It’s no surprise considering the highly lucrative and rewarding nature of the industry. Even entry-level investment bankers can make six figures each year, and Payscale data indicates that investment bankers in the US earn average annual salaries of around $118,000.
MBA students are popular with investment banks as it’s a high-pressured and demanding job that requires a specific set of skills. But the key question is: what do investment bankers actually do?
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What do investment bankers do?
At the core of the job, investment bankers act as financial advisors to their clients—their chief aim is to help them make money.
Investment banking clients can range from high net-worth individuals, to hedge funds, to institutional investors. The typical way an investment banker makes money for their client is by facilitating a transaction, selling securities such as a share or bond to outside investors.
The most common example is between a firm and the market (think IPOs), but investment bankers also work on transactions between two firms (like mergers or acquisitions).
Sometimes an investment banker simply works for their client by helping to establish business plans.
The job requires a number of key skills and each year top investment banks turn to the global MBA cohort to find individuals who possess them.
Here are four skills that are critical if you plan to have a career as an investment banker.
Investment bankers frequently engage with institutional and individual investors to raise capital for their clients. To attract investment, they may need to present financial models, investment opportunities, and market analysis.
Effective presentations can instill trust and confidence in an investment banker's expertise and the investment opportunity they’re selling. Presentations should be persuasive and compelling and inspire confidence.
"Coming out of an MBA, the ability to be client-facing very early and quickly is a considerable advantage and skill set that they'll look forward to developing in you, a new junior,” says Conrad Lochovsky, an investment banking associate at Morgan Stanley.
Presentation skills, particularly adeptness with PowerPoint, are essential to investment bankers, even more so than consultants, Conrad argues. He worked at Deloitte before his MBA, so he knows the different skills needed for the two roles.
"Consultants are supposedly known as the kings and queens of PowerPoint. But I would say in investment banking, arguably, we take it up a notch.”
Effective communication is essential for investment bankers during both internal and external presentations and interactions.
Investment bankers regularly interact with clients, including company executives, board members, and potential investors. Practical communication skills enable bankers to convey complex financial information, investment strategies, and recommendations clearly and concisely.
For Conrad, the communication and organizational behavior skills he gained while studying at INSEAD have allowed him to handle tense or tricky situations effectively. That’s partly the reason that new employees hired straight out of an MBA will be hired as associates and immediately on a higher level than analysts with significant experience in the company.
"You come in as a fresh associate, you have zero investment banking background, but you have an MBA. And you're working with these analysts who sometimes have been working at the bank for two or three years already."
Conrad has used communication skills when handling these interactions to ensure he gives effective feedback while remaining respectful of analysts who hold more experience.
"It's an interesting power dynamic–from a hierarchy and an organizational perspective you're the one in charge, but based on experience, in theory you shouldn't be.
"I give some feedback, but I have to balance it and have that sort of conversation that looks like, even though I'm supposed to give you feedback, I'm also here to learn a little bit,” he explains.
3. Project management
Project management makes up a considerable part of an investment banking job. Projects can be long-running and complex, which requires expertise in balancing various tasks and delegating to other team members.
Managing the various processes involved in a project can be an intense part of the job.
"You've got four or five objectives you need to manage, and you have to figure out where your tradeoffs are. How do you leverage the resources around you? It takes organization and being able to manage time and limited resources," Conrad explains.
Often, investment banking requires you to work on multiple projects that appear similar but have distinct differences. This can be challenging, as you must be able to effectively compare and contrast while also being prepared to adapt during different projects.
"There are learnings I can take across the two projects and apply to each other and contrast and compare, but they are different enough that you can't treat them with a cookie cutter approach.”
Alongside project management comes organization. The number of projects you’ll be tasked with working on as an investment banker requires you to be able to prioritize and juggle multiple tasks.
"I think what is underappreciated is the level of multitasking that goes on in the role,” Conrad explains. "There's also a lot of self-organization and management because the hours are long, and it takes a lot of concentration. So, it's the ability to manage that.”
Working on five or even 10 things at a time can be common. This can be particularly challenging at a junior level when you are first getting used to the job.
Studying an MBA and juggling the various courses and extracurricular elements involved provided a good preparation experience, Conrad says.
Business school students typically take numerous courses within a short period of time. Students get used to juggling technical, hard-skill driven courses such as Financial Markets and Valuation with soft-skill classes such as Organizational Behavior.
“The MBA helps that challenge, especially at a place like INSEAD on a one-year MBA—it’s fast and furious," he adds.
While these are some of the key abilities required in an investment banking career, it’s important to remember that it’s a balance of soft and hard skills that will prepare you for success within the industry.
“Technical skills, yes, you have to check that box. But that's not usually the main thing banks are looking for," Conrad says. "Banks are looking for more of the soft skill sets, they're looking for differentiating factors.”