Can an MBA show you how to be an investment banker ?
The brightest star in the financial job space is that of an investment banker. World famous names of deal makers like Gary Cohn (Goldman Sachs group), Blythe Masters (J.P.Morgan), Kenichi Watanabe (Nomura Holdings) or even Anshul Jain (Deutsche bank) have made their marks through astute deals and decision making. Investment banking brings images of a plush, corner office of a high rise at a posh office location where the banker is surrounded by smart, A-listers from various companies and other banks. Sometimes this might be true, but the real struggle of how to be an Investment Banker, lies in the selling and negotiating part.
Role and Functions of an I-Banker
An investment banker actually is a facilitator to various companies (clients) when they want to go public, raise debt, do a private placement and various such capital raising activities.
Also, an investment banker is required to be well-aware of the functioning of the target company when his client is on the lookout for a potential target. Due diligence for financials, operations and finally pricing or valuation as popularly called are some of the functions associated with an investment banker.
When these activities are not required, then the banker might act as an advisor for certain investments pertaining to the company as per the current economic and market scenario.
An investment banker is usually not one single person doing all this but is backed by a team of valuation analysts, economists, advisors who with a concerted effort present the best possible solutions for the client.
There are various other functions that an investment banker can conduct – research, trading and sales, wealth management, asset management and customization of investments.
Investment bankers also play a role during IPO (initial public offerings) and FPOs (follow-up public offerings) for arranging documentation, seeking regulatory approvals and doing various filings.
Thus, it can become a tedious job with a requirement of know-how of various laws and processes.
Thus working for an investment bank will also open up these different kinds of roles:
- Financial analysts (for buy and sell side)
- Investment analysts
- Valuation analysts
- Research analyst for specific sectors
How does an MBA prepare me for Investment Banking?
An MBA in Finance or M.Sc in finance will introduce you to all the subjects required to assimilate the financial number crunching, economic, social and business inputs to become an effective decision maker and banker.
Economics, Accounting, Corporate Finance, International Finance and Derivatives are the most important subjects that will prepare you. Also the art of Mergers & Acquisitions and Valuations techniques is very important if you wish to go into the deal making side of the business.
It requires quick number crunching and judgement to make on the spot negotiations while keeping the interest of your client in mind. For doing this, the conceptual knowledge comes in handy to prepare before-hand the nuances for each client and the price wars.
Financial statement analysis and financial models (done in MS Excel) are the your best friends to prepare.
If you wish to go to the trading side of the business, a good mathematical hold for trading in derivatives and new kinds of financial instruments will help tremendously.
Qualifications required for an Investment Banker
A Bachelor’s degree in Finance, with graduate degree is sufficient. Traders with Mathematics background can have an advantage along with investment banking lawyers with Law degrees. Some investment bankers are also Chartered Accountants, and the qualification can help.
In the U.S , an investment banker once employed needs to pass a series of tests under the Financial Industry Regulatory Authority (FINRA). Also, specialized finance programs – Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA) are also coveted in this field.
Salaries and Job Prospects
As per estimated by Payscale.com, the median salary of an investment banker is $84,000 . These jobs are expected to grow by 11 percent till 2020, as per Bureau of Labor Statistics.
One needs to start as an “Investment Banking Intern” (after Bachelor’s) or “Investment Banking Analyst”(post graduation). After few years of doing various things into his role, “Associate”, “ Supervising/Sr. Associate” and the ‘Vice-President” is usually the growth path.
This job require a street-smart and well-networking candidate who can find “anyone out of anywhere”. Relationships build the basis of a good investment banker.
B- Schools offering Investment banking courses
Most good B-Schools have M.S. Finance or MBA Finance. However, schools realising the potential of this job profile have created specialised courses as well. Also, allied courses – Financial Modelling, Valuation – most famous in New York University –Stern School of Business owing to the popularity of it’s star faculty – Ashwath Damodaran.
Other top MBA programs that help you in getting job of an Investment Banker are Columbia Business School, Harward, Wharton, Cornell and Chicago Booth. London school of Economics is another coveted school for specialized financial courses and diplomas.
The average fees of attending a good top tier school like NYU is $110,562 for the academic year 2017 -18. The LSE M.Sc Finance full time programme entails a cost of approximately $171,776 for the academic year 2017 -18.
As a profession, investment banking has many layers and various roles one can opt for. Hence, it is recommended that one should carefully assess their strong skills like research, writing, modelling and selling to distinguish and pick the right role for future.
It will always help to first intern in few of these roles and actually understand what they entail. Investment banking as a career is not for the faint hearted as it implied long hours and burning the midnight oil one too often.
However, if you are the kind who loves to deal with people and bring them together for a common cause, a good deal maker might be in the offing.