Hjalmar Lindholm

Hierarchy of jobs in investment banking

Careers in investment banking come in a hierarchical form, with the salaries of the employees climbing each year, as the entrance-level graduate gets promoted to higher positions. The highest paid employees are those who work ninety hour weeks; this is why investment banking jobs are not for the faint of heart. Employees who are paid six-figure salaries are expected to demonstrate a strong commitment to their job by working at least twice the hours of a standard working week.

Many of those who begin as entrants in an investment bank do so through a sponsored internship, however there are other routes; some graduates begin by being hired as a investment analyst or a junior assistant. At this level, new employees will spend their time getting to grips with the basics of investment banking, including learning about networking with clients and understanding the structure of the bank. They also assist the senior managers and analysts by preparing documents and organising meetings. At this stage, they have minimal contact with the bank’s clients, although they will usually be allowed to attend meets in order to observe how these are conducted.

Once they have put in enough hours, and demonstrated the necessary devotion and skills for the job, the entrance-level employees will then be promoted to standard investment banking analysts like Hjalmar Lindholm, whose responsibilities lie in researching and analyzing investment opportunities, as well as dealing with clients directly. It should be noted that those who possess a master’s degree will not usually have to work as at an entrant level before they become analysts or associates; due to their education, they generally begin at associate level. Associates will be paid more than the junior analysts, although at this point they are still not given the responsibility of dealing with clients on their own. Associates work as assistants to the senior managers at the bank, and it is during this time that they learn the communication and valuation skills they need to handle clients alone.

Tips for investment bank interviews

Being picked for an interview for any investment banking institution will often stir up a mixture of worry and excitement in equal parts. Obtaining a position as an associate or an analyst in the world of corporate finance investing is usually the initial stepping-stone towards a large lucrative and successful career. However, interviews with investment banks are famous for being among the most intimidating, so it’s recommended to arrive prepared.

To start with, it’s essential to be very knowledgeable about the firm and the industry in general. Always research and get to grips with the workings of each division within an investment bank, such as corporate finance, sales and trades, together with research. Details for example, the structure of positions in departments such as corporate finance, from analyst, to associate, vice president and managing director, ought to be learned. You may also be asked to explain the distinctions between boutique, middle market and bulge bracket investment banks, and the reason why you might favor one over the other.

Another aspect which one will need to have is a thorough perception of is the financial models they will probably use if they are offered the position; these might include LBO analysis, precedent transactions analysis and discounted cash flow. Having a basic idea of how and why these financial models work may also be helpful with regards to the answering of the more technical questions of the interview.

Candidates may also be expected to have a basic knowledge of such things as deal execution, pitches and the typical workings of the department. Those interviewing will expect the interviewee to be updated on the latest trends and events in the financial markets. Ensure that you regularly read the financial newspapers and follow any news reports on appropriate events.

Investment banking was again in the news, just before Christmas with the announcement by UK Chancellor George Osborne, that the British government would support the recommendations of the Vickers’ banking report, which include the division of retail and investment banking. The objective of this recommendation is to separate the deposits of consumer and commercial customers and ring-fence these from use by banks in investment activities.

In recent years, several UK high street banks suffered substantial losses arising out of their investment activities and the extent of these losses was perceived as a significant threat to their survival – the concept that those institutions had become ‘too big to fail’. The potential loss that would be suffered by consumers and businesses caused the government of the time to provide large-scale funding to prevent bankruptcy of the organisations affected and a subsequent destabilisation of the wider economy.

The ring-fencing recommendation by Sir John Vickers intends that the separation of investments from traditional banking activities will safeguard deposits from activities that carry the potential for losses that are too great for banks to withstand. This would thus avoid the necessity for future government assistance and maintain stability within the banking sector and the wider economy. The practice of separating retail and investment activities is not a new one and was previously in operation in the United States. Following the Stock Market Crash on 1929 and the Great Depression, a similar rule was introduced with the Glass-Steagall Act. The rule continued until 1999, when it was repealed by the Gramm-Leach-Bliley Act. The latter allowed companies to combine investment, commercial and insurance activities.

The cost of the ring-fencing and other reforms detailed in the Vickers report is estimated by the government at up to £8bn per annum to financial institutions, with a potential cost to GDP of between £800m – £1.8bn. However, the Chancellor insisted that these costs would be ‘far outweighed’ by the benefits to the economy of a more stable banking system.

The Vickers reforms are expected to be in place by 2019. This would maintain a uniformity of timeframe with the implementation of international financial rules, contained within Basel III. A White Paper, setting out the Vickers reforms in greater detail changes is expected next spring. In implementing the reforms, the government was backed by the report’s author, Sir John Vickers, who said, “With the architecture for reform now settled, a more stable structure should now be built.” The government’s announcement was also supported by the opposition, Labour Party.

Hjalmar Lindholm