Careers: Business/Investment banking/Finance
I was looking over the best universities for Finance professionals and investment bankers (and the university are essentially the same in both categories, just the rankings are slightly different, but even then, not a lot).
What I want to know, is what is the different between the two categories? For instance, if someone is a trader (of things like mortgage-backed securities, bonds, derivatives and other structured products), is he an investment banker or a finance professional? What is the difference?
ROLE OF AN investment banker
Concept Of Investment Bankers
Investment bankers are financial middlemen in security offering process. They purchase securities from companies and governments and resell them to the general public. Thus,investment bankers bring together suppliers and users of long-term funds in a capital market and there by play a key role in security offering process. It is to be noted that investment bankers are neither investors nor bankers. They do not invest their own funds permanently nor accept and guard the savings of others, as commercial banks do.
Functions Of Investment Bankers
The traditional function of the investment bankers has been to act as middlemen in channeling individual's savings and funds into the purchase of business securities. But now a days, they also provide advice and help in distribution of securities. Thus, investment bankers perform four basic functions as follows:
When underwriting a security issue, an investment banker guarantees the issuer that it will receive a specific amount from the issue. In this process, investment banker buys the security at a lower price and then sells them at a higher price i.e. offer price to public. In this sense, underwriting is the insurance function of bearing the risks of adverse price fluctuation during the period of distribution. Investment bankers take this risk for a specific amount of underwriting spread or commission. If investment banker can not sell securities at specified price, the underwriter, not the company, suffers the loss. Underwriter's gain or loss is computed using the following equation.
Gain or loss to underwriter = Gross proceed- proceed to the company- underwriter's expenses.
Gross proceed = price to public X number of shares to be issued.
Once the investment banker owns new securities. it must get them into the hands of ultimate investors. Hence, the second function of investment banker is marketing new issue of securities. The investment banker is a specialist with a staff and organization to distribute securities. So, they perform physical distribution functions more efficiently and more economically than and individual company.
The investment banker, through experience becomes an expert in the issuance and marketing of new securities. Business firms may take valuable advice and counsel from the investment bankers. Thus, investment bankers perform an advisory function by analyzing the firm's financial needs and recommending appropriate means of financing.
4. Making A Market
In case of a company going public for the first time, the investment banker may be obliged to maintain a market for the shares after the issue. The investment banker generally agrees to make a market in the stock and to keep it reasonably liquid. In making a market, the underwriter maintains an inventory in the stocks, quotes bid and asked prices, and stands ready to buy and sell it at those prices. Thus, investment banker also helps to maintain an active secondary market in the stock of small and newly established company.
A career in investment banking helps you develop an in-depth knowledge of finance and investment banking and gain valuable experiences in managing complex products and business initiatives.
As an Operations investment banker, your influence and response to operational, market and product risks will build rewarding client relationships. Essentially, you will be a part of a highly skilled integrated global team that works alongside all areas of complex, fast-moving businesses.
A career in IB exposes you to every facet of the bank – products, technology,trading desks or global management.
An experiences resulting in a rewarding career within the banking industry.
- Investment banking courses
• Raising Capital & Security Underwriting. Banks are middlemen between a company that wants to issue new securities and the buying public.
• Mergers & Acquisitions. Banks advise buyers and sellers on business valuation, negotiation, pricing and structuring of transactions, as well as procedure and implementation.
• Sales & Trading and Equity Research. Banks match up buyers and sellers as well as buy and sell securities out of their own account to facilitate the trading of securities
• Retail and Commercial Banking. After the repeal of Glass-Steagall in 1999, investment banks now offer traditionally off-limits services like commercial banking.
• Front office vs back office. While the sexier functions like M&A advisory are "front office," other functions like risk management, financial control, corporate treasury, corporate strategy, compliance, operations and technology are critical back office functions.
positions from junior to senior:
• Analyst (grunt)
• Associate (glorified grunt)
• VP (account manager)
• Director (senior account manager, rainmaker in training)
• Managing Director (rainmaker)
Some banks call certain investment banker positions different names or have added levels of hierarchy. For example, sometimes banks separate Senior Vice President from Vice President. Other times, Director is split up into Director and Executive Director (more senior). However, regardless of the names, the general job functions of each relative position tend to be consistent bank to bank.
If you are an undergraduate, you are applying to banks with the aim of landing an investment banking analyst position. Assuming you do well, have an interest in staying, and there is a need, some banks offer direct promotions from analyst to associate instead of requiring that you go back and get your MBA (typically called “A to A”). If you are an MBA student, you are applying to banks with the aim of landing an investment banking associate position and aspire to work up the ranks to Managing Director one day.
