Investment Banker

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.