Careers in commercial banking, corporate banking, investment banking

CAREERS IN

COMMERCIAL BANKING

Institute Research Number 83 ISBN 1-58511-083-3

CAREERS IN

COMMERCIAL BANKING CORPORATE BANKING INVESTMENT BANKING THE WORLD OF HIGH FINANCE IS INDEED A LOFTY ONE. MONEY IS MOVED AROUND

like pieces on a chess board. Figures are quoted in the millions, billions and even trillions of dollars and no one bats an eye. Deals are put together that can change lives, governments and countries. Fortunes are made. Fortunes are lost. It’s fascinating and thrilling. It’s risky and dangerous. The professionals working in high finance are sometimes known as “gamblers in pin stripe suits.” Corporate banking is a part of commercial banking, but the part that the average depositor with a checking and savings account never sees. While banks hold money and mortgages, lend money, extend or open a line of credit for the average depositor, it is business that needs the major financial services to build new plants, erect office buildings and condominium skyscrapers, float bonds to build new schools and make structural improvements on old ones, and start new business ventures including the explosion of dot com businesses on the Internet. Investment banking is now at the pinnacle of financial careers. The consumer’s need for one-stop shopping in financial services is propelling banks, all sizes and levels, to broaden their base of services to include underwriting, venture capital, mergers and acquisitions, trading, financial engineering, money management and more. Only the larger banks will incorporate these new departments into their existing financial services, while smaller and community-type banks will partner with a brokerage firm or investment bank for these services. Ever since the repeal of the depression-era Glass-Steagall Act in 1999 (originally passed in 1933 due to the scandals and excesses of the 1920s), regular banks can now do business in all the financial areas that had been the domain of the brokerage houses and investment banks. So the line 2

between investment banking and corporate banking is no longer distinct. The globalization of business has intensified the need to do all financial transactions in one place so that the right hand knows what the left hand is doing. Expanding information technology, and greater cooperation among monetary authorities in different countries has opened up closer links in the international capital markets. And as more countries have access to international financial opportunities, larger sums of money are moving more easily across borders. This is one of the most competitive, risky and financially lucrative areas of doing business in today’s world. Every financial institution wants a piece of the pie and they are seeking the best and the brightest to work with them. This is a career for the strong, the positive, the creative and the ambitious. This is not for the faint-of-heart or fence-straddlers. Mergers can eliminate jobs at a moment’s notice. A downturn in the stock market can send employees scurrying for new positions. Because of the intensity and competitiveness of the work, and the volatility of stock markets around the world, this field experiences a lot of burnout among professionals. Many eventually find their way to other less hectic financial careers. While the great hubs of this field are centered in places like New York City, San Francisco, London, Frankfurt, Tokyo and Hong Kong, investment and corporate banking thrives in every city across this country and in major cities around the world. No matter how large or small the banking community, there are bright men and women working hard who can put financial deals together. Whether it’s investing in local development or in foreign markets and governments, professionals in this field will have many opportunities to be successful in the coming years.

HOT CAREER FOR THE 21ST CENTURY IN THIS FIELD, YOU CAN EARN A SIX-FIGURE BONUS ONE YEAR AND BE OUT OF A JOB

the next. This is a cyclical industry and if the markets fall, so can the hatchet. But experts in the field believe that the growth of the world economy and our increasing global interdependence bodes well for the future of this career well into the new century. There is also the increased e-commerce activity thanks to the Internet and its user-friendly Web sites. What drives this field is the importance of money in our world. From small business endeavors operating in a community, to mega-corporations 3

operating on the world stage, money – and the need of it – dictates how, what, where, when and why we invest, make loans, underwrite stock and bond issues, sell and trade securities, and provide financial advisory services. We do this locally, regionally, nationally and internationally. Now that the financial services industry has been deregulated and everyone can offer the same services and work for each other, bankers, investment bankers, insurers, securities traders, etc. are all on a level playing field.

WHAT IS INVESTMENT AND CORPORATE BANKING THE FINANCIAL SERVICES INDUSTRY HAS ALWAYS BEEN A FASCINATING STUDY. ONE OF

the more interesting but little known areas in financing is investment banking. It is a demanding and lucrative field that involves helping the corporate world and government raise capital to continue doing business, expand their business activities, and venture into new areas of business.

