Employers often look to a candidate's education to determine their qualifications for the position, and the finance industry is no exception. Investment bankers often receive four-year degrees that prepare them to be successful working in financial institutions. Learning about an investment banker degree can help you decide if it's the right path for you. In this article, we discuss what an investment banker degree is, common responsibilities and skills of investment bankers and some benefits of becoming one.
What is an investment banker degree?
An investment banker degree is a post-secondary program of study that involves classes that teach the necessary knowledge and skills of an investment banker or a related profession, such as a financial adviser. There are no schools that offer degrees specifically in investment banking, but many offer degrees in business, economics and finance which can better prepare individuals to become investment bankers. Such degrees often include courses in finance, accounting, securities trading, economics and business management. Employers that hire investment bankers recognize these degrees as the closest related degrees to the profession of investment banking.
What are the requirements for becoming an investment banker?
Here are some common requirements that employers look for when hiring investment bankers:
Even though there are no degrees specific to investment banking, most employers require at least a bachelor's degree for the position, preferably in a finance-related major. With this degree, it's possible to begin working as an investment banking analyst or a financial analyst and work in investment banking roles. However, if you'd like to gain an immediate position as an investment banker, you may want to attain your master's degree in business administration, finance or other related areas. An MBA provides valuable educational experience in areas such as money management, finance, investments and accounting.
Your financial institution may require you to register as a representative with the Financial Industry Regulatory Authority (FINRA). Depending on your responsibilities, you may also need to pass any applicable licensing (series) exams, such as Series 7, Series 62 and Series 79, to qualify for this registration.
There are also many banking certifications that can help you become more qualified for investment banker positions, such as the chartered financial analyst (CFA) certification, certified financial planner (CFP), financial risk management (FRM) certification and chartered alternative investment analyst (CAIA) certification. Each of these certifications validate a different type of investment banking expertise. For instance, the FRM certification verifies the banker's knowledge of financial instruments used to limit types of risk, such as credit and market.
Related experience is a great addition, or substitute, for education and certifications when applying for investment banker positions. Positions such as risk analyst, wealth manager or financial adviser can help develop many of the skills necessary for an investment banking position. Any experience that develops hard or soft skills associated with investment banking, such as customer service, office administration and accounting, can also help prepare you to be successful in such a position.
Where do investment bankers work?
Investment bankers usually work for a financial institution, such as a large bank or investment firm. Companies hire financial institutions to perform the duties associated with investment bankers. Their clients may be corporations who need help with raising capital, young companies preparing to go public and occasionally, governments requiring financial advising. Some investment bankers have established relationships with companies that exclusively use them for their financial planning, investing and advising.
Related: How To Become an Investment Banker
Common duties of an investment banker
The responsibilities of individual investment bankers may vary, but here are some common investment banking duties, along with how your degree prepares you for them:
A typical responsibility of investment bankers is to assist businesses in raising capital by selling equity and issuing debt. Selling equity involves determining the current valuation of a company in order to calculate the value of stock ownership to be sold to investors. Issuing debt involves setting up terms of repayment of the debt with the lending financial institution. Investment banker degrees prepare you to raise capital by teaching you advanced knowledge about debt, investments and company valuations.
Investment bankers often advise their clients of new investment opportunities that can increase the value of their portfolios and further diversify funds. Investment bankers often advise clients on derivatives, which are contracts tied to the value of an underlying asset, such as stock, bond or currency. Futures contracts and stock options are two types of derivatives. Knowledge of this portion of investment bankers' duties often comes from courses in investment and the stock market.
Assist in mergers and acquisitions
Companies that are hoping to expand may attempt mergers and acquisitions to accelerate their growth. To make the best financial decisions regarding this matter, they often look to investment bankers to guide the process. Investment bankers determine the current value of a company and predict future growth potential in order to create company valuations. They then translate these valuations into monetary offers that are presented to the other company as an offer to buy their entire company or merge into a single company. Investment banking degrees prepare students to handle such scenarios through courses with content about company valuations.
Handle financial planning
Financial planning for businesses involves performing analysis, forecasting and budgeting to support top-level corporate decisions. They often build detailed financial models to support their analysis and plans. Put simply, financial planning entails managing the entire flow of cash through a business. You can gain financial planning abilities by completing courses such as money management, accounting and finance.
Investment bankers spend much of their time conducting industry and company research to remain informed on new innovations, current news and market activity. They also use this knowledge to advise businesses on possible new investments. Investment banker degrees offer research opportunities that allow students to become more adept at performing their own financial research.
Organizations trust financial advisers to be partners with them throughout many important financial transactions. Investment bankers negotiate and advise on behalf of the organization during transactions and prepare much of the necessary paperwork. Many investment banker degrees offer opportunities for students to learn about transactional paperwork and negotiation through their course offerings.
Investment banker skills
Here are some skill sets that investment banking degrees often help develop:
Analytical skills: Investment bankers analyze market conditions, company values and many other financial affairs throughout their careers. Deductive and inductive reasoning, data interpretation and problem-solving are each important analytical skills to have for this position.
Interpersonal skills: Investment bankers interact with many people throughout each workday, such as when they facilitate transactions between two parties, advise executives and network with other investment professionals. Interpersonal skills such as charisma, confidence and clear communication are all necessary for this profession.
Team-oriented skills: Through their work, investment bankers often facilitate team interactions and work with other professionals toward common financial goals. Skills such as goal-setting and leadership are all helpful when becoming an investment banker.
Math skills: Most job responsibilities, including company valuations, investment advising and transaction facilitating, involve math. Being adept at arithmetic, statistics and financial-related math can assist you greatly in succeeding as an investment banker.
Benefits of becoming an investment banker
The following are some benefits from receiving an investment banking degree:
- Higher than average salary: Investment bankers, especially when working with large investment banks, get paid high salaries for their contributions and long working hours. The average salary for an investment banker in the United States is $71,830 per year, with an opportunity to earn substantial bonuses, which can exceed the base salary.
- Work with people: In their interactions with executive teams and their facilitation of transactions, investment bankers are commonly working with other people. If a busy, collaborative work environment motivates you and engages your attention, this job may suit you well.
- Corporate influence: Organizations trust investment bankers to advise and counsel on many subjects that directly impact the future of their business. Successful investment bankers are extremely influential in high-level decisions in the most valuable companies in the world.