Since 1980, business has been the most popular major among undergraduate students. In fact, currently, almost 20% of all college-degree earners are awarded a business degree. People choose to pursue a business degree for various reasons, such as gaining marketable skills that apply to a range of industries, a potentially lucrative career, and to keep their future options open. One option that many college students want to pursue is investment banking.
However, investment banking isn’t necessarily what the name implies. Instead, the career is extremely multi-faced. In this article, we will break down investment banking into its key components.
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What Are Investment Banks?
Investment banking firms accomplish a variety of tasks ranging from raising money for companies through initial public offerings (IPOs) to aiding in mergers and acquisitions. Generally, investment banking firms are split into three main types:
- Boutique Banks. Boutique investment banks can be split into two separate categories: regional boutique banks and elite boutiques. Regional boutique banks are the smallest investment banks, and they typically specialize in a singular area of investment banking due to their small size. As the name implies, regional boutique banks are typically located in one specific region or city. On the other hand, elite boutique investment banks handle deals that can be over a billion dollars, and they have a nationwide and international presence. Like regional investment banks, elite boutique banks do not provide a full range of services and may limit their operations.
- Middle-Market Banks. As their name suggests, middle-market banks work in deals between those of regional-level banks and bulge bracket banks. They have a much larger presence than regional banks but lack the international presence of bulge bracket banks. Nevertheless, they provide similar services, including equity capital market and debt capital services, a full complement of financing and asset management services, M&A, and restructuring deals.
- Bulge Bracket Banks. Bulge bracket banks are the largest type of investment banks and tend to be internationally known firms. Many of their clients are part of the Fortune 500, and they frequently hand deals in the billions of dollars. Goldman Sachs, Bank of America, and J.P. Morgan Chase are examples of well-known bulge bracket investment banks.
A Day in the Life of a Banker
To premise, being an investment banker is a strenuous job. Investment banking analysts often work 100+ hour weeks, and sacrifice evenings and weekends to perform at their job.
Although the long hours seem scary, there is significant “downtime” while waiting for work to be reviewed while in the office. That being said, here is a sample day in the life of an investment banker:
| 9:30AM | Arrive in the office, check emails, status of deals, and voicemail |
| 10:00AM | Fine tune presentations for clients or upper-level management |
| 11:00AM | Due diligence conference call with new deal |
| 12:00PM | Organize meeting minutes and essential questions from new deal |
| 12:30PM | Lunch with co-workers at local deli |
| 1:15PM | Review comments from associate on presentation and complete revisions |
| 2:30PM | Create public information book (PIB) about the new deal |
| 4:30PM | Office gym while waiting for feedback from associates |
| 6:30PM | Review associate feedback on (PIB) |
| 7:30PM | Order dinner and eat with fellow analysts |
| 8:30PM | Receive turn of project from Vice President and distribute to entire team |
| 10:30PM | Create a plan for the subsequent day and reply to all emails, voicemails, etc. |
| 11:15PM | Leave the office, but be ready to come back in case of emergency on finalized deal |
Based on the sample schedule, the analyst stayed at the office for almost 14 hours. However, there will be some days when analysts can leave as early as 6:00PM. Conversely, analysts occasionally stay in the office a couple of hours after midnight.
Due to the long hours and high-stress nature of the job, analysts are compensated well. Still, investment banker burnout is frequent and is one of the largest reasons people exit the industry.
What Does the Career Trajectory of an Investment Banker Look Like?
Investment banks operate in a rigid hierarchy depending on job title and experience. A typical investment banking career trajectory often includes:
Investment Banking Analyst
Investment banking analysts serve as grunts for higher-ranking employees. Analysts control Excel and PowerPoint work, as well as other administrative tasks. Most analysts are between the ages of 22-27, and the total compensation is in the range of $150k – $250k. Analysts work about 80 hours a week and are typically promoted within 2-3 years to associate. However, many people choose to pursue other opportunities like private equity, hedge funds, and venture capital seeking a better work-life balance or because those careers better align with their interests.
Investment Banking Associate
Investment banking associates are more experienced analysts and have more stimulating work. Associates are responsible for checking the work of analysts, and they still do Excel and PowerPoint. Aligned with increased management, associates also have more client interaction. They’re typically between the ages of 25-35 and earn between $300k and $550k for total compensation. The typical promotion timeframe for associates is 3-5 years, but this promotion is harder to achieve than analyst to associate.
Vice President
Vice presidents instruct analysts and associates to meet the needs of managing directors. They also have increased client interaction and may even pitch to clients. Vice presidents are usually between the ages of 28-40 and are typically compensated between $500k-$900k. In line with the increased managerial role of vice presidents, their hours are also reduced to 55-70 hours per week. Promotions can happen in 3-4 years, but they are increasingly potential-based as opposed to time worked in the position.
Senior Vice President
Senior Vice Presidents focus on developing relationships and securing clients, but they still work on projects like regular vice presidents. Most are in the age range of 32-45, and senior VPs typically make between $800k-1200k. Considering the seniority of this level, the hours decrease to about 55 a week, but they could be more depending on travel time.
Managing Director
Managing directors spend time maintaining and building client relationships, and consequently spend little time in an active position in a deal. They are between the ages of 35-50, but few stay until retirement because of the demanding nature of the job. They earn in the high six-figures to low seven-figure range and work 50-60 hours a week with a lot of travel time. Although there are positions in an investment bank that are greater than managing director, there is no clear path toward promotion from here.
Each rank in the hierarchy has different tasks, and the hierarchy ensures clear communication and efficiency amongst teams. The hierarchy also allows for an efficient avenue for delegation because of the clear lines of authority.
Breaking Into Investment Banking
While investment banking requires a plethora of technical skills, the driving factor for recruitment is not what a prospective employee majored in, but rather what school they attended. Investment banking, along with numerous careers in “high finance,” have target schools that they specifically recruit from.
That being said, anyone can break into investment banking if they network early, seek internship opportunities, and learn fundamental finance, accounting, and economic concepts. However, before committing to one of the most lucrative career paths in the world, it’s important to consider the intense environment by networking with individuals in the field and securing internships to get a flavor of the investment banking life.
