An Investment Banking Analyst Career: Pros and Cons
Investment banking analysts (also called financial analysts) offer recommendations for customers who wish to invest in the financial marketplace. They work with individuals and businesses to review the stock market and suggest potential investments for their clients, oftentimes traveling to discuss the available options. Consider the following pros and cons to see if this career is right for you.
|Pros of Becoming an Investment Banking Analyst|
|Above-average job growth (16% growth from 2012-2022)*|
|Higher than average salary (approximately $92,250 in 2014)*|
|Potential to earn bonuses**|
|Work in a comfortable office setting*|
|Cons of a Career as an Investment Banking Analyst|
|This is a high stress, high pressure career.*|
|Competition for jobs is intense**|
|Potential to work long hours (more than 40 hours per week)*|
|Low tolerance for errors**|
Sources: *U.S. Bureau of Labor Statistics, **Duke University
Essential Career Info
Job Description and Duties
Investment banking analysts make recommendations for investments based on their review of financial reports and economic conditions. After analysts research and analyze a potential investment, they will give a presentation or write a report based on their findings. Financial agents and brokers will then make investment decisions using this information. According to Duke University, the duties of an investment banking analyst may involve analyzing potential mergers and acquisitions, completing comparable transaction analysis and conducting valuation analysis.
Firms commonly have investment banking analysts specialize in certain industry sectors, product types or regions. Banks will often have analysts conduct research and make investment recommendations in just about every field and region that can earn a profit. For example, before advising on an investment, an analyst specializing in the Asian automotive industry might be responsible for researching the policies, regulations and politics that affect that particular market. Another example would be an analyst researching and analyzing technology companies in Silicon Valley for potential investment opportunities. While some investment firms and companies may specialize in the automotive, technology or energy industries, large corporations will address many industries, via multiple departments that each focus in a certain area.
The BLS shows that there are different types of investment banking analysts. Buy side analysts will provide investment advice for large financial institutions or organizations that have a lot of capital to invest, such as universities, banks and insurance companies. Sell side analysts will develop investment strategies for the financial agents who focus on the stock market.
Ratings analysts work with debt and evaluate whether businesses, government agencies or organizations can repay bonds. Risk analysts help companies make smart financial decisions by advising them to diversify their investments to limit potential losses.
Career Prospects and Salary
According to the BLS, the major factors affecting employment growth in this field include increasing globalization, developing markets and an increase in financial products. Due to the predicted 16% employment growth, intense competition is expected for these positions because of their high salaries and average availability. The average salary of an investment banking analyst is about $92,250.
Career Skills and Requirements
The BLS reports that a bachelor's degree in finance, economics or another related field is the minimum requirement to obtain a job as an investment banking analyst. Also, the BLS notes that knowledge of stocks and bonds, market trends, risk management, acquisitions and mergers, equity and debt capital is beneficial. O*Net OnLine reports that to work in this field, you should be well-organized and have excellent written and oral presentation skills, along with sharp analytic skills. You also need to make good financial decisions and be able to solve complex business problems.
While a degree in finance or economics will give you a strong background in business and having good organization and communication skills is important, investment banking firms will often require you to complete an analyst program. Analyst programs prepare you to work in investment banking upon program completion. They last about two years and are offered through banks, financial organizations and investment bank training programs. If you perform exceptionally well during those two years, you may get invited back for a third year, which can improve your chances for employment. Depending on the policy, companies that offer training programs may hire third year-analysts as full-time employees.
In order to enroll in this analyst program, you need to have at least a bachelor's degree, and previous experience is recommended. Experience can be obtained through an internship or training program. If you haven't completed an internship prior to graduating, you should look for an analyst training program. Some banks offer 3-6 week training programs that will help prepare you for the analyst program. During the training, you will work with a team and present case studies to a senior team of analysts.
