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The absolute perfect guide to investment banking

27th March 2021 Print

Investment banking is a crucial part of the world of finance. Investment banks have existed as long as corporations have.

Many people have no idea about what investment banking is and what it involves. The following is the best guide to investment banking you will find anywhere:

What is Investment Banking?

An investment bank is a financial institution that assists corporations and businesses with various financial activities. An investment bank acts as an intermediary between other companies and the public.

Some of the functions of an investment bank is to handle initial public offerings, mergers and acquisitions, corporate restructuring and underwriting.

The job of an investment banker is to advise their clients on advanced financial organization issues. An investment banker does a lot of high level financial analysis to advise companies to take certain actions.

An investment banker will not only advise his/her clients on financial strategies but they will also help them implement their strategies.

Therefore, the majority of an investment banker’ time is spent developing strategies to offer clients, conducting financial analysis of companies and engaging the sales force to sell company stocks and bonds.

Investment bankers are critical players in the world of global finance and play a very significant role. In fact, they have played a crucial role in the development of the global economy.

An investment banker typically works long hours doing very complicated work. They get paid on commission when helping companies raise funds. However, if you find the work interesting and have determination, you will be well rewarded for your efforts.

Investment Banking Organizational Structure

Investment banks are companies just like any other but they are often structured differently. You will find that most investment banks have a front office, middle office and back office.

The front office will generate the bank’s revenue. They will typically have three divisions namely investment banking, sales & trading and research. The functions of each division are relatively self-explanatory.

The front office is where most investment bankers make money based on commissions. You should know that when learning how to become an investment banker. However, you should also know that it is the most competitive office.

The function of the middle office is to moderate the activities of the investment bank. They ensure that the bank doesn’t engage in activities that are detrimental to its health. It will include functions like risk management and financial control and compliance.

The front office and the middle office meet when the company is performing the function of raising capital. The latter ensures that the former does not take on too much risk.

The back office provides support for the investment bank’s other offices. It will involve operations and technological support to ensure that the investment bank runs smoothly.

Investment Banking Functions

The functions of an investment bank are not many but they are very crucial to the way the world of finance functions. They are also functions that include a specific level of financial knowledge and expertise.

One of the main functions of an investment bank is to help companies raise capital. The bank will act as an intermediary between the company that wants to issue new shares of stock to raise capital and the buying public. The job can also be called securities underwriting as they are the ones that buy the stock and sell it to the public.

Another crucial function of investment banks is to help companies with mergers and acquisitions. Mergers and acquisitions are vital for companies that are joining together whether willingly or otherwise.

It is a process or corporate restructuring that is crucial to the existence of the business. The investment bank will advise companies on both sides on valuations, negotiations, pricing and structuring. They will also help with setting up procedures and implementing them.

Investment banking will have a research department that creates financial reports on companies and industries. They will use the research to advise companies on making investment decisions.

They will also buy and sell securities on their account based on reports generated by their research department.

Investment Banking Career Road

Investment banking is one of the most competitive fields not only in finance but also among other industries. The journey of an investment banker is a turbulent one that very few ever make.

The ratio of applications to acceptance is about a hundred to one. However, the journey is relatively straightforward for those that do take it.

Positions in an investment bank rank from junior to senior employee. They include analyst, associate, vice president, director and managing director from lowest to highest in seniority.

Therefore, the role of an investment banker placed at an investment bank will largely depend on their experience. The analyst will do most of the technical work followed by the associate. Most of their jobs will include financial modelling, doing equity and debt research, executing deals and making presentations.  

Senior employees such as vice presidents and directors will perform different tasks including building client relationships, giving strategic advice to clients and finding new business opportunities for the bank.

Educational Qualifications


You need a high level of education and skill to become an investment banker. As far as educational requirements are concerned, you need at least a bachelor’s degree in finance, accounting, economics or a related field.

Moreover, you will receive on the job training as an entry level financial analyst for about two to three years. On the other hand, you can join an investment bank as an associate if you have a higher degree in the required fields. Such associates are usually the ones that make it to vice president and director positions.

There are skills that every investment banker should have despite their academic qualifications including being innovative, foresighted, have initiative, have great sales and communication skills. Above all, they need the ability to work long hours at any time. 

In conclusion, investment banking is a broad field that is central to the world of finance. The above is the perfect guide to investment banking for those without the knowledge or someone striving to be an investment banker. Feel free to learn as much about investment banking as you want.

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