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- What is Investment Banking? (Overview of what do they actually do!)
- Investment Banking Functions
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- Sales and Trading in Investment Banking
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Investment Banking Associate Salary – Whether you are in the Finance Industry or you are planning to enter one, get ready to hear a lot about Investment Banks. You will be amazed to know how these Investment Banks work and the magnitude with which they work. The Pay here is amazing but the number of working hours are grilling. Many of us are unaware of how these Investment Bankers work. There are various hierarchical levels and each level gets paid with some handsome salary.
In these articles we are going to focus on the Investment Banking Associate salary in particular.
Following are the points that we are going to cover in-depth:
Investment Banking Functions
An Investment Banker is an individual who works in a financial institution called an Investment Bank. Investment Bank typically is involved in raising capital for its Clients. Clients can be various Companies, Government or other entities. It is also involved in giving advisory services with respect to Mergers & Acquisitions, Initial Public Offerings, Underwriting of stocks, bonds etc.
Following are the major Investment Banking Roles and Responsibilities listed:
- Investment Banking Analysts and Associates carry out research activities on various companies and sectors.
- A lot of detailed analysis is required for these research activities.
- Analysis is done through Financial Modeling techniques and Valuation techniques and a recommendation report is prepared which ultimately provides a Buy or Sell Recommendation.
Sales & Trading:
- Investment Banks have Trading departments that are involved in the execution of the Bonds and Stocks transaction for their clients.
- Investment Banks manage Portfolios for insurance companies, Pension funds or any other clients.
- These investment Banks have their own Asset Management department, which selects the right mix of Portfolio (Stocks, Debt instruments etc.) for its Clients.
- Structuring has been a relatively recent division as derivatives have come into play.
- There are highly technical and numerate employees working on creating complex structured products.
- Here the aim is to offer much greater margins and returns than the underlying cash securities.
Who is an Investment Banking Associate?
- Investment Banking Associate works in an Investment Bank. An Associate can be an Analyst promoted after 3 or 4 years or he may be directly recruited from a good Business school.
- Associates work for 80 to 100 hour weeks; they work on pitch books and models all night and become experts with financial modeling using excel spreadsheets.
- The Associate’s role is similar to an Analyst’s role.
- He may have the additional responsibility of serving as a link between junior and senior bankers. At some occasions, he may work directly with clients.
- It is very common for an associate to work well over 80 hours per week. They often work late nights and sometimes till early morning.
Everyday Job of an Investment Banking Associate:
Working with Analysts
- Most of the work concerned with the presentations and M&A deals is done by the Analysts.
- Associates come into the picture with respect to editing and quality control. They check the final prepared financial models, presentation slides, grammatical mistakes and spelling errors.
- To get the majority of the task done, Associates rely on the analysts and hence they spend majority of their time training them.
Delegating Tasks and Following up
- Directors, Vice-Presidents and Managing Directors are the ones who are in contact with the Associates.
- So whenever a new task comes, it is the duty of the Associate to allocate and divide the tasks between the Analysts and themselves.
- Majority of their time is spent on the phone and sending and receiving emails.
- Associates require everything to be done on time, hence they are constantly chasing everyone to get the job done.
Getting Complex Financial Models done
- Apart from doing most of the Analyst work like preparing presentation slides or financial analysis, Associates are also involved with handling the complex Financial Models and other critical tasks.
- This is specifically during the major Transactions where the VP’s are involved in reviewing the work.
Dealing with Clients
- Associate’s major job is to deal with their Clients. They mostly discuss the numbers or any other Financial Modeling issue.
Handling the Admin Tasks
- Associates are involved in recruiting the Analysts. They deal with the compliance and internal legal teams when there is a Live transaction taking place.
- They also communicate with other banks, lawyers, accountants, advisors etc.
Investment Banking Associate Salaries Explained
Formula to Pay:
- The formula for paying salaries to the bankers varies from firm to firm.
- Some follow rigid formulas which are based on how much business a banker brought in while others pay salaries based on a subjective allocation of corporate finance profits.
- Furthermore, no matter how compensation is structured, when business is slow, bonuses taper off swiftly.
- Some Investment banking firms tend to pay less than others because they can get away with it.
- But always remember that at the entry level, the quality of experience you get and the company and strength of the people that you will work with are far more important than your initial salary.
How much money does an Investment Banking Associate make annually?
A typical Investment Banking Associate salary range from $75,000 to $250,000 in a year.
Associates make more money if they are working for a larger investment firm, generally a ‘Bulge- bracket’ firm.
