Raising Capital & Security Underwriting i.e. the banks are middlemen between a company that wants to issue new securities and the buying public.
Mergers & Acquisitions i.e. the banks advise buyers and sellers on business valuation, negotiation, pricing and structuring of transactions, as well as procedure and implementation.
Sales & Trading and Equity Research i.e. the banks match up buyers and sellers as well as buy and sell securities out of their own account to facilitate the trading of securities
Front office v/s back office i.e. the functions like M&A Advisory are “front office” work and the “back office” work would include risk management, risk control, corporate treasury, compliance, corporate strategy, operations and technology .
Learn more about the roles of Investment Bankers here
Investment Banking culture
Working hours of analyst per week
- An Investment banker usually works for 80 – 100 hours per week. It is not uncommon that at peak times the analyst work till 4 am in the morning. So you may find the analyst would brag about going home only to change the clothes.
- Working hours per day by an investment banker does not have any ground rule. At times their entire day is spend in a coffee shop or browsing internet , or at times they have no time to even eat their lunch.
- Work can come rather at unexpected times – can take Friday, Saturday and Sunday night as well.
- So, for investment bankers weekend work is very frequent. It can be some catch up work and so would require only few working hours or both complete weekend days can be working.
Does the working hours spent by an analyst gets better with the time and the experience gained in the same profession? If no, why can’t the analyst hire new employees?
- The answer to this question is NO 🙁
Investment Banking Culture – Analyst Work
Within Investment Banking, an analyst is mostly involved in two types of work
Non-divisible work – Non divisible work means even if you add more employees to complete the task the work will not get over fast as the work cannot be avoided. Let’s understand this using an example. An analyst will be required to prepare the financial model in excel. This financial model cannot be broken down into pieces which can be allocated to the different employees. The entire model has to be prepared by a single individual. Once the financial model is prepared the review of this model can be done by different person.
Unpredictable work flow – Clients demand being unpredictable at times the work flows comes at extreme peaks. At times your entire week is spend on only drinking coffees and internet browsing and at Friday night you may receive a call for an urgent advice on a large M & A transaction. When you talk about M & A, these transactions are very important and urgent. These deals must come to a conclusion as fast as possible as there is always a possibility that the information gets leaked to the press or the parties may loose time advantage.
Investment bankers come with a high cost to the company. Being work unpredictable stretching the resources they have is cheaper to them as compared to the hiring of more employees that would be idle most of the time.
Investment banking Culture – cause of toxins
Investment Banking corporate culture is accused of being really toxic. It is important that the Investment Banks provide the following
Hire right people
- Motivation is one of the important factors required in a person to succeed. Investment banks hire people who are motivated to become wealthy.
- Maximizing their potential being it earning or career progression is the reasonable thing which people should have and investment banks require people with that mentality. T
- he problem comes during the assessment where only one side of the coin is assessed i.e. how well an employee is performing and fail to look at the second side of the coin i.e. whether the employee is staying in line with where you want in terms of risk. This creates the framework of toxic culture.
There are people who are there for whatever they can get and there are people who are totally focused on the risk management. You need to find the balance between the two. Only judging looking at the employee’s performance is not the right way to judge a person. For this you need to select the right type of person in order to create right kind of culture.
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Toxic culture is created by solely having bad hiring policies and filing up the company with risk-hungry, short-term thinkers.
Right Compensation arrangements
- Compensation arrangements are one of the important causes for the toxic culture in the investment banking.
- Incentives and bonus are structured in such a way that maximizing your ascendancy can be a highly lucrative business.
- The investment banking does not look at people with a 40 year career and getting at top, but they are looking at people who want to make a big impact and move that impact up.
Ensuring Employee retention
- Nowadays people don’t stay in one organization. They work hard in one organization for two to three years enjoy high bonus and then move out to next organization.
- To counteract this, banks need to look at personnel policies at every level – recruitment, promotion and compensation.
Here are some articles that will help you to get more detail about the Investment Banking Culture so just go through the link.