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Must-Have Investment Banking Skills For Professionals

Every field requires its own set of skills. Investment banking is a tedious job but with lucrative opportunities and perks. Long working hours and efforts are its components but there are skills that if obtained and retained can help one go farther and farther in his career prospects. Investment banking skills are no different than any other skills and require effort and practice.

List of best investment banking skills

What is Investment Banking?

Investment banking incorporates the management of large and complex financial transactions related to or for big corporations, organizations, and other types of institutions. It also entails management of mergers and acquisitions and Initial Public Offering(IPO) and helps in raising money by various means such as underwriting securities in the form of equities and debt.

It facilitates broker trades for their private clients and big institutions. It consists of working with governments, municipalities, and other groups. It consists of experts who are very well acquainted with the current scenarios of the financial markets.

It guides issuers on how to issue an offering and execute the placement of stocks. It makes it easy to manage, organize, conduct, and execute transactions for institutions and helps them to save time.

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What Do Investment Bankers Do?

●     Assist in Mergers and Acquisitions

A merger is the joining or combining of two companies so that they can gain market share, increase shareholder value, and expand into different sectors. In a merger, two companies join together with equal values to create a new legal entity. The acquisition consists of the purchase of more than half or entire shares to gain control over it and its assets.

Investment Bankers create valuations of a company that is up for merger or acquisition. Apart from advising about the investment decision in a company, they also advise their clients about the ways to execute it.

●     Helps in Initial Public Offering(IPO)

Initial Public Offering is a process of offering shares of a new private corporation to the public for the first time so that it can raise new equity capital for the operations of the corporation. Before Initial Public Offering a company is a private corporation with few shareholders but after it goes public its shares are available to outside investors.

It gives a chance to the company to expand and grow. Investment Bankers help in the issuance and underwriting of new stock and bonds to institutions so that they can raise money.

They are responsible for explaining all terms related to stock or bond issuance and handling all the regulatory and legal compliance of Initial Public Offering. They try to maintain an optimum balance of the price that they offer so that it is not too high as well as not too low.

●     Executing Private Placements

Private Placement also known as non-public offering is a way of generating funds by issuance of securities that are available to only a small number of chosen investors such as friends or family members, selected institutions, and other investors and it is not available to the general public.

Investment bankers take the responsibility of getting the sale done. They can either offer it to some small investors or any big institution as it is easier and more convenient to offer in any private placement because there are fewer regulations.

●     Underwriting process

Underwriting securities is a process where investment banks formulate the risk and price of shares or bonds of a company and then buy them so that later they can sell them in the market at a higher price keeping the difference between purchase and sell price as a profit known as the underwriting spread.

Investment Bankers help institutions and their clients by taking the inborn risk in the issue of securities and in this way they also help them to raise essential capital.

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What Are the Different Types of Jobs in Investment Banking?

●     Investment Banking Analyst

Investment Banking Analysts conduct essential research about a company or institution, its financial statements, its prospects, its inherent risks and opportunities, and different market trends, and they prepare financial and legal documents. They manage mergers and acquisitions, help in completing IPOs successfully, and help their clients raise capital by issuing securities.

●     Investment Banking Associate

Investment Banking Associate works above Investment Banking Analyst. They prepare models and valuations based on Excel, presentations based on PowerPoint, and Confidential Information Memorandum, they check work prepared by analysts and communicate essential information while managing important projects and they interact with the clients more by explaining a model or making any pitches.

●     Investment Banking Vice President

The Investment Banking Vice President comes as the most junior senior banker in an investment bank. Their tasks consist of completing pitch books, managing different client relationships, communicating with the directors and managing directors about the important tasks and how to execute them, and managing and allocating work between associates and analysts.

●     Senior Vice President

The post of Senior Vice President comes above Banking Analyst, Banking Associate, and Vice President. They have very different responsibilities in an investment bank as their job is more oriented towards getting and managing the prospects of new business. Their post is not as glamorous as it may seem but it is also not as exhausting as the post of new Vice President.

●     Managing Director

It requires a great lot of effort and zeal with a bit of luck to become the Managing Director of an Investment Bank. A Managing Director has the responsibility of supervising and guiding the profitability activities of an investment bank.

A Managing director is responsible for gaining new clients by meeting their needs and demands but also for retaining existing clients by updating them about new opportunities and deals, competing with other banks and trying to win pitches and deals, help venture capital and private equity firms by understanding their portfolios and whether they need to sell or raise any capital, and at last connecting with vice presidents and senior vice presidents to oversee important and internal matters of an investment bank.

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Investment Banking VS Private Equity

Private Equity takes partnership and investment in firms which can be both private or public before they sell them. They buy companies in the place of their high-net-worth customers and institutional clients so that they can manage them before selling them at a higher price. Private Equity firms do not buy or hold stakes in the companies that are listed on the stock exchange.