We are living in a fast-paced, rapidly-changing world and no field is moving faster than finance. Not only is there increased competition here in the United States, but financial institutions around the world want to control their own destinies with leading market positions, broad-based client access, balanced earnings, and a presence in the global marketplace. Young men and women interested in pursuing careers in finance will find that the activities in this field will continue to be global in nature. We already know how economic conditions in the US can impact the rest of the world and vice versa. As technology makes communicating and financing easier and more common than ever before, crossing borders to invest will become the norm. The capitalist mode is growing in developing nations and former Communist countries as stock markets and other financial institutions spread their wings hopefully to claim financial stability and increased productivity in the world marketplace. As needs grow, foreign markets and governments will continue to look to the financiers in the US to help lead the way to their solvency. And here at home, a growing population with increasing needs from homes to jobs to schools to healthcare and more, are also looking to and relying on our financial institutions for that same financial stability and greater productivity to keep the good times rolling. It is an exciting time to contemplate a career in this field. The future trend is total globalization and one-stop shopping for financial services. All major banks and Wall Street firms already operate in at least one overseas 4

market and have embraced the one-stop shopping concept. It is not surprising that American investment banks are dominating global investment activities. But this is not a field for everyone. It takes a special temperament and know-how to be successful in this field. These professionals generally share the following leadership qualities: They are positive thinkers. No matter how difficult the situation, how many obstacles and problems may arise, success, not failure, is their unremitting goal. It is this positive attitude that determines how well they stay on track. They are goal and action oriented. They make conscious decisions about what they want and have specific plans of how to get there. They are always on the move and tend to be pro-active rather than reactive. They never stop learning. As the field advances so must the professionals. They listen, study, read, and participate to get down to the facts. They know how to analyze, be persistent, and never give up. For success, they must put egos aside and learn from mistakes. They are creative and innovative. This work requires creativity and innovation in ways that set these professionals apart from the pack. If everyone else is heading in one direction, they will set out in another direction to find the new niche that will improve on their chances for success.

Investment Banking

This is an umbrella term covering a wide range of financial activities that revolve around raising capital for clients through the issuing of stocks and bonds. Investment banking firms underwrite or sponsor the securities, help to promote them to potential investors, counsel clients in mergers and acquisitions, develop new types of securities and advise clients on their uses, and manage client finances. Full service investment banks generally include three major professional divisions: Corporate finance, public finance, mergers and acquisitions Sales and trading Research

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Research professionals are said to be the “keepers of the banking industry’s knowledge and their relation and position to competitors.” There are very few transactions in investment banking that do not depend upon work done through research departments or individual research experts. There are great rewards in investment banking, but there are also great risks. These professionals must have expertise in what a business is worth either to price the securities offering, or to set the value of a merger or acquisition. Securities include stocks and bonds, and a stock offering may be an initial public offering (IPO) or any subsequent offering. Investment banks charge very large fees for providing this valuation service as well as all other kinds of financial services and business advice. But whatever advice is given, it must be right on the mark. The penalty can be loss of a client and loss of your job. Investment banking is for ambitious people with strong analytical skills, excellent oral and written communication skills, and the ability to be a leader as well as a team player. Most every deal is a team effort and workweeks of 80 to 100 hours can be common. Many get into this field through analyst programs at investment banks even though they only have degrees at the bachelor level. Many others go the MBA (Master of Business Administration) route because firms put a greater financial value on this degree, as well as the added knowledge you obtain in a graduate program.

Corporate Banking

No matter how large or small the bank, these are professionals who possess enormous knowledge and expertise in financial services. A part of commercial banking, corporate banking is focused on analyzing and assessing the risks of a business, establishing the creditworthiness of a business, and trying to predict the likelihood of success or failure of a business endeavor. These are the professionals who help decide what business initiatives will be taken and when; whether or not to expand existing businesses; help develop new markets so that new clients can be found; and help create new products for e-commerce, the Internet and international markets. There is no fixed line between investment banking and corporate banking. But there are some differences. Where investment bankers look for the risks in the hopes of making great rewards, corporate bankers tend to be more conservative and go more with already established channels. This doesn’t mean that corporate bankers don’t take some risks or investment bankers cannot be conservative. It just means that historically 6

established banking practices are more conservative and the newer kids on the block, investment bankers, fly a little higher. Just as with individual customers, corporate banking involves holding funds, lending money, extending credit and more on a much higher and more intense level. The savings and loan scandals of the 1980s were attributed to risky loans, questionable investments, and the extension of too much credit with little or no collateral. While risk is a part of this industry, there are state and federal regulations to reign in the abusers. Corporate bankers hold positions as presidents, vice presidents, treasurers, controllers, risk managers, senior analysts, and other officers. They are the financial managers in the upper echelons of their institutions who are paid high salaries to have the answers, or at least the expertise to find the right solution, when businesses and institutions – local, regional, national and international – need a wide range of services. A bachelor’s degree in accounting, finance, or business administration with an emphasis on accounting and finance is required for entry-level positions. Corporate bankers who have an MBA, like investment bankers, generally achieve higher status and earnings more quickly.

HISTORICAL PERSPECTIVE THE PRACTICE OF ACCOUNTING FOR GOODS BOUGHT AND SOLD HAS BEEN AROUND

for thousands of years. Archeology digs have uncovered many artifacts including clay tablets recording commercial transactions dating back to 3500 BC when scribes in ancient times, who were among the few who could read and write, recorded everything in detail. In fact, most of what we know about these ancient civilizations comes from their recorded accounting procedures.

