Investment bankers have always appeared a little bit complicated yet prestigious to lots of people’s eyes. So what do investment bankers do? What are their roles in the financial market? In this article, we will cover everything you should know about this mysterious term.

1. What Do Investment Bankers Do?

An investment banker is involved in raising capital for governments, companies and other entities. They raise money by issuing and selling securities in the primary market and assist public & private corporations in raising funds in the capital markets (both debt and equity). They also provide strategic advice on specific transactions such as mergers & acquisitions and other types of financial transactions. 

In short, when a corporation is in need of financing, it seeks the help of investment bankers to be able to efficiently execute these major transactions. 

Investment bankers usually refer only to those working in the investment banking division. There can sometimes be confusion between an investment bank and the investment banking division (IBD) of a bank. Full-service investment banks comprise 4 main divisions including Investment Banking Division, Sales & Trading, Equity Research, and Asset Management. Therefore, not all people working in investment banks are called investment bankers. In this article, we will discuss the role of bankers in the investment banking division, which includes underwriting and M&A advisory services. 

1.1. Merger & Acquisition Advisory

Merger & acquisition deals happen when a company either buys another company (an acquisition) or merges with another company to become a single company (a merger). Investment bankers advise clients on the value and structure of M&A deals, and help their client get the best out of any proposed deal. 

  • For firms looking to acquire, investment bankers may provide financial valuations of companies in order to determine the value of a deal. This may be done through valuation techniques such as DCF models or comparable company analysis
  • For targeted companies, bankers will help structure the M&A deal in a favourable way and advise on a reasonable asking price. Investment banks also carry out due diligence, where financial records are examined before entering into a transaction. This helps clients identify any issues or challenges that may not have been obvious at first.

Investment bankers advise on both sides of M&A transactions, representing either the “buy-side” or the “sell-side” of the deal. Mergers and acquisitions can involve lengthy “battles” with investment bankers on both sides of the table evaluating a series of offers and counter-offers.

Sell-side responsibilitiesBuy-side responsibilities
  • Keep fingers on the pulse of industry M&A trends to set valuation expectations for client companies and help them plan their timing and go-to-market strategies
  • Deploy knowledge of the client and its industry to craft a set of key points that form a compelling investment thesis—then assembling marketing materials such as the “Information Memorandum” to convey these points
  • Identify and contact potential buyers, manage information flow and hold strategic discussions with interested parties
  • Establish a formal bid process for the company, review bids and help select a buyer
  • Set up an online diligence “data room” and serve as the primary liaison between the buyer (and/or its advisors) and seller during due diligence
  • Help negotiate the final terms of the deal
  • Evaluate the potential target and its industry to set a preliminary valuation
  • Assess the strategic fit of a potential target with the client; identify and, to the extent that it’s possible, quantify synergy opportunities
  • Craft a bidding strategy and help draft proposed terms of purchase
  • Identify potential issues in the diligence process and follow up accordingly
  • Analyze the buyer’s capital structure to determine the correct transaction financing; help the buyer find financing
  • Help negotiate the final terms of the deal

Overview of 10-step mergers and acquisitions process.

1.2. Underwriting: Stock and Bond Issuance

Investment bankers act as underwriters for stock and bond issuance. Issuing bonds and stocks is one of the main ways that a company can raise capital. However, the process of issuing these securities is complex and generally requires expertise in the financial markets.

In investment banking, underwriting refers to the process of raising capital for a client through selling equity or debt securities

REAm2Issuing debt means selling bonds to investors. When an investor buys a corporate bond, they are loaning money, or capital, to the issuing company for a fixed number of years, usually at a fixed rate of interest. The issuing company makes interest payments throughout the term of the bond and then when the bond term ends, the company remits the principal back to the investor.

Typically, one of the biggest challenges for a company wanting to raise capital by issuing bonds is finding qualified investors with lots of money to invest. This is where an investment banker comes in; investment banks have entire floors staffed with aggressive salespeople, each with large contact lists of leads from which to solicit investment business. A company wanting to issue bonds hires an investment bank not only to help structure the bonds but also to tap into the bank’s vast network of potential investors.

It works the same way for raising capital by selling equity, or stock. Investment bankers serve as the primary go-to people when a company holds an initial public offering (IPO) to sell stock to the public for the first time. Newly public companies are scrutinized beyond belief on how their IPOs turn out. The success, or lack of success, from an IPO often sets a company on an irreversible trajectory, for good or bad. For this reason, companies enlist the help of investment bankers to line up big-time investors and put their IPOs in the most auspicious positions to succeed. 

