Accounting Skills Valuable
The ability to analyse accounting numbers critically is important in most analyst positions. Ultimately, you should aim for the designation if you would like to be a securities analyst. The CFA helps you become much more mobile over time.
Breaking in to Investment Banking
The Job
Entry level positions for recent college graduates are referred to as jobs. Your title will be Analyst or Financial Analyst. An entry level position with a masters (e.g., MBA) degree is as an . Typically, an analyst will stay in position for two to three years before leaving for an MBA or for a promotion to Associate. An Associate will typically be in the position for three to four years prior to a promotion to Vice-President.
Investment banking is a notoriously challenging field to break into. The business involves heady, high stakes deals, huge sums of money and, bailout years excepted, unusually high levels of compensation. It's no surprise that this is a tough area to get into.
Investment Banking:
Job Options
Corporate Finance
In a corporate finance position you would work to help companies raise capital needed for new projects and ongoing operations. You would work to determine the amount and structure of fund needs of a client through equity, debt, convertibles, preferred, asset-backs, or derivative securities. As a starting analyst in corporate finance you would usually work on a client team and would have responsibilities to prepare registration statements, attend road shows where investors are sold on securities etc. , and are acknowledged powers in corporate finance. Sometimes jobs in corporate finance are referred to as investment banking positions.
Capital Markets
This position can be either in Debt Capital Markets or Equity Capital Markets (ECM). Debt Capital Markets (DCM) is often broken down into high yield bonds and investment grade bonds. Sometimes, there are separate desks for origination of sovereign, supranational or municipal bonds. Capital markets officers help companies originate new issues of debt or equity. They get calls from bankers who have clients who are interested in issuing. They then look at market conditions; perhaps tracking swap spreads across the interest rate curve using a Bloomberg terminal and advises as to the right time and form of issuance.
Mergers and Acquisitions
Setting up deals where one company buys another is an important source of fee income for many investment banks. When this area is hot on Wall Street, it can be hugely profitable. But even when capital markets conditions make it difficult for companies to finance acquisitions, as they did in the 2008/09 recession, strategic mergers continue to happen and banks that specialize in M&A continue to do deals, albeit at a lower volume. If you go to work in this area you would help out with a team which acts as an advisor to a client, values transactions, creatively structures deals and negotiates favourable terms. Worldwide, , and are the recognized leaders in M&A advisory. Investment banks have increasingly participated directly in LBOs, spinoffs and bridge loans, often by taking their own investment stake (known as merchant banking). Your duties could involve analysing the appropriate form of participation. Expect to start running lots of valuation models on spread sheets and gradually get more client focus as you progress.
Project Finance
Project finance involves funding infrastructure and oil capital projects off of a company or government's main balance sheet. Banks like and are active in this area. Project financed deals have been some of the first significant conduits of foreign capital into countries such as China, Yemen and Indonesia. When other sources of borrowing dry up, project finance is generally still there.
Derivatives
Derivatives derive their value from another primitive security. Options, swaps and futures are examples of derivatives. The market for derivatives is gigantic and subject to increasing scrutiny. The derivatives business is highly profitable and the demand on Wall Street for skilled derivatives practitioners has been very high. This market is likely to see further innovation in the forms which swaps take and in the area of exotic options.
Advisory
Advisory services are often provided by investment banks to public and private clients involved in M&A and financings. The areas of capital structure advisory, valuation advisory and risk management advisory have been popular at many investment banks. Often work will be done to determine a client's value, options for creating value or on a client's industry conditions.
Public Finance
The market for municipal bonds is very large and calls for analysts, municipal advisors and traders. Positions in public finance are usually difficult to obtain but offer high rewards. Persons with previous experience in public administration would be attractive to investment banks in this capacity. A major growth area in municipals is in the project finance area.
Retail Brokerage / Private Client Coverage / Stockbroker
Private Client Bankers / brokers are in the business of selling stocks, bonds, insurance and other investments to individuals. Some brokers specialize in high net worth individuals while others span a variety of clients. This is a tough business to get started in (especially if you are much younger than your clients), but the rewards to a good people person with great sales skills are high. Many brokers earn upwards of $500,000.
Institutional Sales
In institutional sales you would be responsible for conveying information about particular securities to institutional investors. You would be likely to have heavy contact with portfolio managers and your own firm's analysts and traders. Sales skills and product knowledge are crucial in this area as is the ability to get through to busy institutional investors. Working in sales for an investment bank (on the sell side) is often good preparation to move over to the buy side (insurance companies and mutual funds). Both types of jobs can be brutal and subject you to abuse. A common Wall Street Joke: What's the difference between a sell side and a buy side player? Answer: On the sell side they curse you only after they hang up the telephone. Taking abuse can be lucrative. The average salaries in institutional sales can exceed $750,000 per annum.
Investment Banking:
Firm List