While there were some early banking practices in the Greek and Roman empires, as well as in parts of Asia and North Africa, it was the Italians starting in the 13th century and continuing into the 14th century who established a true banking system. They did this in order to accommodate the prominent role trade was establishing in the world. Banking systems through the effects of trading reached the far corners of that world and eventually found their way to the New World. For a newly-formed United States to get off on the right foot and manage its money in an orderly fashion, Congress in 1791 authorized the First Bank of the United States with $10 million in assets.

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Throughout our short history, our banking system has grown as our needs have grown. We survived the Civil War, the Great Depression, two World Wars, controversial military actions, financial scandals, political scandals and much more. But we have always tried to keep our financial system on an even keel in the best interests of our people and our future. The Great Depression was a turning point in reigning in the financial excesses. This proved to be a long-term success that would give rise to some of the biggest names on Wall Street as our financial strength would grow and become dominant. And after our victorious leadership in World War II, the United States became the leading financial lender and advisor in the world. Corporate banking has been part of the commercial banking system from the beginning. Businesses and individuals have always needed loans and lines of credit to fund their current and future activities. It was in the 1950s when banks got into the mortgage business in a big way. In the 1960s, banks started the venture capital industry – a process by which banks could use their own money to make investments and sell shares later to outside investors. In the 1970s many venture capital specialists left bank employment to form independent venture capital companies. Investment banking has also long been part of the banking system but came into its own in the 1980s and 1990s when the scope of its operations increased to include all major capital market activities. The slow but steady pace toward a global economy enhanced investment banking activities. Also, investment banks are no longer just investing entities but they have ventured into many other areas of financial services to meet client’ demands for one-stop financial shopping. The 1999 repeal of the Glass-Steagall Act marked the deregulation of the financial services industry. Commercial banks, investment banks, securities firms and insurers are now free to offer one another’s services. Industry experts are anticipating cross-industry mergers and acquisitions as investment banks add retail brokerage and lending to their services, and commercial banks try to build up their investment banking services. These potential consolidations would enable clients to invest, save, and protect their money all under one roof. Banking is a cyclical industry. When the economy is good so is banking. Recessions and the inevitable cutbacks following mergers can slow growth in the banking industry. But the globalization of trade and commerce has a very positive side for banking going into the 21st century.

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CAREER POSSIBILITIES INVESTMENT BANKING AND CORPORATE BANKING CAREER POSSIBILITIES COVER A WIDE

range of specialized jobs. The prospects for employment are very good at the beginning of the new century. In fact, analysts expect the industry to reach an all-time high in employment during the next decade. The following are some of the opportunities that may be available in both areas that offer full financial services.

Venture Capital

Venture capital professionals provide money and strategic guidance to newly-formed companies that are experiencing growth but are not yet large enough to have access to public stock equity markets. This work includes venture capital fund management, taking portfolio companies public, or selling out to other businesses. Venture investors handle startups, growth stage, buyouts, consolidations and company turnarounds. Investment agreements and exit strategies are also a part of venture capital investing.

Mergers & Acquisitions An integral part of the investment banking industry, mergers and acquisitions cover strategic planning, valuation, financing, closing, and legal considerations. This is one of the most lucrative areas in investment banking as these professionals take in billions of dollars in fees each year. The volume of business keeps setting records and in 1997 the value of M&A reported deals reached $919 billion. Top M&A advisors include Merrill Lynch, Salomon Smith Barney, Credit Suisse First Boston, Morgan Stanley Dean Witter, Lazard Freres, and Goldman Sachs. Securities Sales & Trading

This is a very high-profile, high pressure part of investment banking. In all other areas, the emphasis is on the team and their joint efforts to close a deal. Here securities salespeople and traders are the independents who work on commission to bring to market the financial products that others create for their clients. The investment banking industry refers to this as “where the rubber meets the road.” There is also a lot of money to be made here and also a lot of risk taken. These professionals are primarily responsible for taking a position on securities using other peoples money. If they hit the mark, they win big; but when they are off the mark, they lose big.

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Money Management This is one of the most attractive areas of

investment banking and is becoming an integral part of the industry. More and more banks and Wall Street firms are going into fund management because it expands the kinds of products and services they can offer to their clients. It is also a less volatile area of investment banking. And the affiliated funds give a synergy to the entity’s underwriting business. Money management includes mutual funds, unit investment trusts, hedge funds, private client services, leveraged buyout funds, and private equity funds.

Financial Engineering This is the most creative area of investment

banking where professionals put their theories, knowledge and expertise to practice. In his book, The Business of Investment Banking, K. Thomas Liaw writes about this specialty. “Financial engineering is the successful implementation of the investment banker’s creativity in security design. The rapid pace of financial innovation is driven by the competition among investment bankers in response to increased price volatility, tax, and regulatory changes, demand for new funding sources, arbitrage, and yield enhancement. The application of mathematical and statistical modeling, together with advances in computer technology, provides the necessary infrastructure for financial engineering.”