The Table below shows the figures for Investment Banking Associate’s Salaries. (Averaged over the last few years)
|Position||Base Salary||Bonus Range||Total Compensation|
|1st Year Associate||$110K-$125K||$60K-$135K||$170K-$260K|
|2nd Year Associate||$120K-$135K||$80K-$160K||$200K-$295K|
|3rd Year Associate||$130K-$160K||$90K-190K||$220K-$350K|
Let’s now see some Actual Salary figures of some leading Investment Banks. (For the Year-2015)
|Rank||Investment Bank||1st Year Associate Salary & Bonus|
|1||Blackstone Group||$213,250 Base: $109K Bonus: $100K|
|2||Evercore||$230,666 Base: $130K Bonus: $116K|
|3||Harris Williams & Company||$208,399 Base: $120K Bonus: $100K|
|4||JPMorgan Chase||$156,269 Base: $100K Bonus: $35K|
|5||Goldman Sachs||$181,778 Base: $110K Bonus: $70K|
|6||BMO Capital Markets||$205,938 Base: $125K Bonus: $90K|
|7||Piper Jaffray||$183,044 Base: $100K Bonus: $125K|
|8||CIBC World Markets||$179,500 Base: $98K Bonus: $47K|
|9||William Blair||$125,000 Base: $85K Bonus: $35K|
|10||Citigroup||$157,292 Base: $100K Bonus: $40K|
Why are Bonuses of Investment Bankers variable?
You can say that the bonus component is influenced by these two things:
- Individual performance
- Group/firm performance.
This implies that even if you have performed more than 100%, your Bonus will suffer if your firm is not closing the deals & bringing Business.
In scenarios where there are not so much of deals, the workload still remains the same. This may bring down your morale as you are not getting paid even though your performance is top notch.
Job Requirements of Investment Banking Associate
In Investment banking, Corporate Finance, and M&A:
In Equity and Debt Capital Markets:
- Pricing up new deals for bonds, convertibles or any other instruments.
- Tracking past deals and pricing to know where the market is going.
- Due diligence coordination.
- Preparing Documents on debt and equity deals.
- Generating Pitch books.
- Checking and generating weekly newsletters in some cases.
In Sales and Trading:
- Knowing where prices are!
- Working with Options Pricing Models
- Making Clients feel comfortable
Key Success Factors includes
- Working in a chaotic environment and getting things done.
- Taking Initiatives and working on how the Job could be done in a better way.
- Maintaining a good work relationship with Clients as they may bring you more Business.
- Having an excellent network within the firm.
- Being a Computer Wizard.
- Good Dressing sense.
- And last but not the least: Always making your boss look good!
Following Skills are must for working in an Investment Bank
- Investment banks want employees with a combination of strong, interpersonal skills, Sales skills, Communication skills, Analytical skills, Ability to synthesize, Creative ability.
- Hours are regularly long and often unsocial. Weekend work is common as deals approach crucial stages.
- Fifteen-hour days are not unusual at an investment bank. Investment bankers work up to 100 hours a week.
- The working environment can be extremely stressful as high expectations for targets are set. The investment banking industry is strongly connected to the economy. Thus job availability and amount of job losses fluctuates depending on how healthy the economy is.
- Many investment banks have global offices and offer trainees the chance to work overseas within the first two years. Once qualified, an investment banker may spend substantial time working overseas.
Educational Qualification of an Investment Banking Associate
- Investment Banking Associates have to be Geniuses and infact they are due to all the math, finance and other challenging subjects they learn in college.
- Most of the Associates have their Master’s degree in Business administration, finance or statistics.
- Some may even have a doctorate in Business, Finance or Economics.
- Investment Banking is not just a cup of tea. And that is why the Associates have to be smart, quick and often have to undergo Training sessions to keep their knowledge updated.
Investment Banking Associate Interview Questions
These will be the general question that you may expect during your interview:
- What do you know about Investment Banking and this Industry?
- Why are you interested in a career in Investment Banking Industry?
- What do you know about our Firm?
- What about our Culture and Firm appeals to you?
Following are the resume related questions which may be asked:
- Your strengths and weaknesses with proper justification and examples of the same.
- Application/Use of your Strength to Investment Banking?
- Your greatest accomplishment?
- How would you describe Failure? Your experience if any and what did you learn from it?
- What Qualities can you bring to your Team? Examples for the same.
- How would your Colleagues describe you?
- How would your Manager at a previous job describe you?
- What is your Leadership style?
Pros & Cons of an Investment Banking Job:
Investment Banking Jobs Upsides
- Good pay
- Opportunity to interact & work with really smart people
- Awesome Investment Banking Lifestyle
- Great Office Spaces
Investment Banking Jobs Downsides
- Long working hours
- Lack of sleep, lack of routine and health hazards associated with it.
- Expectation to be available 24*7
- Stressful Environment
- Rocky Personal Life
- No Social Life
Investment Banking Associates enjoy the increasing Salary numbers but so do they fear the increasing working hours. Such is the Glory and the Agony of working in an Investment Bank. Hope that you got a glimpse of who these Investment Banking Associates are, and how much they are paid for working in an Investment Bank.