What does Investment Banking involve?
All roles fit into three categories; front office, middle office, back office.
Front office is generally described as a revenue generating role. There are two main areas within front office: Investment Banking and Markets. Investment Banking is basically advisory on mergers, acquisitions and fund raising. Markets is then split into further divisions; sales, trading, some research and also structuring.
Middle office roles generally comprise risk management positions. This can be seen as more cost cutting roles, as middle office positions involve analysing and evaluating the risk taken by front office employees. This can be done by setting limits on the amount of money available to trade with, for example.
Back office roles are mainly operation roles and include the technology division. Operations employees are used to make any transfers, and generally ensuring there are no errors in what is being performed.
Why should I apply for a career in Investment Banking?
Let's face it, there's only one reason why anyone would apply for a career in Investment Banking, and that's for the money. If that's all that motivates you, then you'll probably have a great time. If you want something a bit more meaningful out of life, then turn back now.
- The Vault Career Guide to Investment Banking - is probably industry standard as where to learn everything you need to know.
- Introduction to Global Financial Markets - is decent if you want to go into sales/trading to learn all the products. Perfect for a generalist Global Markets internship.
- Monkey Business - is absolutely fantastic. Even if you're not going into IBD, a humorous read which tells it like it is.
- Tales From The Square Mile - I think is a must buy. Written by an ex Deutsche ECM Director, lots of short stories - very readable. He claims all of the anecdotes are 100% authentic but some are just beyond belief!
- At Bonus Time, No-one Can Hear You Scream - is a good one to bring you back down to earth and get a sense of perspective. Keep away from socialists or they'll burn down the Square Mile.
- Traders, Guns and Money - My personal favorite; read it, love it. It's that simple really, if you don't find yourself laughing at Budi and Adiweko then finance isn't for you.
- Foreign Exchange: A Practical Guide to the FX Markets - A tad pricey, but well worth it if you want a good overview of what happens on the trading floor. It leaves much to be desired in terms of the actual mechanics of trading.
Training and Applicants
Ideally take Maths, Economics and a language.
Further Maths, Sciences and academic subjects such as History would also suffice. Generally speaking you'll want to take numerical subjects, but languages are increasingly important. J.P. Morgan require a 2nd language to apply for their Summer IBD internship.
In terms of grades a minimum of AAB-ABB is generally required.
Investment Banking, as it is known in everyday language today, comprises many different roles and positions. Some require a great amount of technical knowledge, where as some might require a great ability to work under extreme pressure. Due to different natures of the business, it is possible to enter Banking with a variety of degrees. Examples from this very forum include Economics, Politics and even Geography. Corporate Finance and Sales roles tend to be filled by graduates from all kinds of degrees including Arts, where as the majority of Trading and Quant positions are taken by people who have completed degrees with a substantial Mathematical element in them. These degrees usually include Economics, Mathematics, Physics, Chemistry, Computer Science, Engineering, and Accounting & Finance.
Which University Do I Need To Go To?
There is a general trend followed by all Investment Banks. Oxbridge and Imperial students are very much sought after, regardless of which subject you are studying.Imperial graduates owing to their quantitative degrees are also in high remand. On par with Oxbridge and Imperial are students from LSE . LSE offers much less choice in terms of degrees available but is strongly regarded and considered to be a breeding ground for bankers, and coupled with the fact it is in London, it is perfect for Banking.
(Oxbridge and Imperial are considered top tier universities by Investment Banks so getting a degree from these universities will definitely put you at an advanage over all other UK universities ). Media:http://www.worldfinance.com/banking/investment/grad-schemes-still-available-in-banks
Along with Oxbridge, Imperial and LSE are universities such as UCL and Warwick (though this only applies to Warwick's Economics and Maths departments). UCL and Warwick are the remaining members of the G5, and are also top Universities to break into the profession from.
After the G5:
- Bristol/Durham/Edinburgh/St Andrews
- Bath/Cass Business School (City University London)/Nottingham
However, after G5, the degree you do does start to become more relevant. For example, theoretically, it would be ‘easier’ for someone with a Geography degree from Oxford to get into Banking than someone with a Geography degree from York/Engineering from Loughborough etc.