Research Analyst

This is the most crucial area of the financial services industry. Every deal and every decision must be well thought out, based and backed up with the best and latest information possible on any given area. There is not a part of investment banking that does not rely on top-notch research analysts to come up with the backgrounds of the people involved, in detail; provide the total financial picture and history of an entity for investment purposes; compile the outlook of a company’s product sales against their competition; and give a complete report on the company’s management, labor relations, stock position and much more. Larger firms have research departments while smaller ones may buy analysts’ information from investment-rating firms that specialize in research.

Stock Underwriting

Another very lucrative and competitive area of investment banking is where professionals move around billions of dollars each year by underwriting initial public offerings and secondary offerings. The firm that wins the mandate to handle an issue of new securities is called the “lead manager or the bookrunner.” 11

These professionals must be fully aware of market conditions, and know client capabilities as well as their financial position. Guess work can mean disaster and great financial loss. This is a very complex area of investment banking and involves every area of underwriting equities including the mechanics, process and pricing, underwriter risks and compensation, aftermarket trading, equity takedowns and more.

Asset Securitization

This revolutionary way of financing businesses first began in 1995 writes K. Thomas Liaw. “Asset securitization – the selling of securities backed by the cash flows from a pool of financial assets – has revolutionized the way businesses are financed. It provides businesses with access to new sources of capital at lower costs, even when upfront analysis, structuring, and credit enhancement costs are factored in. Also, securitization provides a crucial source of funding for companies with limited access to other forms of credit because asset-backed securities (ABS) are rated on their own merit, independent of the issuing company’s financial standing.”

Securities Regulation & Ethics

Every investment banking endeavor has at least one professional who is up to speed on the changes and updates in the regulatory process. Regulations facilitate the process and protect the interests of the investing public. The Securities and Exchange Commission (SEC) is the regulatory agency responsible for administering the federal regulatory laws. With regard to ethics, in this field “your word is your bond.” High ethical standards, integrity, and strict regulatory compliance are basic not only to the professionals, personally, but to their success as well. Those individuals and firms who do not subscribe to the code of ethics and accepted standards of professional conduct soon fade away or land in jail. While there are other complex areas of investment banking you can work in, this gives you a good snapshot of career possibilities and the knowledge and expertise it would take to become part of it. Don’t be amazed by the big money numbers because these professionals earn every penny of it. This is a career that can devour you, require your undivided attention sometimes seven days a week for 80 to 100 hours of intense activity, and give you as many lows as highs. Many professionals in the field start out as financial analysts who research the clients the bank will be underwriting issues for, research other financing alternatives, and help develop client strategies. Some who enter this field with only a bachelor’s degree will go for the MBA after three or 12

four years on a job. Some employers will pay part of the tuition and some will pay it all if they consider you a valuable asset to their firm. As professionals gain experience and knowledge, they will have increased contact with clients, more responsibility for developing good client relationships and maintaining them, and eventually the authority to advise clients on the kinds of appropriate financing that will meet their needs. Another important aspect is guiding clients through the maze of financial instruments in today’s overloaded technological advances that can be very sophisticated and complex, especially when doing business in other parts of the world. So, if the challenges and excitement of this field interest you, then read on and find out what some professionals have to say about their work.

BANKING PROFESSIONALS TELL THEIR OWN STORIES I Raise Venture Capital Money for Business “I‘m an investment banker specializing

in venture capital projects. I help businesses raise the needed money to start up a new venture, expand an old one into new areas, add another product to a company’s line and other projects along these lines. We make equity investments in entrepreneurial endeavors that we feel have a better than average chance of succeeding. These decisions, of course, are only made after much research, discussion and examination of the risk factors, profit and loss allocations, management fees, exit strategies, and tax and legal issues. Uncovering money for new businesses is very exciting, but we proceed with great caution. Everyone thinks they have the magic plan for launching a new endeavor and making it into a success. The truth is that for every one that makes it, hundreds fail. It’s a kind of Russian Roulette where we finally make our pick and then hold our breath waiting to see if it is going to succeed or fail. That is why so much is done upfront to ensure that when we say “go” we have more than an even chance of succeeding. It’s nerve racking and exciting at the same time. 13