Private Equity is often for high net-worth individuals because it requires the investment of very high amounts of capital. They invest in mature companies rather than startups. It is most popular when interest rates are low and stock prices are high.

If a private equity firm can sustain and develop a firm then there is less risk but if it is unable to sustain it then there are chances that it can go into unsustainable amounts of debt.

 

Investment banks act as a middleman between any institution and the public so that they can help institutions sell their shares acting in the sell side function. Private equity firms invest and use their own money in a firm, public or private acting in the buy side function.

It is less stressful to work in private equity firms than in investment banks. It requires abstract and less critical analysis skills to work in investment banks but it requires more critical thinking to work in a private equity firm.

Investment Banking VS Hedge Fund

A Hedge Fund is a type of partnership that is limited in nature and is only available to private investors and their money is managed by professional and expert fund managers. A hedge fund manager uses the funds of his clients mixed with leverage and invests in securities or assets that are non-traditional and makes sure they earn above-average returns.

Investing in a hedge fund is a risky game and is only suitable for wealthy people who are capable of investing large amounts of money. Many types of hedge fund strategies are riskier and use leverage and various types of derivatives like options and futures.

The success of a hedge fund depends on the managers and their abilities and differs from person to person. Even though investment banking is a competitive job, hedge funds are even more competitive than investment banking.

Jobs in investment banking and hedge funds require high number crunching skills but it also requires excellent communication skills. Investment banks offer services to their clients by way of mergers and acquisitions, IPOs, capital and debt financing, and investing in securities while Hedge Fund manages portfolios of their clients and finds ways and places to optimally invest their capital.

Investment Banking VS Trading

Trading is an activity that involves buying and selling bonds, stocks, currencies, and other financial instruments. It differs from person to person as it is dependent on the ability and how well a person can understand the financial markets.

There are two types of trading, one is Flow Trading in which traders use their client funds to buy securities and financial instruments despite using their funds and the other is Agency Traders make trades between the clients of different brokerage firms and act as an intermediary on behalf of their clients.

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The job of a trader is not only to buy and sell securities but also includes researching financial markets, and trends, creating reports, and analyzing economic trends. Investment banking also involves buying and selling securities and helping buyers meet their suitable sellers.

But the duties in investment banking are more diverse than any Trading activity like engaging in Mergers and Acquisitions, raising capital for their clients, and helping in the completion of any Initial Public Offering.

Investment Management VS Wealth Management

Wealth management is an advisory service where managers manage the wealth of affluent clients by combining other types of financial services. They collect all the necessary information about their client’s wants and needs and find personal ways and strategies to meet them.

Wealth managers provide many types of services like tax services, accounts management, retirement plans, and investment advice. It does not encompass financial pieces of advice but it is an integrated approach where the whole financial life of an individual is taken into consideration.

Wealth managers take input from clients as well as their accountants and other advisory personas to establish an optimal financial plan. Investment bankers offer their services and suggestions to big institutional clients rather than any individual white wealth managers offering their services to affluent individual clients.

Investment managers also handle any short-term plans and investments of their clients while wealth managers often take part in long-term financial planning and execution.

Investment Banking VS Corporate Finance

Corporate Financing deals with the management of how corporations decide and allocate their funding sources, how they structure their capital mix, their accounting functions, and how they execute their investment decisions. It involves determining plans and strategies in such a way that can maximize shareholder wealth in the best possible way.

It focuses on maximizing profits and minimizing losses. It consists of how to allocate the capital of a firm and where to allocate it through a process called capital budgeting, and what should be the mix of debt and equity in a company.

 

There are many job opportunities in corporate finance: Cost Analyst, Financial Planner and Analysis Manager, Chief Financial Officer, Financial Analyst, etc. Corporate finance deals with day-to-day matters and financial operations of a business by looking over long and short-term decisions and goals while investment banking deals with big decisions like mergers and acquisitions and raising capital.

Corporate finance focuses on the management of a company and business and investment banking focuses on growing a company.

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Top Investment Banking Skills Are:

 

Rank #1. Investment Banking Skills

1.    Open Mindedness 

A business in an investment bank consists of contacting and interacting with people with different backgrounds, cultural differences, languages, geographical differences both nationally and internationally, and many other differences so an investment banker must possess open-mindedness to break the ice and develop cordial relationships to smooth the business operations.

An investment banker must have knowledge and understanding of the business and can communicate is essential. Advances in social skills, communication skills, and becoming affluent in any second language are desired in IB skills.