The Investment Banking Analyst
Investment banking analysts are typically men and women directly out of undergraduate institutions who join an investment bank for a two-year program.
After two years of working for the investment bank, top performing analysts are often offered the chance to stay for a third year, and the most successful analysts can be promoted after three years to investment banking associate. Analysts are the lowest in the hierarchy chain and therefore do the majority of the work. The work includes three primary tasks: presentations, analysis, and administrative.
Investment banking analysts spend a lot of time putting together PowerPoint presentations called pitch books . These pitch books get printed in color and are bound with professional looking covers (usually in-house at the bulge brackets) for meetings with clients and prospective clients. The process is very formatting intensive, attention to detail is critical, and many analysts find this part of the job to be the most mundane and frustrating.
The second task of an analyst is analytical work. Pretty much anything done in Excel is considered “analytical work.” Examples include entering historic company data from public documents, financial statement modeling, valuation, credit analysis, etc. Interview questions often focus on this part of the job and Wall Street Prep's training programs are focused on demystifying the analytical work that analysts are expected to perform.
The third main task is administrative work. Such a task involves scheduling, setting up conference calls and meetings, making travel arrangements and keeping an up-to-date working group list of deal team members. Lastly, if you are the sole analyst on the deal and it is sell-side (you're advising a client on selling its business), you may have control of the virtual data room and will need to keep it organized so all parties have access to the information. It is an interesting experience in that there are several data room providers and many times they will try to win business by offering free sports tickets, etc. It gives you a chance to feel how your clients feel as you try to win their business.
The Investment Banking Associate
Investment banking associates are usually recruited directly out of MBA programs or analysts that have been promoted. Typically, bankers will be at the associate level for three and a half years before they are promoted to Vice President. Associates are also categorized into class years (i.e. First Year, Second Year and Third Year or say, Class of ‘05, ‘06 and ‘07). The number of years it takes for Associates to get promoted actually depends on the bank. Sometimes it could be more than three and a half years if there is not a need for another Vice President.
At that point, an associate should evaluate whether it makes sense to stay at the bank or try to move elsewhere to receive a promotion.
The investment banking associate’s role is similar to the analyst's role, with the additional responsibility of serving as a liason between junior and senior bankers, and in some instances, to work directly with clients.
How Analysts and Associates Work Together
Analysts and associates work very closely together. Associates check the work of analysts and assign them tasks. Checks could be in-depth where the Associate literally looks through models and checks inputs with filings or it could be much more high level where the Associate looks at an output and determines whether the numbers make sense.
The Senior Bankers (VPs and MDs)
Senior bankers primarily source deals and maintain relationships. Senior bankers have a wide variety of past backgrounds ranging from investment banking to corporate executive management.
Aside from relationships, senior bankers often understand their industry landscape at a very detailed level and can anticipate deals in the sector. As economic environments shift, they anticipate when companies will need to raise capital or when strategic discussions (M&A, LBO) are necessary. By anticipating such needs, Managing Directors can start crafting appropriate pitches early-on to clients with the aim of turning these pitches into live deals.
ROLE OF a finance professional
-Preparing high quality business reports to support stakeholder understanding
and decision making.
*Leadership and management
-Managing resources and leading organisations effectively and ethically,
understanding stakeholder needs and priorities.
*Strategy and innovation
-Assessing and evaluating strategic position and identifying imaginative
options to improve performance and position; implementing strategies
to ensure cost effective and innovative business process improvement and
-Implementing effective investment and financing decisions within the business
environment in areas such as investment appraisal, business re-organisations,
tax and risk management, treasury and working capital management, to ensure
*Sustainable management accounting
-Assessing, evaluating and implementing management accounting and
performance management systems for planning, measuring, controlling and
monitoring business performance to ensure sustainable value creation.
*Law and taxation
-Understanding laws and regulation relating to business; understanding
taxation, regulation and systems, to establish tax liabilities for individuals
and companies, and minimising these liabilities using tax planning.
*Audit and assurance
-Providing high quality external audits; evaluating information systems and
internal controls, and gathering evidence and performing procedures to meet
the objectives of audit and assurance engagements.
*Governance, risk and control
-Ensuring effective and appropriate governance; evaluating, monitoring and
implementing appropriate risk identification procedures; designing and
implementing appropriate and effective internal audit and control systems.
*Stakeholder relationship management
-Managing stakeholder expectations and needs; aligning the organisation to
their requirements; engaging stakeholders effectively and communicating
*Professionalism and ethics
- Understanding and behaving in accordance with fundamental principles of
ethical behaviour and personal ethics; ensuring implementation of appropriate
corporate ethical frameworks.