I was interested in the investment business from early on because my father worked for the Small Business Administration and used to tell us stories about the successes and failures and how hard it is to know when you are doing the right thing by either going ahead with a loan or denying it. I also liked math and was good with figures so it was an easy stretch to get my bachelor’s degree in economics and then go right into an MBA program to increase my chances of being recruited by a well-known investment firm. I was a solid student with good grades and graduated from both degree programs in the upper five percent of my class. My prayers were answered and I was recruited by one of the top international investment banking firms and went to work for an excellent starting salary, plus signing bonus, larger than my father was making after 30 years with the SBA. He is now retired and doing consulting work with small businesses. I started out on the front line and it was an eye-opener. What you learn in the classroom and even in some field work bears only some resemblance to what you do in reality. I was prepared with the knowledge, but not for the intensity and hard work. My firm has offices across the country and in many parts of the world. We deal in all areas of investment banking and I was drawn to venture capital because I like the idea of investigating and supporting new business concepts. The very first deal I assisted on was a large food company that wanted to add another line to their products. They wanted to purchase a very large national baking company. Since I was the newest employee on the team, I did most of the grunt work in pulling together numbers and research from outside sources as well as from our research department. It was a fascinating experience. I listened, learned and made notes about every aspect of the deal. Even though the food company was well-known and had a good reputation and stock portfolio, the amount of money needed to buy the bakery operations and move it into their corporate structure was sizeable. We raised the money. Not every story is a success story. Some ideas we find too thin, while others are too far out, and still others have not been thought through enough. We are successful because we are 14

careful in what we take on. I’ve been here almost six years and I’m still learning. I’m no longer the newest employee and am now an integral part of our venture capital activities. Soon I will be working on my first international deal. I want to become a leading venture capital specialist and be able to put together the kind of investment deals that get you noticed. I’m in the right place and while I won’t stay here forever, I’m not yet ready to make a move. But I am positioning myself for bigger successes and maybe eventually a consulting career. You should know that this is a field for the very ambitious. You can make a lot of money if you are successful – and the if is very big. There is unbelievable pressure and there is burnout. But for those who know what they’re doing and like what they’re doing, it is a very rewarding career.”

I’m in Corporate Lending “I have been in

commercial banking for almost 35 years and am now vice-chairman of an independently-owned community bank overseeing commercial loans and commercial real estate loans. This bank is one of the oldest and largest of its kind in the state and is a full-service bank with individual checking and savings accounts, business checking, safe deposits, commercial loans, commercial real estate loans, first mortgage loans, home equity loans and lines of credit. The banking and financial services industry has changed greatly over the years. Both arenas were clearly defined as to what services we could offer under federal regulations. But the repeal of the Glass-Steagall Act in 1999 changed all that. Now our bank can offer the same financial services that a Merrill Lynch can. Of course this creates greater competition and eventually mergers will weed out the weak links, but in the long run I think it will help strengthen operations like ours. I chair the committees that make all the business loans. It is a long and tedious process, but very necessary if we are to make solid decisions. We do our homework on each and every loan no matter how long it takes. I personally do not get involved with

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loans under $3 million, but the respective committees have the final say so over every loan. We are in an area of growth. New homes and condominiums, new businesses, and a revitalized business district are keeping us very busy. Because we are the only bank in our community that makes commercial loans, our clients depend upon our knowledge and expertise to guide them through the loan maze. We employ top-notch professionals to ensure that our business grows with the community’s business. There is no room for error when you are handling money. We maintain a high standard of ethics and we are respected among our peers. This is a great career for you to consider particularly if you like to work with numbers and like finance in general. You should also consider a career with a smaller firm like ours. It may not seem as exciting as the big banks, but we do the same work and it is no less intense, just on a smaller scale. Here, we are the big deal.”

I’m an Investment Banking Analyst “Actually my

title is, Associate, Investment Banking, and I have just completed my first year in this office which is a branch of one of the largest investment banking institutions in the world. I am an associate in corporate finance which is basically a four-year apprenticeship in learning how to run a deal. There was a 10-week training period before I was placed into this program. I have an undergraduate degree in economics, am Phi Beta Kappa, and participated in sports in college. This gave me good bargaining power when firms came to recruit on my campus. I had a number of offers but chose this firm because of the diversity of their work internationally. I have traveled in Europe, speak French and German fluently and would eventually like to work in Europe. Investment banking is team work. Our team is usually made up of a vice president, who is the senior associate, an associate and several analysts. The work is fast-paced and the hours are long. I have worked many weekends and many 80-hour-plus weeks. But I love it. I love the learning and the challenge in putting together a deal and seeing it to its successful conclusion. 16

My department manages securities offerings for large companies who want to sell stocks or bonds to investors to raise capital for expansion such as building a new plant. When these companies are ready to raise this financing, they go to several investment banks and invite them to compete for the job of raising the funds. Our team and my work is about the ‘pitch books’ that outline just how and where we would raise the funds and why we should be chosen for the deal. Initially my job was to make sure that all the details in the book were in the right place, like tabs and page numbers, charts and forms. This may not sound important, but these books become bibles at would-be client meetings and when you are with a prospective client and going over each step in the order of importance, you better have all your ducks in order. In other words, one misnumbered page or one fact out of sequence can sink the deal. I learned fast that every detail has a purpose. Recently, I started writing some drafts for the book and as time passes will be given more responsibility. By the time I complete my four-year apprenticeship, I will be close to running the deals and leading the team. Eventually I hope to become a vice president and senior associate. This work is hard, competitive and fascinating. I make really good money and work with great people. But I don’t want to make it sound too glamorous. I’ve had to give up a lot of my social life to work late into the night or over a weekend. And when we lose a deal to a competitor, heads can roll. The atmosphere can be very stressful. I believe investment banking is the wave of the future in the financial services industry. I am glad I chose it as my career and see a good, successful future ahead of me.”

