Investment Banker
Categories: Banking
What do investment bankers do? They sell money. Sorta.
So there are a gadjillion different things that happen inside of an investment bank, but when most people ask this question, they are referring to corporate finance division investment bankers who raise money for companies, and do other big fat financial strategery for big fat companies.
And yes, they earn big fat paychecks, too.
The easiest way to think about the line job of an investment banker is to think about a realtor. They dress nicely. They knock on your door. They fill your wallet with business cards. And then they ask to sell your home. If they do, they get 5 or 6% for their trouble. Or rather, the total commission is about 5 or 6%, with about half of that amount going to the buyer’s agent, and about half going to the agent who listed the home for sale.
A home might sell for 500 grand, and 5% of that is 25k…so each side might get something like 12 grand and change. The individual realtor who sold it might keep half of that amount in her pocket in bonus money, paid quarterly, or however the local players play it. Well, bankers aren’t all that different. They might charge one percent for selling a company. Think: GoPro being sold to Apple for $5 billion. But that one percent is on a biiiig number. Not many homes sell for 5 billion bucks.
So the banks get 1 percent in commission, or a total pot of $50 million, which is generally also split by both sides.
That’s 25 million bucks each to pay for the time of a half dozen professionals, a hundred or so hours of lawyer time, some legal filings submitted to the government. and a few other things.
But that’s it. Ever been in the lobby of Goldman Sachs? Yeah. Nice work if you can get it.
So...how do you get it? Well, you start off being good at math in college. You take a bunch of econ courses and hopefully have half a clue about how to work a spreadsheet. Then you get signed by one of the big banks into their analyst program, where you, uh...analyze stuff. Acquisitions. Mergers. IPOs. LBOs. If you’re good, you get promoted and become master of the Powerpoint.
It will be you and you alone in charge of producing spiffy presentations to clients who would, in theory, happily pay your exorbitant fee in return for making even more money from buyers, sellers, and Wall Street in general. If you’re good at presenting Powerpoints, then you will gradually gain the attention and respect of clients. It will be you who reaches out and asks clients about this deal and that deal and every other strategic financial move in-between. If clients actually start relying on you to guide them financially, then you become a vaunted managing director who is then responsible for “a book of business.” That is, you will cover an industry and be responsible for banking fees inside of it.
Your competition wins three deals in a row over you? Go back two steps, do not pass go, do not collect 2 million dollar annual bonus. But if you do become a playa in the space, and get lots of clients to do business with your bank in various forms, then you begin to exhale.
That is, multi-million dollar bonuses, stock options, a big fat expense account, and the fear, loathing, and adulation of your partners at the bank for whom you are paying the very expensive rent and light bills...all of this comes at a price. Stress levels are high.
Divorce lawyers feast on investment banker fees, and only a small handful of jobs which you would actually want are available to a highly competitive, select group of people at any one time. But stay in the game long enough, kissing clients’ butts with gusto...and you make serious bank, i.e. 50 to 100 mil a year, as you dream about doing…almost anything else.
The good news? You can retire young if you want to, and then you get to do that “anything else.” You might be the oldest extreme snowboarder out there on the powder, but...you do you.
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Finance: What Does an Investment Banker ...449 Views
finance a la shmoop - what do investment bankers do? well they sell money, sorta.
that's what they do sell money and you might guess there are a good jillion
different things that happen inside of an investment bank. but when most people [people fly inside fancy bank]
ask this question they're referring to corporate finance division investment
bankers who raise money for companies. you know they sell companies and they do
other big fat financial strategy for well big fat companies and yes they earn
big fat paychecks too. the easiest way to think about the line job of an [woman waves check]
investment banker is to think about a realtor. they dress nice they knock on
your door they fill your wallet with business cards, and then they ask to sell
your home. if they do they get a five or six percent commission for their trouble, [man holds cards]
or rather the total Commission is about five or six percent with about half of
that amount going to the buyer's agent and about half going to the agent who
listed the home for sale or rather their agency. well a home might sell for five
hundred grand and five percent of that is 25k so each side might get something
like 12 grand and change. the individual realtor who sold it might keep half that [chart with numbers shown]
amount in their pocket in bonus money paid quarterly or however the local
players pay it. while bankers aren't all that different they might charge 1% for
selling a company like think selling GoPro to Apple for five billion dollars.
but that 1% is a big number! not many homes sell for five billion bucks. so the [camera and apple logo displayed]
banks get 1% in commission or a total pot of fifty million dollars which is
generally also split by both sides. that's 25 million bucks paid to each
side for the time of half a dozen professionals a hundred or so hours of
lawyer time some legal filings submitted to the government and a few other small
things, but that's it. ever been in the lobby of goldman sachs yeah nice work if [man holds tray of champagne]
you can get it. so how do you get it well you start off being good at math in
college get really good grades and go to an Ivy League school pretty much because
most the bankers come from Harvard Yale Princeton Stanford and just a few others. [man stands in front of white board]
you take a bunch of econ courses and hopefully have half a clue about
how to work a spreadsheet. then you get signed by one of the big banks into
their analyst program where you will analyze stuff- acquisitions mergers IPOs
LBOs we do the math behind who gets what on
each of those. if you're good you get promoted and become a master of the [frowning woman smiles]
PowerPoint. it'll be you and you alone in charge of producing spiffy presentations
to clients who would in theory happily pay your exorbitant fees in return for
making even more money from buyers sellers and Wall Street in general. if
you're good at presenting PowerPoint then you'll gradually gain the attention
and respect of clients .it'll be you who reaches out and asks clients that is [woman smiles]
CEOs and CFOs of large public companies generally speaking about this deal in
that deal and every other strategic financial move in between as you're
trying to sell them smaller companies and of course you get to know the
smaller company CFOs and CEOs as well and they tend to return phone calls [group of people waves]
little quicker. all right well if clients actually start relying on you to guide
them financially then you become a vaunted managing director, who is then
responsible for a book of business that is, you'll cover an industry like oil or
gas or transportation or media telecommunications technology stuff like [various technology shown]
that. and you'll be responsible for the banking fees your bank would get inside
of that vertical .well your competition wins three deals in a row over you?
ah, go back two steps do not pass go do not collect two million dollar annual
bonus. but if you do become a player in the space get lots of clients to do [man in vintage library]
business with your bank in various forms including having your bank manage their
newfound wealth after the IPO then you begin to exhale
that is multi million dollar bonus checks stock options in the bank itself-
like you become a partner- a big fat expense account, and a fear loathing and [smiling man]
adulation of your partners at the bank for whom you are paying the very
expensive rent and light bills all. of this comes at a price
stress levels in Investment Banking are high. divorce lawyers feast on investment
banker fees and only a small handful of jobs which you [hands feed man money]
would actually want are available to a highly competitive select group of
people at any one time. but stay in the game long enough kissing client butt with
gusto and while you make serious bank. like 50 to 100 million dollars in a
career. maybe more .and all this as you dream about doing well pretty much
almost anything else because at some point [man skis]
kissing client butt it gets old real fast. yeah you'd much rather be the client.
right, well the good news is you can retire young if you want to. and then you
won't get to do anything else. you might be the oldest extreme snowboarder [man carries snow board]
out there on powder, but you know, you do you.