Investment banking (IB) is a specific division of banking or financial institutions, that helps individuals or organizations to raise capital and provide financial consultancy services. The operations tend to be more sophisticated than traditional deposit-taking, credit-giving, and retail banking services.
Some of the largest global Investment Banks could be the following: JP Morgan Chase, Goldman Sachs, UBS, Credit Suisse, Morgan Stanley, CitiGroup, Barclays, Bank of America.
Let’s start from the beginning. An Investment Bank is based on three main areas: investment banking division, sales and trading, and asset management. Looking more closely at the structure, this is broadly split into two sectors: products, and industries. On one hand, we find the investment banking product groups: mergers and acquisition, leveraged finance, equity capital markets, debt capital markets, restructuring. On the other hand, industry groups focus on one specific division like technology, media & telecommunications, energy, financial institutions.
There is a well-defined hierarchy in the Investment banking division.In fact, the typical organization chart includes Analysts, Associates, Vice President, Senior Vice President, and Managing Director.
Starting from Analysts: they are typically recent college graduates. Generally, analysts’ position consists in performing the bulk of the analytic work needed to facilitate corporate transactions and typically involves a lot of presentations and models using Excel and Power Point. Basing on IB reports published by Wall Street Oasis, the base salary for an Analyst in the US could range from 85K$ to 95K$ per year, and if we include the bonuses, then we start from 130K$ to 200K$ per year
To become Associate, it is recommended to work as Investment banking Analyst for at least or three years or having applied for an MBA. The Associates operate as intermediaries between analysts and vice president because their role will be focused on coordinating the work of analyst to meet the expectations of the VP. The US base salary for this position could take up from 150K$ to 200K$ per year, with a compensation from 250K$ to 450K$
However, it is with a Vice President position that we have the first managerial position in the firm. VPs coordinate associates and analysts, in order to produce what the Senior Vice President and MD request. This kind of job requires a deep focus on customer relations with a regard on wages, they could range from 250K$ to 300K$ per year and the total compensation from 400K$ to 700K$.
The Senior Vice President role is a mixture of VP and MD. There is no set time frame for when they could become MD, but it depends on how successful the SVP is at sourcing clients and deals. Base salary in the US could range from 300K$ to 350K$, and the total compensation from 600K$ to 1000K$.
At the top of the pyramid there is the Managing Director, which is the highest level in IB, apart from the CEO, CFO. Their work is mainly focused on client relationships and sourcing new clients. At this position, wages start from 400K$ to 600K$ per year, and the total compensation is higher than 1000K$.
To get through the content, we must say that there are six main components of “Compensation”:
- Base salary = stable reliable income source
- Stub Bonuses = bonus for associates and analysts, for their first 6 months on the job
- End-of-Year Cash Bonus = after your first full year of work
- Stock-Based/Deferred Bonus = a portion of your total bonus could become deferred and paid in stocks
- Signing Bonuses = to Analysts and Associates who graduate and accept full-time offers
As is it shown, the salary in IB is very high, but this is because work-life overcome mostly the private one. In fact, reading the surveys published by some workers from Goldman Sachs, on March 2021, they enlight how working in firm such as IB lead to worsening social living relationships, dangering both physical and mental health. According to analysts, they averagely work from 98 hours per week, since the beginning of 2021, and sleep for only five per night. All respondents said, moreover, their schedule had negatively affected their relationships with family and friends.
Despite the negative aspects that working in this field could imply, the Investment banking division, continues to be the maximum aspirations for young students in the strictly financial field, especially from for MSc in Finance or MBA students.
This is an extremely competitive sector, with very high entry requirements like getting a degree from a Business School and, sometimes, higher qualifications like MBA, an internship in a top Firm, networks, and finally, competences.