Please note that this does not mean that if you do Mathematics at Oxford you are certain to get a position in Banking - your extra curricular activities, work experience, CV, cover letter, contacts and interview technique will all count.
What Else Can I Do To Enhance My Application?
Finance online communities are a great place to join to increase financial knowledge and awareness, extra-curricular activities are often used to distinguish the ‘better’ candidates as they have demonstrated initiative and motivation to take part in activities other than just studies. Young Enterprise is always a good one to have to portray your ‘entrepreneurial’ skills which enable the employer to see you can make key decisions, have the ability to think on your feet and most importantly, can make money. A step further is starting your own business which shows tremendous character and also ticks boxes to some key skills which are common to both starting and running a business and investment banking. Any clubs/societies that you feel should be mentioned (not drinking ones, for example ) should also be included in your application. They can represent a different variety of things, and if you were the founder/president/chairman of a society then this definitely should be mentioned.
TechEd startups like Get Ahead Modelling offer a download package that teaches financial modelling skills which even those with extensive intern experience won't have learnt yet. See getaheadmodelling.com. These skills aren't a pre-requisite but could really make you stand out from the competition.
What to do
In the bygone era when the vast majority of intern applicants did not even know what acronyms MBS, ABS and CDO stood for, a reputable university, a good subject (preferably single-honours), an array of extra-curricular activities (president, treasurer, etc.) and a presentable/eye-pleasing CV were prerequisites to get an interview in an investment bank. From then on it was all down to the applicant's own gift of gab. A penultimate-year internship was, however, still needed to get a job. Nowadays, in the post-credit-crunch apocalypse, the above is not enough. Nowadays, one needs a first-year spring week to get a penultimate year internship to get a job.
For a spring-week the application process is pretty much the same as for a penultimate-year internship. There is an online application form, followed by a phone interview and/or a first round interview, and usually a second round interview or an assessment centre. The requirements for a bygone era penultimate-year internship process are transposed to the spring-week application process – so one will need a reputable university (one of the top 6), a good subject (preferably single-honours), an array of extra-curricular activities (president, treasures, etc.) and a presentable/eye-pleasing CV.
To get an IB internship, work experience relevant to finance is almost essential, with a spring-week (or a couple) being considered the norm. Yet if one fails to get a spring-week data input, accountancy work or personal trading (whether using real money or 'Fantasy' Stock/FX trading) is also good. Maybe you'll be able to fit something in during termtime, and if not the summer after your 1st year is a good time to get some experience. Particularly useful is getting into the 'back office' of an investment bank through a temping agency such as Michael Page or Joslin Rowe. Then you'll already have an impressive name on your CV when applying for internships...
An 8-12 week IB internship in the summer after your penultimate year (i.e. the 2nd year of a 3-year course, or 3rd year of a 4-year course) is the way that the vast majority of IB candidates end up with a graduate job. An internship gives you real 'hands on' experience, demonstrating that you're able to cope in a pressurised environment, not to mention awesome pay for a student (from £500-£800/week at leading IBs). Almost all application forms are via the internet, and open up during the autumn/christmas period. It's worth applying as soon as they open since many assessment centres are conducted on a loosely 'first come, first serve' basis. It's worth applying for 10-15 internships - yes multiple application forms are lengthy and somewhat tedious, but it maximises your chances when the applications:offers ratio for internships can exceed 60:1.
Turning your internship into a full time position
OK, so you're in. Time to relax? No. Now comes the important step of trying to convert your internship into a full-time job offer. After all, if you apply for grad jobs at other banks they may ask if you got an offer after your internship, and it may be tough to sidestep why not. And it'd always be nice to come back to uni starting your final year with a full-time offer already under your belt. Depending on the division and the bank, anything from 20-80% of interns are given full-time offers at the end of their placement. The key to success is simply to not screw up. If you don't do anything they object to then they have no reason to turn you down, whereas if you are overly annoying or display incompetence then you're probably in trouble. You need to show keenness, but not too much of it, and demonstrate that you would fit in well with the team. Then at the end, if you like the bank and want to work there in the future, you're sorted with a hassle-free final year - you can just sign the contract and concentrate on your degree as peers stress out over what they're going to do next. And if you don't want to stay there, you can leverage your internship when applying for grad jobs.
