The career of an investment banker progresses along a fairly standard path. Investment banking positions from junior to senior:
- Analyst (grunt)
- Associate (glorified grunt)
- VP (account manager)
- Director (senior account manager, rainmaker in training)
- Managing Director (rainmaker)
Some banks call certain investment banker positions different names or have added levels of hierarchy. For example, sometimes banks separate Senior Vice President from Vice President. Other times, Director is split up into Director and Executive Director (more senior). However, regardless of the names, the general job functions of each relative position tend to be consistent bank to bank.
If you are an undergraduate, you are applying to banks with the aim of landing an investment banking analyst position. Assuming you do well, have an interest in staying, and there is a need, some banks offer direct promotions from analyst to associate instead of requiring that you go back and get your MBA (typically called “A to A”). If you are an MBA student, you are applying to banks with the aim of landing an investment banking associate position and aspire to work up the ranks to Managing Director one day.
The Investment Banking Analyst
Investment banking analysts are typically men and women directly out of undergraduate institutions who join an investment bank for a two-year program.
After two years of working for the investment bank, top performing analysts are often offered the chance to stay for a third year, and the most successful analysts can be promoted after three years to investment banking associate. Analysts are the lowest in the hierarchy chain and therefore do the majority of the work. The work includes three primary tasks: presentations, analysis, and administrative.
Investment banking analysts spend a lot of time putting together PowerPoint presentations called pitch books (click here to see an example of a pitch book). These pitch books get printed in color and are bound with professional looking covers (usually in-house at the bulge brackets) for meetings with clients and prospective clients. The process is very formatting intensive, attention to detail is critical, and many analysts find this part of the job to be the most mundane and frustrating.
The second task of an analyst is analytical work. Pretty much anything done in Excel is considered “analytical work.” Examples include entering historic company data from public documents, financial statement modeling, valuation, credit analysis, etc. Interview questions often focus on this part of the job and Wall Street Prep’s training programs are focused on demystifying the analytical work that analysts are expected to perform.
The third main task is administrative work. Such a task involves scheduling, setting up conference calls and meetings, making travel arrangements and keeping an up-to-date working group list of deal team members. Lastly, if you are the sole analyst on the deal and it is sell-side (you’re advising a client on selling its business), you may have control of the virtual data room and will need to keep it organized so all parties have access to the information. It is an interesting experience in that there are several data room providers and many times they will try to win business by offering free sports tickets, etc. It gives you a chance to feel how your clients feel as you try to win their business.
The Investment Banking Associate
Investment banking associates are usually recruited directly out of MBA programs or analysts that have been promoted. Typically, bankers will be at the associate level for three and a half years before they are promoted to Vice President. Associates are also categorized into class years (i.e. First Year, Second Year and Third Year or say, Class of ‘05, ‘06 and ‘07). The number of years it takes for Associates to get promoted actually depends on the bank. Sometimes it could be more than three and a half years if there is not a need for another Vice President.
At that point, an associate should evaluate whether it makes sense to stay at the bank or try to move elsewhere to receive a promotion.
The investment banking associate’s role is similar to the analyst’s role, with the additional responsibility of serving as a liason between junior and senior bankers, and in some instances, to work directly with clients.
How Analysts and Associates Work Together
Analysts and associates work very closely together. Associates check the work of analysts and assign them tasks. Checks could be in-depth where the Associate literally looks through models and checks inputs with filings or it could be much more high level where the Associate looks at an output and determines whether the numbers make sense.
The Senior Bankers (VPs and MDs)
Senior bankers primarily source deals and maintain relationships. Senior bankers have a wide variety of past backgrounds ranging from investment banking to corporate executive management.
Aside from relationships, senior bankers often understand their industry landscape at a very detailed level and can anticipate deals in the sector. As economic environments shift, they anticipate when companies will need to raise capital or when strategic discussions (M&A, LBO) are necessary. By anticipating such needs, Managing Directors can start crafting appropriate pitches early-on to clients with the aim of turning these pitches into live deals.