The Institute for Finance Education
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Columbia Business School

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  • Sat. and Sun. 9:00am - 5:00pm
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Questions about investment banking

What is an investment bank?

An investment bank is a type of financial institution that performs the function of investment banking (as discussed in the next question) but may also have many other finance related activities including sales and trading of various financial instruments, equity research, asset management and more. In addition, an investment bank may be just one division of a larger financial institution such as a commercial bank.

What is investment banking?

Investment banking is the function of a financial institution that advises and helps raise money for corporations and sometimes governments and wealthy individuals. The activities of investment banking include, for example, advising companies on mergers and acquisitions, initial public offerings (IPOs), debt issuances and leveraged buyouts (LBOs). The services of investment banking are sometimes also referred to as "corporate finance" or "advisory services". Often, the activities of investment banking are just one division of a larger financial institution (as discussed in the previous question).

What is the typical job title hierarchy or ladder?

Most investment banks have the same strict hierarchy or ladder of financial professionals. From junior to senior, the typical hierarchy is (1) Analyst, (2) Associate, (3) Vice President (VP), (4) Senior Vice President (SVP)/Director and (5) Managing Director (MD). Some banks have different names for some of these positions, but the relative roles of each tend to be consistent within all investment banks.

What is the general role of each of the different levels?

Analysts are typically men and women directly out of undergraduate institutions who join an investment bank for a two-year program. As Analysts are the bottom rung on the investment banking ladder, they do the vast majority of the actual "work."

Associates are typically either individuals directly out of top MBA programs or Analysts that have been promoted. The first role of the Associate is to oversee and to check the work of the Analyst. In addition, the Associate will often help with presentation and analytical work, including financial modeling.

The primary role of the Vice President is to be the project manager, whether for marketing activities or while on a live transaction. The VP must manage the client and the more senior bankers, and oversee the work of the Analysts and Associates.

The SVP/Director may either play a role similar to that of the VP or play a client development role like the MD.

As the senior level banker, the role of the Managing Director is mostly one of client development. The MD will likely be the one with the senior level company relationships and is typically responsible for leading marketing efforts.

What kind of work do Analysts and Associates do on a day-to-day basis?

Broadly speaking there are three types of work that Analysts and Associates do: presentations, analysis and administrative tasks. Presentation work involves the putting together and writing of various PowerPoint presentations including marketing documents ("Pitches" or "Pitchbooks") and documents for live transactions.

The second main task of an Analyst is analytical work. Pretty much anything done in Excel is considered analytical work. The most important types of analytical work are typically valuation (i.e. how much is a company worth) and financial modeling.

Administrative work involves things like scheduling and setting up conference calls and meetings, making travel arrangements and keeping a list of deal team members up to date. Associates tend to have significant ongoing interaction with clients and with other investment bankers while on live transactions.

What is the difference between a bulge bracket bank and a boutique bank?

The term "bulge bracket" generally refers to the large investment banks that cover most or all industries and offer most or all of the various types of investment banking services. While there is no official list of bulge bracket banks, most people would consider the following banks to be bulge bracket in the United States: Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and UBS.

For the most part, all banks that are not considered to be bulge bracket are referred to as "boutiques." Boutiques, while ranging in size from a few professionals to hundreds or even thousands of professionals, can generally be categorized into three types: (1) those that specialize in one or more products, (2) those that specialize in one or more industries and (3) those that specialize in small or mid-sized deals or companies (generally less than $500 million). Some boutiques are considered to be just as prestigious as the bulge brackets.