What Is Investment Banking? A Guide To The Financial Services Sector


If you know anything about investment banking, it is probably that it is one of the most lucrative fields you can get into, even on Wall Street. However, there is much more to investment banking than long lunches and a large pay check. If you are interested in learning about what investment banking really is, you have come to the right place. Below you will find an overview of all of the work investment banking entails.

Raising Capital

To understand what investment banking is you need to understand what they do. One of the primary operations of investment bankers is to raise capital. They raise money for corporations, governments, and other financial institutions. This is done through the traditional selling of stocks and bonds or aggressive investing, which many people picture when they think of Wall Street. However, raising capital can also include working with credit facilities and raising funds through Initial Public Offerings. Some of today’s oldest and largest banks got their start simply by raising capital for clients.

Sales And Trading

Sales and trading is another big division of investment banking that ties into raising capital. This refers to the various activities involved in the buying and selling of securities or other financial instruments. These tasks are performed on behalf of the clients. Also known as market making, sales and trading helps to facilitate investments, allowing clients to make incremental amounts of money with each new trade. Sales and trading is a key function of investment banking that you need to know.

Mergers And Acquisitions

Mergers and acquisitions involves more client-centered work, unlike services offering simple Forex trading tips. Primarily, investment bankers will advise their clients, buyers and sellers on financial matters. Alongside their business valuation advice, investment banking often requires the implementation of negotiation tactics. Investment bankers will work to create proposals and arrange financial deals. This is one of the most profitable divisions of investment banking because it doesn’t require much of the bankers other than their time. Because they are in an advisory position, the bankers and investment bank itself are not at risk of losing any money. Instead, they guide clients and corporations on how to spend their own money.

Asset Management

Asset management is the housekeeping division of investment banking. It can be considered its own separate field of business, often referred to as investment management. However, it plays an important role within the greater investment banking industry. At its core, asset management simply involves the handling of other people’s money. In investment banking, this works alongside sales and trading as well as mergers and acquisitions to support large financial institutions. Asset management requires extensive planning and research. Investment bankers offer strategic planning and asset management advice to their clients.

Not For Individuals

Another important factor of investment bankers is that these finance professionals are not available to private individuals, like yourself. Investment bankers’ services are tailored to corporations and governments. They will not help you find quick business loans or provide other similar financial services. While an investment banking professional may advise corporations or governments on the state of capital markets, they will not provide the same financial services to a private investor. This is an important distinction to remember regarding this profession.

Investment banking is a grueling industry. It requires many long hours and sleepless nights. From creating proposals for clients to buying and selling stocks, investment bankers do it all. However, whether they are dealing with asset management or sales and trading, even the most entry-level Wall Street workers are compensated handsomely. Now, you know about all of the behind-the-scenes work that goes into investment banking and why those analysts and associates earn a six-figure salary.

Photo from http://www.bloomberg.com/news/articles/2013-08-29/why-investment-banking-jobs-should-come-with-a-surgeon-general-s-warning

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