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QUALIFICATIONS YOU WILL NEED CENTRAL TO SUCCESS ARE THE LEADERSHIP QUALITIES OF BEING A POSITIVE THINKER,

goal and action oriented, willing to pursue ongoing learning, and creativity. But being in the financial services industry of investment and corporate banking requires additional skills and characteristics.

Mathematical and analytical skills are very important. While liberal arts majors and others without extensive math backgrounds can and do succeed in this field, one should at least have an interest in and an aptitude for manipulating numbers. Computer knowledge and skills are a must. As technology advances, more and more aspects of this industry are being computerized. Today, it is almost impossible to find a position that does not require good computer skills. Communication skills are crucial to this work. A recent study noted that many employers are complaining about the lack of good communicating abilities found in new recruits. Professionals in financial services need to make both oral and written presentations, speak effectively one-on-one to clients, lead team efforts and more. This cannot be accomplished without excellent communicating skills. Dedication to the work is part of the success. The history of this field is littered with the tales of those who went into investment banking for the money and discovered the hard way that it takes performance, attention to detail, good people skills, a team player and more to make a success. Integrity and ethics are the very foundation of this career. You are entrusted with confidential information about people, companies, and finances, and what you read, see or hear remains with you and is never discussed outside of the office. Since the insider-trading and other financial scandals of the 1980s, the financial services industry has placed a greater emphasis on individual integrity and adherence to the ethical standards set by the industry.

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ATTRACTIVE FEATURES IF YOU LIKE TO WORK WITH NUMBERS AND OTHER FINANCIAL ACTIVITIES, THEN THIS IS

one of the most exciting and promising careers for the 21st century. It involves major players on a national and international stage. The stock offerings of a Fortune 500 company could be on the line, or the financial stability of a third world country could be teetering and you are called to the rescue. You and your colleagues have the power to make financial history.

You get to associate with interesting people from many walks of life and work with them in different situations. The hours can be long, but the rewards for the hard work are great in terms of accomplishment. When you are part of putting together a multi-billion dollar deal, or underwriting a stock offering, or trading securities to bring a new product to market, you are involved in the kind of deals that others only can read about. And they read about them after the fact. You get to use your creative skills as well as the latest technology, work in pleasant surroundings with mostly state-of-the-art equipment. You are part of a team effort to help others realize their potential through financial endeavors. And the deals you help put together could make a difference in the lives of people, the survival of companies and the economic stability of another country. There is a lot of money to be made in this field and you will work very hard for it. Extensive travel, conferences and other stimulating events may be part of your work schedule, and this broadens your own portfolio for advancement. You are a respected professional. And, you will be on the front line as globalization in the marketplace makes the work even more exciting and important.

UNATTRACTIVE FEATURES THIS WORK IS STRESSFUL AND DEMANDING. THERE IS FAR TOO MUCH COMPETITION

and everyone is out to do the other one in. Clients can be impossible in their demands and never care to hear about your side of any problem, or anything negative. They think you only have to wave a wand to come up with millions of dollars for whatever is on their plate. And they will bolt to another firm in the blink of an eye before they give you a chance to explain why a deal was not possible, no matter how long and hard you may have worked to try and put it together. 19

The hours can be inhuman. The meetings are endless. Working 80 to 100 hours a week can become a habit that is hard to break. It’s like the tax season for accountants – only all year long. The work can be repetitious as you prepare and go over the same kinds of documents and presentations for clients. There are no thanks - just more work. The money doesn’t begin to compensate for cold dinners eaten out of bags at your desk, or weekends away from family and friends. Everything has to be done by yesterday and if you don’t do it then your competition will. Losing an important client to a competitor is a major crisis, and the finger pointing begins and can result in one or more dismissals. Fuses can run short especially when putting a deal together and people pop antacids like candy. It’s a nervous and tense atmosphere. The frustration and aggravation level is high because the stakes are so high. The chance at making the kind of money most can’t even imagine makes people crazy. There is a great burnout rate in this field. Many people can and do thrive in a rat race. But many others need to find other avenues for their financial skills that are less volatile and stressful. It is a difficult field with unreal expectations of trying to meet all the financial needs of a rapidly changing world. This field requires the kind of stamina that many either do not have or choose not to be part of.