Applying for graduate jobs with an internship under your belt
Most of the applications open up around 1st September, around the end of internships. The application form and recruitment process is very similar to that of internships, and with an internship under your belt (whether you converted this to an offer or not), you should have much less difficulty in getting to assessment days - the application ratio for full-time jobs is actually lower than for internships, usually. If you apply early you could have an offer by October, although others carry on into February or March. If you're not having much luck don't let it get you down though, as you need to keep on top of your degree since a 2.1 is required by most IBs these days, and you can always re-apply for graduate jobs the year after. But with a bit of luck you'll graduate in June and have a couple of months off before entering the City.
What opportunities are available within the sector?
Opportunities can begin from your GCSE days if you know the right people. For example, if you do have an uncle who is a MD at Barclays Capital, try and get him to get you any experience he can. Anything that shows initiative from a young age will only work in your favour. Not only this, but you can begin to start building up your ‘network’. Formal opportunities begin for A-Level students where a number of banks run programmes in partnership with the Windsor Fellowship. This can range from the ‘I have a dream…’ programme at Deutsche Bank which is four weeks long, to the Merril Lynch Atlantic Fellowship programme which is two weeks long, but has activities in both London and New York. First year spring/Easter programmes have also become popular. These are usually ranging from a week to two weeks long and can be done in a number of divisions. Big name banks such as Goldman Sachs and Morgan Stanley take part in these schemes. Some programmes also let you bypass the application stage for penultimate year internships, which is always a bonus! Second year (or penultimate year) summer internships are the most popular and most competitive pre-graduate programmes. They let you gain some ‘hands-on’ experience in the realm of finance, and allow you to find out if banking is for you or not. Internships can be done in most divisions in an Investment Bank. This allows you to apply to as many Investment Banks as you like, and even allows you to apply for perhaps, equities trading at one and fixed income derivatives at another. Graduate Programmes are, in a sense, perhaps the most important programmes. These are again highly competitive but allow you to put your foot in the door in terms of your career. It is important that you research Banks and the divisions you apply to, as a wrong choice here, though might not be the end of the world, would be pretty dreadful. Graduate positions are often part filled up by the previous internship take, which again underlines the importance of internships.
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I guess this is probably the most important question for a lot of you reading this, which is fair play. All front office, middle office and back office positions start at around £32k to £40k. On top of this, some people are given a ‘golden handshake’ which is a one off payment to ‘welcome’ you into the firm; this is usually in the region of £4k to £8k. Now the juicy bit; bonuses. Investment Banks are quite famous for their bonuses, and so they should be if they are hitting the £50 million figure. However, this is not for a few good years!!! Bonuses are usually calculated algorithmically based on your P&L. If a trader makes X amount of money, then he will get a X/Y bonus, i.e. a percentage. Corporate Financiers bonuses are based on the deals they have been working on and these are usually a small piece of a very large pie. Post starting on the graduate programme, front Office pay will supersede middle Office pay, which will supersede back Office pay. This is also true for bonuses; front office percentage is a lot higher than the middle office percentage bonus, which is higher than back office percentage which is usually low double digit figures. As a general rule of thumb, your average banker is going to earn more than your average trader. However, your best trader is going to earn a fair chunk more than your best banker.
I’ll start off with saying that the hours in banking aren’t great. Apparently, a bank once started their graduate programme with, ‘You have sold your soul to the devil.’ Still want to be in banking? Corporate Financiers have the worst luck in the sense that they literally have to be working an incredible amount of hours, anything up to 100+ hours a week. Sales and trading roles have more sociable hours. They tend to work during market opening hours and plus a couple more to catch up on what’s happening across the world in markets and prepare for the next day; this is usually in the 12 hours mark.
When did you begin training?
How did you find the traning?
Did/do you enjoy the job?
Have you gained anything from this job and if so, what?