Whatever Jonathan Cree says, accidental is not a term that goes well with investment banking. He wrote a book called ‘The Accidental Investment Banker’ in which has beautifully portrayed what he did as an investment banker in a decade of working in Wall Street.
Unlike commercial banks, investment banks, per se, don’t have cash deposits. They act as intermediaries and match those selling stocks and bonds to those buying them. The major services offered by investment banks are:
Research functions: Without research services, there can’t be advisory services. The career of investment banking also entails a hawkish view of economic trends, company news, and underlying potential opportunities for maximization of business opportunities which comes easily with an investment banking certificate. Offering bonds, creating and issuing bonds either to public or private investors through IPO (Initial Public Offering) is not a child’s play and take a lot of deliberation to go about it.
Strategic and financial planning advisory to different companies: A number of institutions take help from investment banks in dealing with financial instruments and their buying and selling strategy. One very important services for which advisory are used is mergers and acquisitions (M&A). The details about targets, company valuation, bidding process, and strategies are dealt with by the investment banks.
The guaranteeing services in form of underwriting: The capital is raised through sale and purchase of financial instruments such as stock and debt. A lot of testing mechanisms are leveraged to offer the clients valuation of different companies. The ‘spread’ or the difference in the purchase of financial instruments (Underwritten price) and their resale is what the investment banks earn.
Sales and trading: The underwritten securities are put in the financial market for sale. No distribution channels or sale methods would result in complete failure of the system. The major buyers of securities are money management funds, pension funds, and security funds. An investment bank is supposed to have a large distribution network and salespeople who are lawyers on the search of people who are willing to buy bonds, stocks, and securities.
Market-making services: The investment banks have to trade in stock markets to maintain the liquidity required to handle day-to-day operations such as retail and institutional sales. To make sure marketing stock runs smoothly, the investment banks are usually ready with underwritten capital to trade them at public prices.
Only 2-3% of 1000 applications get passed through stringent regulations which are required to be an in the profession of investment banking even with a valid investment banking certificate. Everybody who applies has come from prestigious university and has top grades but that doesn’t seem to be only qualifications to guarantee you an investment banking career.
It takes no Gordon Gekko to make an investment banking career, but an investment banking certificate. Even the gender bias seems to be evaded by the interviewers and the investment banking world altogether visible with the bronze sculpture ‘fearless girl’ placed right in front of the Wall Street bull.