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Business News of Wednesday, 28 September 2022


How to break into a career in investment banking at JPMorgan, Goldman Sachs, others

The photo used to illustrate the story via Nairametrics The photo used to illustrate the story via Nairametrics

If you’re a Nigerian studying at an Ivy League university abroad or a graduate from a Nigerian university with an excellent grade, you may want to consider a career in investment banking.

It’s worthy to note that 20 US financial services companies, including Citigroup, JPMorgan Chase, Goldman Sachs and American Express, have given the issue of diversity for African/Nigerian professionals in senior management positions more serious consideration.

When it comes to the career path for investment banking (IB), it is comparable to that of a ‘fraternity’ or ‘mafia’, offering a clear hierarchy, specifics you must perform, but with benefits, and increased responsibilities at each level.

This article will cover the benefits and drawbacks of the investment banking career path, focusing more on the Analyst and Associate role before delving into Vice president and other positions subsequently. The role of an investment banker, hierarchy, advancement opportunities, lifestyle, working hours, pay, and exit strategies will all be covered here.

What do Investment Bankers do?

Investment bankers provide advice to corporations on large-scale corporate transactions such as mergers and acquisitions, as well as debt and equity issuances.

“Advise companies” means “work with management teams to market and sell companies, find potential acquisition targets, and close deals; or recommend the best terms and timing for a capital raise, and then market that debt or equity issuance to investors.”

On a grand scale, the role is part advice, part sales and marketing, and part negotiation and deal-making.

Why a career in Investment Banking?

For financial reasons, a lot of people choose a career in investment banking. Even at mid-levels, they become the top 1% of earners in most states and countries.

As some are fascinated by deal mechanics, others are drawn to the thrill of deals and high-stakes negotiations with influential people like CEOs and board chairs.

Yet more people are drawn to careers in investment banking by the exit opportunities, particularly those that are open to junior bankers like analysts and associates.

Required skills, Interest & Requirements

- People who are ambitious, competitive high achievers who are prepared to put in long, arduous hours

- Extremely detail-oriented

- Strong in reading/writing and basic math

- Interested in deals rather than simply following the markets or investing in public companies or other assets.

- Interested in a specific exit opportunity that typically requires investment banking, like corporate development or private equity.

- Junior investment bankers are typically, though not always, recent graduates from elite institutions of higher learning, such as Ivy League in the United States or colleges like Cambridge and Oxford in the United Kingdom.

- May have completed an internship in finance during their undergrad studies after which the bank offers them a full-time position.

- If employed full-time in a related industry, such as corporate banking or valuation at a Big 4 firm.

- If you attend a prestigious business school and have the appropriate work experience, you can break in at the MBA level.

How to break into the industry

- Work and leadership experience that appears to be highly relevant for IB roles;

- A strong academic record (grades, test scores, and university reputation);

- A lot of networking and interview prep; and something “interesting” that makes you look like a human, not a robot.

- Because it is nearly impossible to break into mid-level investment banking careers, you will need do it early, that is, fresh out of an undergraduate program, an MBA program, or as a recent university graduate; or much later – if you’re already a C-level executive in another industry.

Career Path

The corporate hierarchy and career path in investment banking are clearly defined and haven’t changed much over time. This is the basic career path for investment banking, though there are some variations with slightly different titles:

- Intern or Summer Intern – Assistant to the Monkeys
- Analyst – Monkey
- Associate – Better-Trained Monkey
- Vice President (VP) – Manager of the Monkeys
- Director or Senior VP (SVP) – Manager and Rainmaker-in-Training
- Managing Director (MD) – Rainmaker
- For now, here’s a summary of what to expect at each level:

NOTE: The descriptions, salaries, and bonuses listed below are for front-office roles in investment banking, not back or middle office functions.

Furthermore, the figures are based on pay in USD according to salary reviews and reports, specifically from large banks in New York. In other regions, such as London, and at smaller banks, pay will be lower, sometimes significantly lower.

Investment Banking Analyst job description

As an Analyst, Excel and PowerPoint are the regular tools you will use to work on administrative tasks such as tracking buyers and sellers, managing the data room and deal documents, and responding to client and potential client requests.

Age Range: The majority of full-time Analysts have recently completed undergrad, while some have completed Master’s programs, or another full-time role, so that should be around 22-27 years.

Salary + Bonus: Base salaries at large banks typically range between $100,000 and $125,000 USD, (varies) with bonuses ranging from 0.5x to 1.0x of that base salary. The total pay is normally within the $150K – $250K range (as of 2022).

Work Hours: Although you’ll spend between 70 and 85 hours a week at the office, you won’t be working the entire time. Although the hours for investment banking are long, there is also a lot of “downtime.”

Weekends are less stressful than weekdays, and occasionally you’ll get a protected weekend with Friday night and Saturday off.

Promotional Requirements: Previously, it took three years to be promoted to Associate, but many banks have shortened this requirement in order to reward long-term employment, so to be conservative, it now takes more like two to three years.

Exit Opportunities: As an Analyst at a large bank, you will have access to the full range of investment banking exit opportunities, including private equity, hedge funds, asset management, corporate finance, corporate development, and venture capital.

Your options at smaller banks will be more limited to other banks, corporate finance, and corporate development roles.

Investment Banking Associate job description

As an investment banking associate, you are a better-trained’ monkey’ with more life experience, higher pay, and more interesting work.

In a team, the analyst will do the majority of the grunt work, while the associate will assign it, check it, and occasionally jump in to do some Excel and PowerPoint, especially in more complex presentations and models.

Associates also attend more meetings and interact with more clients, though they are unlikely to have “speaking roles” in the majority of meetings.

Some Associates are chosen for recruitment from prestigious MBA programs or fields related to investment banking.

Analysts were previously thought to be short-term hires at the bank, while associates were seen to be permanent employees. Banks, however, have been attempting to change that by encouraging Analysts to remain longer.

Age Range: Because associates come from more varied backgrounds, the best guess for the age range is 25–35. Unless you graduated from college at age 18 or 20, it would be nearly impossible to become an IB Associate much before the age of 25.

Salary + bonus: In large banks, base salaries range from $175K to $225K, and associates typically earn between $300K and $550K USD in total compensation. At smaller banks, expect the bonuses to be significantly lower.

Hours: You don’t get called in for as many last-minute emergencies, so the average is close to 65 to 80 hours per week.

Promotion time: If your performance is good, it may take 3-4 years to advance to the next level of vice president.

However, getting promoted to VP is more difficult because the bank may not need another VP right away or may be skeptical of your ability to eventually become a rainmaker.

Exit Opportunities: Exit opportunities for investment banking associates are more limited.

Headhunters will not actively seek you out as they do for Analysts at large banks in the on-cycle private equity recruiting process, so you must be very proactive.

Corporate finance careers or corporate development careers are always options, but if you want PE or HF roles, you’ll need to be extremely targeted and proactive to have a good shot, and you’ll almost certainly have to focus on smaller firms.

The next in the series will focus on the job description of Vice President (and why these bankers have the title “Vice President”, as well as Managing Director and Group Head. It will also profile some Nigerian in the diaspora who has risen to the senior positions at some of these investment banks.

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