The Investment Banking Machine

Screen Shot 2017-01-24 at 17.31.35Similar to most professional services jobs, there is a structured and defined path from junior employee to senior member of the firm. This long and challenging process begins during the summer internship.

 

Internship

The first stage is the 10 week summer analyst program which gives interns an introduction to banking and an insight into the job. Hours are brutal, mistakes are plentiful and stress is high. The internship is used to quickly evaluate whether or not an intern will succeed as an analyst. The most important point to note here is that success in the internship is not based solely on intellectual horsepower but also on the intern’s fit within the team. Cultural fit is an important test factor because after achieving high grades in school and performing well during the technical interviews, you should be able to do the actual job. Each group has a different culture and these broader environmental factors count for a lot in the final evaluation.

 

Analyst
After a successful summer internship, the next step is a 2 or 3 year analyst program (note: many programs in US are increasingly moving towards a two-year program but in Europe, it is still usually three). It begins with ~2/3 months of training in the firm’s headquarters. For the larger global banks, this usually occurs in New York or London. It is an intense, 10/12-week crash course aimed at bringing analysts up to speed on the firms’ internal processes and learning/revising the core accounting and valuation concepts. It is important to do well here and to invest the necessary time because when you hit the desk, you have to start strong.

Once training is finished, you start the job for real. The first six months should be among the most challenging of your life as you will constantly be asked to do tasks that you simply have no idea how to do and haven’t done before. This alone is difficult; the tight deadlines that come with banking add to the pressure. However, everyone in your intern class is in the same position and will be experiencing similar pain. Hopefully, the more senior members of your team will remember what it was like for them starting out and are understanding of your position. This is usually the case but there is always at least one colleague who will be obnoxious. Be prepared for that person.

 

Associate
After the analyst program, junior bankers either leave banking or move on to the next level which is associate. A high percentage of analysts leave banking at this point. Analysts who leave go to private equity, hedge funds, venture capital, business schools or take up corporate roles within other companies. For an in depth evaluation of exit opportunities see our ultimate guide. As a side note, the range of opportunities available to analysts after their initial years in investment banking, is one of the main attractions to the industry. Given the high attrition rate at analyst level, this opens the doors for recently graduated MBAs to enter the banking industry as associates.

Whereas analysts typically focus on a couple of projects deeply, the associate will manage more projects but is less involved in each. Their primary function is to ensure that the product, typically a presentation deck or a process, e.g. managing a data room, is delivered on time and is absolutely accurate. Many describe the role as similar to a quarter back in American football and to a certain extent it is, although it differs greatly from group to group, office to office and firm to firm. Some associates, particularly in the early years, are still very much in the weeds with their analysts in excel and powerpoint. Others, certainly in later years, have a much more supervisory role over analysts and simply review work. For associates, getting this balance right is often the hardest challenge. Associates must typically focus on one sub-sector / vertical in the group prior to being promoted to VP.

 

Vice President (“VP”)

A VP’s role is a significant step up in responsibilities. While the associate is responsible for ensuring no mistakes are in the materials, the VP must control what material goes into the presentation. During transactions, they are also the day-to-day point of contact for dealing with the client and managing the process. In coverage groups, they will begin to cover clients, attend most meetings and have more speaking roles. However, they will rarely if ever be in excel and have similarly low levels of interaction with powerpoint. This said, the exact role of VP varies greatly between groups, firms and individuals, but the norm is what we are outlining here.

 

Executive Director / Director / Senior Vice President

Some firms have this role, some don’t. It is a layer above VP and before MD where one’s ability to win business is tested. Essentially, this role is a trial run to see whether you can successfully make the transition to a producer for the firm. In other words, can you go out and win new business on your own? It is less defined how many years one completes at this level but overall it is a stepping stone to MD. If you get to the Executive Director level, the firm has great faith in your ability and wants you to succeed. Attrition at this level is quite low as it is extremely selective to get here and the firm has invested a lot of time and resources in your development.

 

Managing Director

Ten years later and you have made it. A newly minted Managing Director – a rainmaker, well not quite a rainmaker just yet as now you have to go out and start landing the big deals for your firm. This is where the hard part starts as you have to build, nurture and develop relationships with clients in the hope of winning business from them. The focus shifts from hard technical skills such as modelling to soft skills such as networking. This is certainly true for industry coverage groups where you are out meeting clients all the time generating business for the firm.

One of the most rewarding and enjoyable aspects of the role is that the skills required keep changing. Just because you are a rock star analyst doesn’t necessarily mean you will be a top ranking associate. At each grade, there is a demanding step up in skill set required. These frequent transitions to a new role mean you are always being challenged to grow. It always keeps you on your toes while rewarding you financially, which is a great combination for a job.




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