Investment banks are responsible for attracting investors that may buy issued stocks or bonds. Investment banks create a prospectus that can be given to potential investors. The prospectus provides information about the company and explains the terms of the offering, such as the number of issued shares and the initial stock price.

It is crucial that the terms of the offering are set in a way that provides the best results. For instance, if the stock price is too high, it could fail to attract a sufficient number of investors. If the stock price is too low, it may struggle to raise enough capital for the client. Hence, investment banks are often employed to attract buyers and to ensure that the issuing of stock or bonds is carried out effectively.

2. Investment Banking Job Responsibilities

Key responsibilities for investment banking analysts and associates are building financial models, doing company research, and preparing presentations and pitch decks. But as they climb the ladder to senior roles (vice president, managing director), they will do more execution work and project management like pitching potential clients on deals, getting involved in deal negotiation and developing relationships to win clients.

PositionKey responsibilities
Analysts / Associates
  • Perform valuation, and develop financial models.
  • Conduct preparation and review of materials used in the financing of clients, including investment memoranda, management presentations, and pitchbooks.
  • Perform due diligence, research, analysis, and documentation of live transactions.
Vice Presidents/ Managing Directors
  • Manage tasks and check work products by analysts and associates
  • Develop relationships with new and existing clients in order to expand the business.
  • Develop recommendations for product offerings, transactions, mergers and acquisitions, and valuations.
  • Handle deal pitch and execution.

2.1. Investment Banking Analyst Job Description

The most junior position in investment banking is analyst, who is typically hired straight out of undergrad or after a master’s program. As an investment banking analyst, you’re in charge of:

  • Prepare PowerPoint for pitch books and client presentations
  • Do Excel-based financial modeling and valuation
  • Assist with creating initial screening memos and final investment memorandums
  • Administrative tasks such as tracking buyers and sellers, managing the data room and deal documents, and responding to requests from clients and potential clients.

To get a flavor of the work and what an average day is like, see the articles on the investment banking analyst job and investment banking pitch books.

2.2. Investment Banking Associate Job Description

In the investment banking career path, associates are one level above analysts in the hierarchy. While analysts are usually recruited from top undergraduate universities, associates are promoted internally from analysts or recruited from top MBA programs.

Just like analysts, investment banking associates also spend time on:

  • Excel-based financial models and valuations.
  • PowerPoint-based pitch books and client presentations.
  • Confidential Information Memorandum (CIMs) and other marketing documents for clients.
  • Questions from clients and other team members.

So, what’s the difference? If you’re an associate at a large bank, the main differences are:

  • More “checking” and less “doing” – You will spend more time assigning and checking analysts’ work in Excel and PowerPoint, and less time doing it yourself.
  • More communication and project management – You will also process instructions from the VPs, Directors, and MDs, and relay them to the analysts; on deals, you’ll have more responsibility for following up with different parties and making sure the documents are in order for each step of the process.
  • More client interaction – You’re more likely to attend meetings with clients and potential clients (pitches), and when a client has questions about the details of a model or presentation, they’ll go to you.
  • More PowerPoint and less Excel – And when you do the work, you’ll be in PowerPoint more often, drafting and editing presentations. You may still do some Excel work, particularly for more complex models, but you’ll almost certainly spend more time in PowerPoint.

The associate role also varies significantly based on bank size, group, and seniority.

For example, if you’re at a regional boutique bank where the deal team consists of you and a single MD, you will act more like an analyst, and you’ll start and finish the models and presentations.

But if you’re a third-year associate at a bulge bracket bank, and the deal team consists of you, an analyst, a VP, and an MD, you’ll be more like a “project manager.”

2.3. Investment Banking Vice President Job Description

The vice president is considered the “project manager” at a bank. Unlike associates and analysts, an investment banking vice president does not get into the weeds of Excel models and PowerPoint pitch books, but instead spends time on tasks such as: 

  • Assigning work between associates and analysts and checking the work product before showing it to the director and managing directors.
  • Speaking with clients and potential buyers, sellers, and investors, and handling deal and process-related requests.
  • Developing relationships with new potential clients, as the VP becomes more senior and moves toward the director level.

