Careers in Investment Banking A career in the securities industry can offer exciting work if you enjoy working in a competitive and demanding atmosphere. Investment bankers, stock brokers, and stock traders all make up the securities industry providing services to each other, as well as the general public. All of people involved in this field deal with stocks, bonds, and other financial material in some way or another, but they all have their own specific objectives and duties.
The primary differences between the three are the services they provide and who they provide these services to. Investment banking seems to be the most interesting of the three, as well as the most rewarding. This is due to the nature of the job an investment banker must perform. A career as an investment banker has its pros and cons just as any career does, but if you’re looking for a high-demanding, high-risk career that at times is very rewarding financially, investment banking could be the career.
Investment banking has been around since stocks have been issued and bonds sold, but the field demanded little, if any new jobs before the 1980’s. This was due to the low complexity of the financial markets. Since then, investment banking jobs have been significantly growing due to the availability of complex securities and high-yield bonds, also known as junk bonds.(Investment Banking,12) Now that the financial market has become more complex, companies that didn’t require and investment bankers now need their advice to effectively help their company sell stocks and bonds, and to make financial plans for the future.
This shows the growing need for investment bankers in the securities industry. Investment bankers serve a major part in shaping our nation’s economy as well as the world’s. This is done by devising financial plans and putting them into effect. The process of doing this is very time consuming but doesn’t seem a bit boring. Investment bankers also spend a lot of time traveling to various clients to present ideas and when at home, investment bankers work on developing financial plans and strategies for clients. All this work can appear to be very time consuming, and it is. According to Linda C. (So You Want To Be, 2) a typical day for an investment banker out of school is to start at nine in the morning and work fairly consistently until midnight, five days a week. To be considered for a job in the securities industry one must be content living in or near a large city, and have at least, a four year degree in some type of business field, typically finance or accounting. Working summer internships in your chosen field also aids in job finding. If these requirements are met an investment banking firm will consider hiring the graduate into their two-year financial analyst programs at starting salaries of $25,000-30,000.(Morgan, 12) The competition to get into an analyst position is extremely hard and competitive. The competition to get into the trainee classes at the top investment banking firms is tougher than becoming an astronaut, according to Preston Pumphrey. (Pumphrey,2) The typical analyst works mainly on analytical work and also does a fair amount of writing.(So You Want to Be A,4) From here an analyst has the option to either go back to school and pursue an MBA, or try to advance to the position of a junior associate, which basically has the job of supervising the analytical work done by the analysts. Junior associates are basically trying to learn the business and acquire the skills they need to develop financial plans rather than to execute them. Their main responsibilities, according to Rich W., a vice president of a large investment firm, include running computer analyses, preparing the financial reports which accompany stock issues, and putting together the documents used by senior bankers to pitch ideas.(So You Want To Be. 4) Junior associates are primarily watched over by the senior associates. Senior associates, or vice presidents, depending on the investment firm’s structure, oversee the preparation of documents that leave the firm, and they begin to be involved in the more creative side of business, working with senior bankers and clients to develop financial strategies. Senior associates are basically more specialized in a specific type of transaction, and have established banking skills that will help them in the future. Normally, the only step up from a vice president is a senior banker who has ownership interests in the firm he or she works at. To become a senior banker it usually takes about ten years of experience and a lot of hard work. By now it’s obvious to see that investment banking offers many opportunities to move up on the corporate ladder, and as one moves up so does his or her salary. The amount of increase in salary is quite significant. According to investment banking(Investment Banking,7) the average starting salary for a junior associate is around $100,000, while a vice president makes around $300,000 a year, and a ten to fifteen year experienced banker makes around one million dollars a year. These figures sound really great, but there are some catches. First off, investment bankers are guaranteed a relatively low base pay for the year, and the rest of their earnings are compensations determined by their job performance for the year. So in a given year one junior associate could make $65,000 while another of the same education and background could make $120,000, because he or she continuously had better job performance. Because investment firms determine salaries by job performance and base compensation on performance, employees of that firm work under extreme pressure to produce successful results. To many, this method of rewarding bankers is a positive, but others feel it is way too stressful not to be guaranteed a fixed income. Another drawback to working in the securities industry is a lack of job security. Poor performance or non-performance, being too conservative, can be a large factor determining whether a firm should keep its employees or not.(Investment Banking,3) When deciding whether a career in this particular field is right for someone looking into investment banking, one must first consider the advantages and the disadvantages of this particular career, and then decide whether the job will suit his or her individual needs. In general, a career in the securities industry seems extremely hard and very time consuming, and from time to time, has had me contemplating whether or not to major in finance. The type of work demanded is very diverse and seems very interesting, with very high compensation for individual performance. With that in mind, choosing to go into the securities industry could be very rewarding.
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