In order to become licensed, investment banking analysts must acquire sponsorship from their employer and pass an exam administered through the Financial Industry Regulatory Authority (FINRA). Because analysts need employer sponsorship, the BLS reports that they are not always required to earn licensure before obtaining a job. As an analyst, you are not required to obtain all licenses at one time.
For investment banking analysts to work with specific investment products and give financial advice, they may need to pass certain licensing exams, including the Series 7, 63, 66 and 79. According to FINRA, the Series 7 exam qualifies a financial analyst to solicit, purchase and sell corporate securities, investment company products and municipal fund securities. Passing the Series 63 will qualify you to work as securities agents, while the Series 66 prepares you to become an investment adviser representative. Earning Series 79 licensure will qualify you to advice and facilitate on debt and equity offerings, mergers and acquisitions, financial restructurings and corporate reorganizations.
What Employers Are Looking for
Reviewing job postings may offer you a chance to see some of the skills and requirements that will be needed to obtain a position as an investment banking analyst. Banks and companies hiring analysts often want applicants to have at least a bachelor's degree and experience in mergers and acquisitions. To be considered for analyst positions, you need to have strong interpersonal, organizational and problem-solving skills. These job postings are from March/April 2012.
- In New York, NY, an international bank is looking for an investment banking analyst who can research potential companies for mergers, maintain databases and prepare presentations and marketing materials for clients. Prospective applicants need to have at least a bachelor's degree and experience working with mergers and acquisitions.
- A California business development company is looking for an investment banking analyst who has at least a bachelor's degree and 1-3 years of mergers and acquisition experience. The duties of this analyst position include researching and evaluating aerospace companies and giving presentations and pitches about potential investments. Additional requirements include having a strong academic record, excellent communications skills and the ability to work long hours.
- A Boston investment firm wants to hire an investment banking analyst who can research and create pitch materials and assist in acquisition and merger transactions. Along with a bachelor's degree, applicants are required to have at least six months of experience and Series 63 and 79 licenses.
How to Stand out in the Field
A bachelor's degree is acceptable for many analyst positions; however, a Master of Business Administration (MBA) degree may be preferred by employers. Many job postings will list a bachelor's degree as the minimum requirement for the position, but prefer that applicants have an MBA. While earning a high-level degree can improve your employment opportunities, the BLS also notes that having a strong understanding of geographic regions and the ability to perform in-depth analysis of a potential investment is important. Morgan Stanley, a global financial firm, writes that speaking another language and having a strong academic record may be beneficial to entering a training program.
Those already working as analysts are encouraged to become certified as CFAs (Chartered Financial Analyst). The BLS notes that certification is recommended to increase advancement opportunities. To qualify, CFA applicants need to pass a series of three exams and have a minimum of four years of relevant experience.
Other Careers to Consider
Because of the highly competitive nature of working as an investment banking analyst, you may want to look at alternative career options. With a bachelor's degree in finance or economics, you could find work in a number of business-related areas. Like investment banking analysts, budget analysts and cost estimators analyze numbers and conduct research for projects and companies. While investment banking analysts research investment opportunities, budget analysts ensure a company remains in budget and cost estimators determine the budget for a specific project.
A budget analyst can find employment with private companies, non-profit organizations and government agencies. Duties include developing budgets, performing spending analysis, ensuring compliance with laws and projecting financial needs. If you want to work for a government agency, you can obtain certification through the Association of Government Accountants. According to the BLS, from 2010-2010, career opportunities for budget analysts are projected to grow ten percent. In 2011, the BLS also reported that the median annual salary for budget analysts was $69,000 per year.
Another career option is to become a cost estimator. Cost estimators work in the construction and manufacturing industries and are responsible for estimating the cost and requirements for a project. In addition to having business skills, you will also need to know how to read blueprints and use computer software to determine the cost for a project. Certification is available through numerous organizations, including the Association for the Advancement of Cost Estimating International. Cost estimators earned a median annual salary of $58,000 per year and employment opportunities were expected to increase 36% from 2010-2020, according to the BLS.