EDUCATION AND TRAINING IF YOU HAVE NOT PAID TOO MUCH ATTENTION TO YOUR GRADES UP TO THIS POINT,

now is the time to get serious and do better if you expect to go on to college and be accepted in a good program. Grade averages do make a difference to colleges and universities. Getting your act together in this area will make it easier for you in your college studies where self-discipline is the individual’s responsibility. You will need at minimum a bachelor’s degree to work in this field. If you have an interest in finance and are good with figures, then you can enter this field with a bachelor’s degree in liberal arts, English, economics, accounting, business administration, etc. The need for a master’s in Business Administration (MBA) degree is up for grabs. Some employers require it for entry-level work, others do not. Knowledge, experience and hard work can advance you in this field. However, if you aspire to work in one of the top-tier investment banking firms, then you should consider an MBA, and one from a top business 20

school. U.S. News and World Report ranks the top-rated business schools annually. Starting salaries of recent graduates from the top 10 MBA programs in the country range from $75,000 to $100,000. “Careers in Finance” by Trudy Ring notes the following about educational opportunities in this field: “In the fall of 1992, the Stuart School of Business at the Illinois Institute of Technology (IIT) in Chicago began offering a degree program that may become a popular alternative to MBA study. By offering a master of science degree in financial markets and trading, IIT has the world’s first degree program in the study of modern capital markets.” All 50 states, plus the District of Columbia, have universities and colleges that offer courses and degree programs in finance and banking. And many states like Alabama, California, Florida, Georgia, Illinois, Indiana, Iowa, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas and Wisconsin have multiple programs across the states. Your public library will have this information along with the criteria for admission and where to write for more information. Most investment banking firms have internships, summer programs and opportunities to volunteer to learn more about the field. This is a career that will require ongoing education and training to advance. The financial landscape is in constant motion thanks to new technology and instant information worldwide. What you learned yesterday could be obsolete tomorrow. Reading the pertinent materials, learning the new technology, attending seminars and conferences, and listening will help keep you a step ahead of the pack. The global financial community is here. You will have to prepare for it.

WHAT YOU CAN EARN THERE IS MONEY, POSSIBLY A LOT OF MONEY, TO BE MADE IN THIS CAREER. BUT A

word of caution – money should not be the primary reason you select a career. Choose a career for its exciting dynamics, its opportunities to learn and advance, its possibilities for making a difference. Salary ranges at top-tier investment banks are excellent, but keep in mind that the substantial additional money made in investment banking comes from the bonuses, which can exceed the base salary after you’ve been at it for a few years. 21

Undergraduate degree: $40,000 - $50,000, plus an annual bonus of $15,000 - $25,000. MBAs: $75,000 plus a $20,000 - $30,000 signing bonus, and the first annual bonus of $25,000 or more. Remember, these figures are for the top recruits from the top schools. But the rest of the pack does quite well. Salaries at the undergraduate level start at $35,000, and MBAs start at $55,000. There are signing bonuses for MBAs and annual bonuses for all, depending upon how well you and the firm do in a particular year. Your salary level has many components and will depend upon your education, training and experience, who you work for, what part of the country you are in, your responsibilities and your potential. It is possible to rise in salary to the six-figure range within a few years of working in your position, if it is earned. That is the key word – earned. Investment banking does not just hand out big salaries, they require you to earn them in a big way. An important reminder. Earnings are directly related to the business you generate for the company. Once again, this is a cyclical industry. When times are good the financial rewards are good. But when times are bad you could be out of a job in a moment’s notice. The saving grace may be the globalization of business. In other parts of the world, many businesses that once were government-owned are becoming investor-owned. Thus, many new companies in the developing nations are growing to substantial size and that will create the need for investment banking services. And financial services of professionals from the US are sought the world over. The opportunities are available for those with a global outlook on business.

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OPPORTUNITIES EVERY FALL, MORE THAN 8,000 MBA and undergraduate résumés find their way into the hands of recruiters at the top tier banks in the country who are looking for about half that number. They are looking for excellence in academics, athletics, computer skills, and more. They are looking for candidates who have credentials in more than one area and are considered well-rounded individuals. The remaining half will find good jobs at the second and third tier of banks, who are also getting great candidates.

Because the financial services industry has broadened so fast, the options for job seekers are also expanding. It is said that investment banking is one of the best ways a young person right out of college can learn about finance and make good money. On job prospects, WetFeet.com notes, “Two things you need to know about jobs in I-banking. One, these jobs pay a lot, with year-end bonuses that can match your salary. Two, bonus or no bonus, you are going to work very, very hard. No one is exempt, and no one, particularly anyone who’s already paid his or her dues, is much interested in changing the system.” This Web site further notes that if you want to reclaim your life at a later time, the skills you learned in investment banking will be very valuable in most business careers. There are several categories for job opportunities depending upon what area you want to work in. Venture Capital industry has the big banks like Chase Manhattan, Wells Fargo, and FleetBoston Financial. There are also private industry firms like Kleiner, Perkins, Caulfield & Buyers, E.M. Warburg Pincus and Co., and Menlo Ventures, who were among the first independent VC companies in the 1970s and 1980s. Bulge Bracket firms include the biggest of the brokerage houses such as Merrill Lynch, Lehman Brothers, Morgan Stanley Dean Witter, Salomon Smith Barney. Boutiques and Regional firms are either aligned with a bank or still working independently. These include Hambrecht & Quist, Robertson Stephens, Montgomery Securities, and Alex. Brown. There is also the Internet boom in trading stocks and some of these same financial institutions are trying to capitalize on the startup companies and get ahead of the pack in online investment banking. There are several