 

 

Rank #2. Investment Banking Skills

2.    Intelligence

A job in any investment bank requires strong intellect and reasoning skills. Decisions in an investment bank incorporate requirements of knowledge of Economics, Finances, Analytics, and Mathematics.

Curiosity is another factor that plays a big role in how competent an Investment Banker is because curiosity helps in gaining more insights and helps to reveal new opportunities and ways. A desire to look after complex problems and figure out ways and solutions to them plays a big role.

 

Rank #3. Investment Banking Skills

3.    Discipline

Even though the salaries and perks of an investment banker are high and lucrative, it comes with dedicated hard work, long work hours, diligence, and discipline surpassing all. Every level of job position in an investment bank consists of constant pressure and intense demands.

That’s why discipline is needed to handle it and work efficiently. It is hard to learn but when learned it is also most rewarding. It can be learned by indulging in a demanding task or learning courses that require constant hard work and zeal like Law or earning any athletic accomplishments.

 

Rank #4. Investment Banking Skills

4.    Skill of Building Relationships

As an investment banker starts to excel, the skill of building relationships becomes more and more important. The ability to deal with different types of people in different types of situations, the art of establishing and maintaining long client relationships, and a positive attitude are what sets apart an investment banker from others.

 

How much money an investment banker can make depends on the quality of work he does, so an investment banker must have strong social and interpersonal skills to excel in investment banking skills.

 

Rank #5. Investment Banking Skills

5.    Tone of Creativity

A creative person can come up with new ideas and innovations with solutions to a certain problem. The job role of an investment banker requires constant input and output of information and creativity helps an investment banker to communicate it efficiently to its users.

The ability to reach people and problems with a different view and perspective is the product of creativity that a person inherits. Sometimes academics is not only needed to accomplish something until it is combined with ideas and creativity. That is why entrepreneurship and other social job roles require and demand the touch and tone of creativity.

 

Rank #6. Investment Banking Skills

6.    Financial Skills

The role of an investment banker consists of making big decisions about Mergers and Acquisitions, Initial Public Offering, Capital raising, and investments which all require strong financial skills. Financial skills in investment banking skills require a strong base in mathematics, economics, and accounting to help in making decisions more swiftly and precisely.

How to do financial analysis, create statistics reports, to interpret data, the ability to manage credit and risk, knowledge of the necessary laws, legislative policies, and procedures of the financial sector, and knowledge of currencies, stocks, bonds, and other financial instruments.

 

Rank #7. Investment Banking Skills

7.    Analytical Skills

Making sound financial decisions requires strong analytical skills to solve complex problems and analyze large amounts of data. It requires collecting essential data then analyzing it and interpreting it. Investment banking job requires curiosity, analyzing information quickly, and asking a lot of questions so that tasks can be completed efficiently and goals can be achieved on time.

 

Rank #8. Investment Banking Skills

8.    Understanding of Teamwork

Working in an investment bank requires working with a team of analysts and other people. It is a team role where everyone collaborates to achieve one specific goal. The ability to communicate easily and lead as well as cooperate in a team can help an investment banker to excel in his career prospect. Efficient teamwork and leadership skills can help an investment banker to win promotional opportunities in his workplace.

 

Rank #9. Investment Banking Skills

9.    Resiliency and Entrepreneurial Skills

It is a tedious job to work in an Investment Bank because it consists of long working hours, constant pressure, and a lot of work to do. If one has resiliency then it is possible to thrive in such a complex environment. Entrepreneurial skills are always required whether you are doing any kind of deal, taking part in mergers and Acquisitions, or any other type of project. Having these skills helps you to recognize attractive opportunities and grab them.

 

FAQs

●      What is the range of salary of Investment Bankers in India?

The average salary of an Investment Banker is ₹12 lakh in India with a range of ₹3 lakh per year on the lowest side and ₹38 lakh per year on the highest side.

●      How can I become an Investment Banker?

To become an investment banker first one should get a college degree in finance from any of the top tier schools or an advanced degree in Finance, then one should try to get into any Internship by creating as many networks as one can and establishing one’s image in the place they are working. It is a long process but with effort, it is possible.

●      What kind of scope does Investment Banking have in India?

Investment Banking is a profession whose demand is continuously increasing in India. Investment banks provide many types of services to government organizations, and public and private organizations which is why there is a huge scope for it in India. As foreign direct investment is increasing in India, so does the demand for Investment Bankers.

Conclusion

There is no doubt Investment Banking is worth every effort but it is also true that to increase the chances of becoming a successful Investment Banker one should adapt and cultivate essential skills. It is not easy to develop new skills and patterns in one’s self but with constant efforts and trials, it is possible. Knowledge and skills are two things that never go out of style and they always come to our rescue whenever we need them. So it is worth it to go ahead and take the wheel of learning these skills and apply them whenever we need them.

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