessary insights of an Investment Banker’s life.