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Silicon Valley firms – Volpe, Brown, Whelan, and Thomas Weisel – who are already taking advantage of the Internet phenomena. Job opportunities exist in every state across this country wherever there is a big bank, a community bank, or a brokerage firm. The financial services each entity provides in their state, city or community are every bit as important as what the major firms do. In fact, many professionals say that being a big fish in a small pond is more preferable and rewarding to being lost in a giant firm. Whatever your preferences, it is important to start your career search now.

YOUR PERSONAL CAREER DEVELOPMENT PLAN IF YOU HAVE NOT ALREADY STARTED tO THINK SERIOUSLY ABOUT A CAREER THEN YOU

should do so today. You don’t have to commit to anything, and you can always change your mind and go in another direction. But you must develop a plan for pursuing information on a career that will match your talents and interests and give you the kind of insight that will eventually lead you to an informed decision. If you have not as yet developed your own plan, then here are some tips to follow.

The career report you have just read is designed to give you basic information about the financial services industry in general, and investment and corporate banking services in particular. It is meant to whet your appetite for more information. The following steps will allow you to learn more and help you assess whether this career could or should be in your future. Read everything you can on this career. The public library has many books on banking, investment banking, corporate/commercial banking, the stock markets here and around the world, individual investing and so much more. Read the financial section of your daily newspaper, or the library will have copies of such publications as The Wall Street Journal, The New York Times, Fortune, Inc., Money, Barrons Weekly, Business Week, Forbes, etc. Or you can find many of these publications online. Make a list of your talents (including qualifications and characteristics) on one side of the lined paper and your interests (including hobbies) on the other side. See how they match up with what you have read. You may be talented with figures but find your interests are elsewhere. Then, again, you may be a perfect match for this career. 24

Talk with professionals in the field. Start where your family banks. Visit the facility and set up some appointments with professionals in various departments. Get as many perspectives as possible. Visit other banks and brokerage firms to add substance to your research. Always go with a list of questions to ask people you meet, about their background, education, how they got into the field, their responsibilities, the pay and benefits, the positives and the negatives, and how they like their work. Ask for any printed brochures and newsletters the institution hands out. Keep notes or a diary on people you talked with and the highlights of the conversation. You may want to take a tape recorder if that is agreeable with the person you are talking with. What were your impressions? Do you need to go back to anyone and talk further? Having a record to refer to makes it easier to recall conversations. Now you should have enough information to talk with your school counselors, family and friends about your interest in this field. Try to invite one or more of the professionals you talked with to come to your school for a career day. Again, make sure that you and your classmates have prepared the right questions to ask so that you will obtain all the information you need. If you have decided that this is the career for you, then your next step is to research colleges and universities. Again, the public library is your source for these lists. Select a minimum of six schools, public and private, to write to about their admission requirements, curriculum, degree programs, tuition, etc. It is always helpful to have a basis for comparison and the more schools you write to the better picture you will get of the educational opportunities. Use the Internet – it has a wealth of information on all types of careers including banking and investment. Also, many colleges and universities have Web sites and give their admission requirements along with other information. If you do not have a computer at home or are not as yet hooked up to the Internet, or cannot use your school’s or a friend’s – then use the library’s. Most public libraries today have at least one computer for public use. Because this is one of the most important decisions of your life, you want to allow enough time to gather information and get a feel for the career. The more you know the better your final decision will be. Today would be a good day to start developing your plan. Good luck!

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ASSOCIATIONS n

American Bankers Association

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American Financial Services Association

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Association for Investment Management and Research

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Financial Executives Institute

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Financial Managers Society

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Financial Women International

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Institute of Financial Education

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Investment Company Institute

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Investment Management Consultants Association

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National Venture Capital Association

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Savings and Community Bankers of America

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Securities Industries Association

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Securities Traders Association

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PERIODICALS n

Bank Management

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Barron’s National Business and Financial Weekly

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Business Week

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Financial Analysts Journal

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Financial Executive

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Financial Management

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Financial World

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Forbes

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Fortune

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Inc.

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Institutional Investor

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Investment Dealers Digest

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Investment Management Weekly

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Investor’s Business Daily

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Money

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The New York Times

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Securities Industry Trends

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USA Today

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The Wall Street Journal

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The Washington Post

COPYRIGHT 2005 INSTITUTE FOR CAREER RESEARCH CHICAGO CAREERS INTERNET DATABASE www.careers-internet.org

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