Overview
Investment banking includes a wide variety of activities, including underwriting, selling, and trading securities, providing financial advisory services, and managing assets. Investment banks cater to a diverse group of stakeholders – companies, governments, non-profit institutions, and individuals – and help them raise funds on the capital market. They perform the following major functions for their customers:
Investment banking includes a wide variety of activities, including underwriting, selling, and trading securities, providing financial advisory services, and managing assets. Investment banks cater to a diverse group of stakeholders – companies, governments, non-profit institutions, and individuals – and help them raise funds on the capital market. They perform the following major functions for their customers:
- Serve as trading intermediaries for clients
- Lend and invest banks’ assets
- Provide advice on mergers, acquisitions, and other financial transactions
- Research and develop opinions on securities, markets, and economies
- Issue, buy, sell, and trade stocks and bonds
- Manage investment portfolios
Investment banks once contrasted sharply with commercial banks, where people mainly deposited their money and sought commercial and retail loans. In recent years, though, the two types of structures have become increasingly similar; commercial banks now offer more investment banking services as they attempt to corner the market by presenting themselves as one-stop shops.
Investment banks do differ from brokerages and broker-dealers, though, even though those three entities are often thought of as one and the same. A brokerage firm takes a commission for assisting in the purchase and sale of stocks, bonds, and mutual funds. A broker-dealer executes similar functions, but it also trades for its own account; for instance, when you buy a stock, you can buy it through an exchange or the dealer’s own account (and you’ll pay the current market price no matter what the dealer paid for it). An investment bank actually is a broker-dealer that provides corporations with financial services, such as assistance with initial public offerings, merger and acquisitions advice, and strategic planning.
If you’re interested in an investment banking career, get ready for a likely move to New York City, the world’s hub of investment banking. There are a few other money centers around the world – Hong Kong, Tokyo, London, Moscow, and Singapore, to name a few – but as the industry consolidates the list grows smaller. Leading banks include Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, Citigroup, Credit Suisse First Boston, and JPMorgan Chase. These investment banking firms, as well as smaller regional and boutique firms, regularly send recruiters to campus career centers.
Experience, Education, and Skills
Investment banks hire creative communicators with strong analytical and interpersonal skills. And they want to be sure you enjoy the work itself, since long hours are common in this high-risk, high-reward job. An investment banking career is definitely a challenge – the salary may be impressive, but if the economy’s in a slump, you may find yourself unemployed.
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