HERE IS A LIST OF TOP 50 UNIS.
-FIRST 15/16 WOULD INSIST ON 2 YEARS EXPERIENCE.
-OTHERS OFTEN WAIVE IT OFF --ON A CASE BY CASE.
1. Harvard University (MA)
2. Stanford University (CA)
3. University of Pennsylvania (Wharton)
4. Massachusetts Institute of Technology (Sloan)
5. Northwestern University (Kellogg) (IL)
6. University of Chicago
7. Columbia University (NY)
8. University of California–Berkeley (Haas)
9. Dartmouth College (Tuck) (NH)
10. University of California–Los Angeles (Anderson)
11. Duke University (Fuqua) (NC)
12. University of Michigan–Ann Arbor (Ross)
13. New York University (Stern)
14. University of Virginia (Darden)
15. Yale University (CT)
16. Carnegie Mellon University (Tepper) (PA) *****
17. Cornell University (Johnson) (NY)
18. Emory University (Goizueta) (GA)
19. University of Texas–Austin (McCombs)
20. University of North Carolina–Chapel Hill (Kenan-Flagler)
21. Purdue University–West Lafayette (Krannert) (IN)
22. Ohio State University (Fisher)
23. Indiana University–Bloomington (Kelley)
24. Michigan State University (Broad)
25. University of Minnesota–Twin Cities (Carlson)
26. University of Rochester (Simon) (NY)
27. Washington University in St. Louis (Olin)
28. University of Illinois–Urbana-Champaign
29. University of Southern California (Marshall)
30. University of Washington
31. Texas A&M University–College Station (Mays) *****
32. University of Notre Dame (Mendoza) (IN)
33. University of Wisconsin–Madison
34. Arizona State University–Main Campus (Carey)
35. Brigham Young University (Marriott) (UT)
36. Georgetown University (McDonough) (DC)
37. Georgia Institute of Technology
38. Pennsylvania State University–University Park (Smeal)
39. University of California–Irvine (Merage)
40. University of Maryland–College Park (Smith)
41. Boston College (Carroll)
42. Southern Methodist University (Cox) (TX)
43. University of Florida (Warrington)
44. Boston University
45. Rice University (Jones) (TX)
46. University of California–Davis
47. University of Georgia (Terry)
48. University of Pittsburgh (Katz)
49. Babson College (Olin) (MA)
50. Tulane University (Freeman) (LA)
51. Vanderbilt University (Owen) (TN)
IN ANY FINANCE FIELD, COMPETENCIES ARE CRITICAL FOR CAREER SUCCESS.
A competency map is made up of four areas of competence attributes:
I. Personal Attributes - The characteristics which enable the employee to attract others to well reasoned and logical points of view, to effectively communicate, and to relate to others. These include:
A. Insight and Judgment
B. Integrity and Ethics
C. Continuous Personal Improvement
D. Commitment and Performance Stability
E. Interpersonal Orientation
F. Project Management Skills
G. Innovative/Creative Thinking
I. Business Writing
J. Professional Demeanor
II. Leadership Qualities - The skills that allow the employee to assume a position of influence by assembling and leveraging a variety of resources that address problems and opportunities throughout the organization. These include:
A. Strategic Thinking and Planning
C. Negotiating and Persuading
E. Coaching and Empowerment
F. Problem Solving
G. Decision Making
H. Cross-Functional Perspective
III. Broad Business Perspective - The body of knowledge that encompasses an understanding of the organization and its industry. These include:
A. The Organization and Industry Knowledge
B. Internal and External Consulting
C. Business Relationships/Partnerships
D. Current and Emerging Management Practices
E. Best Practices
F. Risk Management
G. Mergers, Acquisitions and Strategic Alliances
H. Management Accounting
I. Organizational Systems and Processes
IV. Functional Expertise - The traditional technical skills that the employee should possess and which form the basis for their unique ability to understand an organization from a perspective that others cannot. For eg. A finance professional should have knowledge in the following:
A. Financial Analysis
B. Treasury Management
C. Cost Management
D. Human Resources
F. Information Technology
G. Control Environment
H. Financial and Statutory Reporting and Accounting Principles
I. Internal Audit
J. Budgeting, Forecasting and Business Planning
Once a competency map has been developed and validated, it can be used as a tool to manage, evaluate, and develop employee performance; recruit and select individuals that possess the skills required in the position; and compensate individuals based on their demonstrated performance.
AS YOU DEVELOP YOUR FINANCE KNOWLEDGE,
YOU MUST ALSO DEVELOP THE COMPETENCES
WHICH WILL HELP YOUR FINANCE CAREER.
