How to Become an Investment Banker
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- Investment bankers work to issue securities and facilitate complex financial transactions.
- Investment bankers need to study finance, with many earning master's degrees.
- Investment banking is highly regulated, and bankers need to pass licensing exams.
The issuing, management, and sale of financial securities, such as stocks, is a complicated and highly regulated process. As such, companies hire investment bankers to assist them in this and related processes.
Investment banking is a suitable career for someone skilled in math. Investment bankers should also have a good mind for laws and regulations to navigate the complex legal landscape surrounding investment banking. To become an investment banker, students pursue an education in finance. While you can begin as an investment banker with a bachelor's degree, most eventually pursue a master's degree.
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What Does an Investment Banker Do?
Investment bankers typically begin their careers as analysts for an investment bank. After work and further education, they can be promoted to analyst or vice president, where they begin managing and supervising newer investment bankers.
Typically, these upper-level jobs require a master's in finance or an MBA. After work in investment banking, many pursue other jobs in finance, such as hedge fund management, corporate finance, and venture capital.
Investment Banker Responsibilities
- Advise and facilitate corporate clients in complex and regulated financial events like mergers and acquisitions.
- Arrange financing for a company, guiding them through the process of issuing stocks and bonds, or through private placement.
- Help companies raise capital through stock sale (securities investment), often underwriting stock offerings and assuming the risk of their initial purchase.
According to Payscale, the average annual base salary is $101,300 for these professionals, as of June 2022. However, total compensation including bonuses and investment opportunities can lead to high six- to seven-figure total compensation by mid-career.
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What Are the Steps to Become an Investment Banker?
A career in investment banking is a highly structured process. Beginning in college, aspiring investment bankers study finance. They then pursue entry-level positions, before most seek a master's degree. While working as an investment banker, they also obtain necessary licenses to conduct their business.
Step 1: Earn a Bachelor's Degree in Finance
For those seeking a career in investment banking, a bachelor's degree in finance is a prerequisite. Other potential acceptable majors include economics or business supplemented with a minor in finance.
In a bachelor's in finance program, student's learn how to perform financial analyses and forecasts. They also learn the skills to evaluate financial statements, and receive a general overview of financial markets. They also obtain soft skills in business, such as networking skills for financial services sales.
The National Center for Education Statistics reports that the average bachelor's in finance program carries a tuition of $9,375 at a public four-year school with in-state tuition, and above $35,000 at private nonprofit four-year institutions.
Step 2: Get an Entry-Level Investment Banking Job
Most investment bankers enter the industry as investment analysts. This entry-level job has an average annual salary of $67,860, according to August 2022 Payscale data. High bonuses common to investment banking can raise overall compensation.
Entry-level jobs in investment banking are competitive. Students should actively network during their studies and complete internships to gain applicable real-world experience. Some financial institutions offer career bridge programs to accelerate students' careers directly out of school.
Typically, bankers work as analysts for a few years before pursuing an advanced degree or being promoted to a higher position. Applicants should consider total compensation and potential paths to advancement when deciding on a position.
Step 3: Earn Your Master's of Finance
While not necessary for entry-level positions, most higher-level positions in investment banking require a graduate degree. Most commonly, investment bankers obtain either a master's of finance or an MBA with a specialization in finance. An advanced degree can also make you more competitive when applying for jobs in investment banking and raise your earning potential.
Costs vary by the type of program you attend. According to the College Board, public graduate programs have an average tuition of $9,000 per year. An MBA program can cost significantly more at prestigious institutions.
When considering whether to go into debt for graduate school, it is worth noting the high earning potential of upper-level investment bankers, many earning well into the six figures.
Step 4: Get a Job as a Investment Banker
Once you have obtained a master's, most investment banking positions follow a fairly standardized advancement track. As investment bankers gain seniority, they become associates, before becoming vice presidents and overseeing a team of associates and analysts.
Step 5: Consider Continuing Education or Specialization
While it is possible to earn a doctorate in finance, this is not a very common path. A doctorate in the field often sets graduates up for careers in academia and research. An MBA is the typical terminal degree for an investment banker.
Some investment bankers do choose to continue their education in other ways. Many pursue additional continuing education courses and certifications in banking or finance to remain competitive in the fast-paced industry landscape.
What to Know Before Becoming an Investment Banker
An accredited degree program ensures that you are receiving an education that meets the standards of an accrediting body licensed by the U.S. Board of Education. This is important as it means you will be getting an educational background that will prepare you for work and will be recognized by a potential employer.
Licensing and Certification
Generally, investment bankers need to get securities licenses to perform their work. They cannot get these licenses until they are working and are sponsored by their employer. However, before employment, a student can take the Securities Industry Essentials Exam, a prerequisite exam to other licensure exams.
The average cost of pursuing a career in investment banking is relatively high compared to other positions. While the bachelor's degree costs the same, the majority of the expense comes from the need to pursue an MBA or master's in finance. However, these costs may largely be defrayed by an investment banker's high earning potential.
Investment bankers make an average base salary of $101,300, according to June 2022 Payscale data. However, total compensation is typically higher, with bonuses. With a master's degree, salaries may go to the high six-figures.
Frequently Asked Questions About Becoming an Investment Banker
What qualifications do you need to become an investment banker?
To become an investment banker, you need a minimum of a bachelor's degree. Common majors are finance, business, economics, and accounting. You also need to pass licensing exams to work as an investment banker. The initial Securities Industry Essentials Exam can be completed at any time, but securities license exams are taken while employed.
To advance as an investment banker, most employers require an MBA or master's in finance. Connections made during a master's program also provide an important network for relationship-based sales work.
What is the fastest way to become an investment banker?
The fastest way to become an investment banker is to apply for an entry-level position, typically an investment analyst role, after graduating with a four-year bachelor's in finance. Choosing an accelerated degree program can shorten time to graduation and allow you to enter the workforce quicker.
Positions are typically competitive in this industry. Additional education, such as an MBA, can provide an advantage in securing an entry-level position. Some initial work in the banking industry can help you pursue a top MBA program.
What are investment securities?
Investment securities are tradable financial assets that are held as investments. Over time, these assets grow in value, becoming one of the main sources of revenue for a bank.
As part of their job, an investment banker analyzes securities, predicting which will be strong investments, and how the bank can best manage the assets they have. The industry is highly regulated, so investment bankers need to be licensed to trade them.
Can I become an investment banker with an online degree?
You can become an investment banker with an online degree in the most general terms. A bachelor's degree is the only real requirement for entry into the profession.
However, the field is highly competitive, with many employers hiring graduates primarily from top universities. Applicants from any background should make sure their application stands out by supplementing their resume with further education and internship experience.
How much money can I make as an investment banker?
Investment bankers are among the highest-paying jobs. In an entry-level position with a bachelor's degree, Payscale reports an average salary of $101,300, as of June 2022. However, bonuses in investment banking can be close to or equal to salary.
Later in their career, with an MBA or master's in finance, total compensation can increase greatly.
These salaries make it more than worth it to pursue graduate school, balancing the expense of a terminal degree.