Just as associates tend to spend more time “checking” and less time “doing,” the same applies to VPs, but even more strongly. If you’re at a regional boutique or another, smaller bank, then the VP and associate roles may be very similar.

The main differences between a VP and an MD are:

  • Less autonomy – MDs have to maintain relationships, build new ones, and come up with deal ideas to generate fees for the firm. VPs start training for these tasks but are not independent, commissioned agents in the same way.
  • More day-to-day execution work – If a client is angry with the way your bank has laid out its CIM or management presentation, the VP must fix it. The MD won’t be involved unless it’s an extremely important deal.

2.4. Investment Banking Managing Director Job Description

The primary role of an investment banking managing director is to bring new business to the firm, so they are also responsible for most of its investment banking revenue. They spend their time winning deals and clients, meeting companies, and developing relationships. Sometimes MDs get involved in deal marketing and negotiations, especially for high-profile clients that require special finesse, but they spend far less time on project management than VPs. 

An investment banking managing director’s daily tasks include:IBA

  • Meeting with new companies that might become clients in the future, listening to their concerns, and answering their questions.
  • Meeting with existing clients and subtly convincing them to do deals or updating them on overall market activity.
  • Pitching companies and competing against other banks to win deals
  • Meeting with private equity and venture capital firms to discuss their portfolio companies and which ones might need to sell, go public, or raise capital.
  • Meeting with VPs to discuss deals, potential deals, and internal matters such as recruiting.

3. How Much Are Investment Bankers Paid?

The average starting base salary for an investment banking analyst right out of college ranges from $80,000-$100,000. Investment banking is among the most well-compensated Wall Street jobs. A first-year investment banking associate may earn up to $180,000. Vice presidents are typically paid $200,000-$300,000. 

The compensation package for investment bankers also includes a bonus pay of 30% to 100% of the base salary depending on seniority and performance. It’s not uncommon for an investment banker’s bonus to exceed their base salary when they reach vice president/managing director level, and in profitable times, senior investment bankers may take home six-figure bonuses.

Salary range for investment bankers also depends on the types of banks they work for: bulge bracket banks, middle-market banks, and boutique banks. While the bulge bracket banks tend to defer a large portion of monus to next year or pay in stocks, middle-market  and boutique banks pay bonuses in cash. 

Position TitleBase Salary (USD)Total Compensation (USD)Timeframe for Promotion
Analyst$100-$110K$130-$150K2-3 years
Associate$150-$200K$200-$250K3-4 years
Vice President (VP)$200-$270K$300-$400K5 years with strong performance
Director / Senior Vice President (SVP)$270-$350K$470-$700K5-10 years
Managing Director (MD)$400-$600K$1,000K+ (highly dependent on the amount of deals you bring into the firm)N/A

*These figures are for bulge bracket investment banks in the US (updated 2021)

4. Investment Bankers’ Working Hours

The brutally long hours investment bankers work are legendary. A widely-reported recent survey of first year analysts at Goldman Sachs revealed that they work on average more than 95 hours per week, and sleep around 5 hours each night. Across the industry, average investment banker hours are between 70-85 hours per week.

As you advance in the investment banking career path, your hours improve because the nature of the work changes. For example, investment banking associates work a bit less than analysts, and VPs and directors work less than associates.

  • Work based on client demands: Investment bankers always have to work around the client’s schedule so they can’t control the working hours actively and have to work according to the client’s demand. Sometimes, to deal with urgent requests, investment bankers work overnight. 
  • Hierarchy structure:  You spend a lot of time waiting for feedback and turnaround.  There are a lot of bottlenecks in the banking process and junior bankers sit at the bottom/last part of the process, ie. junior bankers sit around waiting for a series of bottlenecks to unclog before they can do their thing.  The unclogging generally happens at the end of the day, so the junior banking work usually starts at the end of the day.  
  • Super high standard and precision: Remember this is primarily a ‘sales’ job.  The majority of time is spent ‘perfecting’ the pitch. It requires very high-standard work quality, there’s no excuse for even small mistakes in your financial model or pitch books. A small mistake can lead to the loss of millions or billions of dollars. So investment bankers need to be extremely careful about the data they work with, double or maybe triple check is required every time. Thus, perfecting all the work can consume loads of time.
  • Intense workload: Services such as M&A require a huge amount of time and effort to work on. This means investment bankers have to spend a lot of time working on different kinds of models, terms sheets before the deal is executed.