AS YOU DEVELOP YOUR FINANCE KNOWLEDGE,
YOU MUST ALSO DEVELOP THE COMPETENCES
WHICH WILL HELP YOUR FINANCE CAREER.
DEVELOP YOUR SKILLS IN
*Public speaking skills
[ DALE CARNEGIE INSTITUTE ]
Taking risks, adapting quickly to change, leading the change process
Positively influencing people and events
3.Impact & Influence
Persuading, convincing or influencing
Understanding business plan goals
Working cooperatively and productively with others to achieve results
Managing and continually improving one's own performance
Understanding and meeting or exceeding client needs
Knowing what results are important, and focusing resources to achieve them
Clearly conveying and receiving messages to meet the needs of all
Aligning behaviour with department values, principles and goals
Developing and maintaining win/win relationships and partnerships
Ensuring contracted services are delivered effectively to clients
Effectively managing internal and external resources to achieve organizational goals
Taking a broad scale, long term view, assessing options and implications
Professional / Managerial / Technical
1 Select the resources which meet specific organizational goals.
2 Understand the organizational structure & business
3 Provide services to meet the business requirements
*Understanding of organizational needs
1 Interact with the project/departmental heads to know their current & potential needs.
2 Control over supply of information by selecting what is relevant & usable .
3 Review / suggest enhancements for uniformity and standardization in the format, data collection and distribution channels.
4 Ensure uninterrupted access and circulation of informations.
*Overseeing infrastructure development, housekeeping activities, sharing of resources and expertise within and across branches.
1 Design a policy for development based on organizational plans & projects.
2 Design strategies for resource utilization.
1 Communicate the value of information services and policies
2 Present ideas clearly & concisely, either verbally or in writing
3 Actively listen, consider and then respond.
*Flexible & Positive
1 Willingly assume different responsibilities at different points in time that respond to
2 Maintain a positive attitude & help others to do the same.
3 Create partnership and alliances within (like IT, Human Resource, Learning & Development, etc) of the organization.
4 Use your network to learn.
1 Working together cooperatively towards a common goal
2 Good understanding of team work and team building are critical for your business success.
1 Build & lead an effective information services team
2 Support & guide professional development of people working within the team
3 Set high performance standards to the team.
4 Effectively manage and develop a diverse, multifunctional workforce.
1 Effective marketing of strategic management services internally.
2 Implement and supervise internal marketing initiatives useing intranets / knowledge management portals.
1 Coaching is one part of a high-quality professional development plan.
2 Coaching helps to bring the best of solutions in oneself by using his knowledge and skills.
1 Recognize pattern, draw logical conclusions, and make recommendations for action.
2 Use a well-ordered approach to solve problems and sound judgment in making decisions despite obstacles.
3 Develop actionable recommendations based on an understanding of various options.
4 Gather, utilize, and interpret relevant information when making a decision.
1 Encourage people to be result-oriented.
2 Let them know the bigger picture so that they know what they are fighting for.
* Organizing & Planning
1 Plan, prioritize & focus on what is critical.
2 Define strategic goals for self & the team to ensure long-term plans drives daily decisions & operations
*Innovation & Creativity
1 Think creatively & innovatively to offer the best of services to the MARKET.
2 Look at the existing operations, processes & services and try to improve them to meet the dynamic changes of the MARKET requirements.
3 Always search for new ideas from all the fields of study.
-Manage changes in the organisation
-Policy, social, political and economic trends are identified and assessed for potential impact on the
-Management and work practices are assessed and revised relative to social, political and economic
trends and impacts.
-Indicators for change within the organisation are defined and monitored.
-Opportunities for positive change are identified and promoted and appropriate work is undertaken to
maximise support from staff, clients and stakeholders.
1 Budget forecasting and provisioning for new initiatives/events/goals.
2 Ensure savings, optimization and financial disciplines.
3 Analysis & reporting of expenditure pattern/trend and provide inputs to management.
*Copyright & IPR management
1 Know the copyright & IPR issues
2 Violating the copyright & IPR issues.
SECOND SET OF FRAMEWORK
Major Sub set High level components
Values and behaviour Beliefs Values, ethics & professionalism
Analytical skills Observations & analysis
Conceptualisation & problem solving
Relationships Complexity, change & diversity
Communication & presentation
Responsibility & accountability
Personal development Focus and time management
Technical competence Specialization Knowledge and skill
Consultative Client focus
Partnering and networking
Tools and methodologies
Risk and quality management
Business Acumen Consultant Business Consultancy environment
Commercial aspects of assignment
Client Business External awareness
Understanding the client
Client’s project imperative