If you are a finance major at a college or someone who is interested in a job in finance you have probably heard peers or teachers talk about Investment Banking. In fact, many people when you say “I want to work in Finance” their first thought go to Goldman Sachs, JP Morgan, Morgan Stanley, etc. These big Wall Street banks are the classic “finance” job and one that is highly recommended. But as shown in my previous post, there are so many other industries in finance so why is Investment Banking such a good place to start?
To start, let’s talk a little bit more about what Investment Banking is. Investment banking is considered to be on the “Sell-Side” of finance. “Sell-side refers to the part of the financial industry that is involved in the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments” (Investopedia). Rather than investing its own money or a client’s money into stocks like a hedge fund sell-side essentially means you are doing work for a client. There are a few main staple segments of an Investment bank but the job opportunities are massive, with several front and back-office jobs. Some segments that quickly should come to mind are Mergers and Acquisitions, Sales and Trading, and Corporate Finance.
Now that you have a little bit more background let’s dive into why Investment Banking can be a great place for you to start your career.
- Firm Name Recognition: These firms are incredibly competitive to get into, especially in some of the more popular divisions. But they give you incredible name recognition on your resume. If you have gone through one of their analyst programs other firms know you have been trained very well.
- Quality and Quantity of the Work: While working at one of these large firms you will be exposed to a lot of very high-level clients and there is a constant rotation of work. Investment Banking is known for its 100 hour work weeks. But one of the benefits of this is you get to work on projects for hundreds of firms a year. The work not only is intense, highly structured, and for major companies but due to the size of investment banks you get to have your hands on so many different deals. This is seen as valuable to your career because often smaller companies, take an M&A company, for example, might only do 6 deals a year. And if you are an analyst there you may get to work on a large part of 3 of those. But at a big IB, they do hundreds of deals a year and you will get to be a part of many of them.
- Well Designed Programs for College Grads: At an Investment Bank their employees are their greatest asset. So over decades, these firms have built incredible programs for college graduates to come into the IB system. Their 2-year analyst programs train you very well and place you in divisions where your strengths lie.
All of these are reasons why investment banking is such a great place to start your career. But why does this matter? Well, Investment Banking is the foundation to move into any area in Finance that you want to pursue. It gives you the experience and recognition to work at a top tier private equity firm or hedge fund. It gives you the connections to go to graduate school and build out career opportunities at other firms. In Finance they say investment banking gives you the best “exit opportunities” because it provides such a great “base” and you can build anything off of it.