The investment banking career path can be a rewarding, profitable, and challenging undertaking. In general, it can be a great path to take if you love crunching numbers, working with clients, and helping others accomplish their big (expensive) goals. Plus, working a few years in investment banking can open up many job opportunities, making it an appealing career choice.
What Is Investment Banking?
Investment banking is a branch of finance that involves raising money for large companies, governments, and investors. Investment banking companies work to raise capital for their clients and assist in large corporate transactions, like mergers and acquisitions (M&As) and initial public offerings (IPOs). The key player in an investment bank is the investment banker, a specialized type of financial analyst. These bankers connect buyers and sellers,find ways to make their clients money, and perform in-depth research to inform investing decisions for the bank and its clients.
Investment bankers aren’t the only employees at these banks, though. Other roles include accountants, actuaries, brokers, and investment managers, as well as support roles in human resources, legal, and office management.
JPMorgan Investment Banking
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Avg. Time: 5 hours
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What Does Investment Banking Pay?
Investment banking is an industry focused on making clients money, so it makes sense that the people who work in investment banking also make a lot of money. The U.S. Bureau of Labor Statistics (BLS) reports that financial analysts make an average of $108,790 per year. However, investment bankers are just one type of financial analyst. Ultimately, salaries for these bankers can range from $80,000 to over $200,000 depending on the location, company, and level of experience.
This compensation usually includes base salary, year-end bonuses based on performance, signing bonuses, stock-based bonuses, and stub-bonuses, which are a portion of the overall yearly bonus given to people who start mid-way through a fiscal year.
Additionally, big banks, like JPMorgan and Goldman Sachs, typically offer high base salaries to attract top employees. For example, first-year investment banking analysts at JPMorgan Chase & Co. are reported to have a base salary of $110,000.
Other roles at investment banks, like accountants, often have high salaries, too. Accountants and auditors make an average of $86,740 per year, according to the BLS.
What Is the Investment Banking Career Path?
Entry-level investment banking positions require a bachelor’s degree, usually in a finance or an economics-focused field. To move up the ranks of the investment banking career path, you may need a master in business administration (MBA) or specialized higher degree in something related to corporate finance.
Many investment bankers begin with an internship at an investment banking company, after which they may obtain a full-time offer and start as a full-time analyst after graduation. An investment banking internship isn’t always necessary, though, and you can still qualify for entry-level analyst positions without one.
Beyond education or internships, the key to landing a job in investment banking is having core investment banking skills, like financial modeling and business valuation methods, like discounted cash flow (DCF) analysis. Some soft skills that can make you standout include communication and analytical thinking skills.
Investment Banking Career Progression
Titles and levels may vary by company, but the progression through an investment banking career generally involves the following roles:
Interns
Since the point of an internship is to learn and gain experience, interns follow analysts and associates and support them in their day-to-day duties. Some interns may help create presentations or financial models alongside an analyst.
Analysts
An analyst handles a lot of presentation and Excel work, supporting higher-ups in their efforts to win clients and close deals. Analysts typically stay in this role for two to three years before being promoted or transitioning out of investment banking.
Associates
An associate does similar work as an analyst but has more responsibility (and pressure) to ensure everything runs smoothly. Associates often work on getting their master in business administration (MBA), too, so they are in a better position for promotion or moving into a more niche area of finance.
Vice Presidents (VPs)
Vice presidents have more responsibility and more contact with clients. They need to balance their time between clients and being in charge of the analysts and associates below them, on top of pitching potential clients and managing deals. After three to four years of outstanding performance, VPs can be promoted or head-hunted to a more specialized position in finance, such as hedge fund management.
Managing Directors (MDs)
Managing directors are the head of the team, and their only job is to make the bank and its clients money. They spend their days finding clients, winning them over, and maintaining existing client relationships. The managing director assigns work to the lower positions and has to make sure that everything is perfect to keep the clients happy.
Pros and Cons of Investment Banking
| Pros | Cons |
|---|---|
| Good compensation packages | Long hours |
| Transferable skills | Stressful environment |
| Opportunities for growth | Competitive industry |
Pros
The biggest positive to the investment banking career path is how quickly you gain experience. Investment banking hours are long and challenging, but the knowledge you learn is invaluable.
“Within your two years as an analyst and associate, you really build up some core business skills that will make you valuable as an employee forevermore,” says Chris LaFerla, founder and CEO at software company Tatem and a former investment banker. “From there, the career opportunities are wide open: You can move into investing (private equity, hedge funds, venture capital) or go take a job as an operator, which is becoming more and more popular these days.”
Beyond solid compensation, investment banking can open a lot of opportunities and give you great networking connections.
Cons
Investment bankers often cite long working hours as the main downside. They can work anywhere from 60 to 100 hours per week, and sometimes more, working for days on end if a big project is in the works.
“People talk about how hard it is, but prospective bankers cannot really understand what it’s like until you’re in the office on a Thursday night, sitting at your desk at 2 a.m., waiting for comments on a presentation you’ve been working on non-stop for three days, knowing that you have to wake up at 7 a.m. to be back in the office for any last-minute changes and do it all over again,” LaFerla notes.
The field is also incredibly competitive. For example, CNBC reports that for a 2021 investment banking internship program, JPMorgan received nearly 50,000 applicants with only 400 open positions. That’s an acceptance rate of less than 1%. The competitive nature of the industry, plus long hours, can create a stressful work environment.
Bank of America Investment Banking
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Avg. Time: 5 hours
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Bottom Line: Is It a Good Career Path?
Yes, investment banking is a good career path if you are passionate about finance and are willing to work hard. You make great money, learn incredibly useful skills, and connect with real decision-makers. Investment banking is a highly competitive field to break into, but there are only two things you need to get started:
“Drive and determination,” says LaFerla. “The rest can be learned. But you need to be hungry, want to learn, and be willing to sacrifice other areas in your personal life for the first year or two to succeed.”
Think investment banking may be the right career path for you? Learn the skills you need to succeed with Forage’s Investment Banking Career Path.
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