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Advantages and Disadvantages of investment Banking Career

Advantages and Disadvantages of investment Banking Career

23-Jan-2023

Recent graduates, particularly those in Business and Finance majors are increasingly drawn to the profession of Investment banking. Although it's undoubtedly a tough industry, it also has a lot of options and a high earning potential, which contributes significantly to its attraction. The attractive benefits of an Investment banking career have resulted in a consistent increase at a rate of 20% in India in the past five to six years.

Investment banker assists their customer in making financial decisions that will maximize their earnings. It is a tremendously gratifying work that offers both financial benefits and opportunities for personal and professional development.

Advantages and Disadvantages of investment banking

In this article, we will delve into the advantages of Investment banking, how it offers excellent and rewarding opportunities to graduates, and the loopholes in the field by outlining the disadvantages of investment banking.

Defining Investment Banking

Investment banking is that branch of banking that coordinates massive, intricate financial transactions like Mergers or the Underwriting of initial public offerings (IPOs). Furthermore, they employ various ways to raise money for businesses apart from underwriting new securities issuance for a firm. They also take the onus of overseeing an IPO for business. Additionally, investment banks offer guidance throughout mergers, purchases, and reorganizations.

Investment banks deal with the selling of securities, mergers, and acquisitions, reorganizations, and broker trades for institutions and individual investors. Their underwriting task also includes new debts and equity securities for all kinds of corporations. Investment banks also advise issuers on the stock offering and placement process. Investment bankers are professionals who have an accurate awareness of the Investment market. They help their clients to steer their firms through the complex finance industry.

Advantages of Investment Banking Career

Let us explore the numerous benefits of investment banking career and learn why it has become a highly sought-after profession by recent graduates.

High Option for Income Generation

With an average annual compensation of $66,493 for investment bankers, a career in the financial sector has the potential to be financially rewarding. Successful investment bankers can make substantial commissions in addition to hefty base pay. For professionals that value their ability to generate money when choosing a career route, this can make investment banking a potentially alluring job option. This is one of the biggest advantages of Investment Banking.

Valuable Benefits Packages

Your benefits package is another area where the pay in this profession might be attractive. Investment bankers frequently receive large perk packages in addition to high pay. This professional path may be interesting due to compensation like commission and bonus potential, insurance coverage, and stock options.

Working with Focused Coworkers

Your contemporaries are probably working just as hard as you to succeed in the competitive field of investment banking. The position calls for intellect and analytical skills, and coworkers and clients might need to perform well to stay competitive. Working with other motivated individuals may serve to challenge you to keep learning and give you competent coworkers when you need assistance.

Effective Networking

This career path offers powerful networking opportunities. Senior Executives at the firms that investment bankers deal with and analyze frequently maintain contact with them. This offers the chance to establish personal and business ties with these powerful individuals. This can help you in your job by providing a networking opportunity. Members of your network might help you uncover new employment chances, act as references for you when you apply for a job you've found, or ask for a promotion. This is another one of the excellent advantages of an investment banking career.

Continuous Improvement

Investment banking is a discipline that is continuously evolving since the markets that investment bankers study in the course of their work, as well as many businesses you may study, are continually changing. This implies that while the knowledge and skills you acquire early in your career may still be crucial, you may also discover that you need to acquire new ones in order to keep up with advancements in your area. Investment banking can be a great career choice since it gives you the chance to constantly improve your knowledge and skills to stay up with developments in the business world.

Open Up Several other Opportunities

You'll have the ability to converse with affluent people and create a superb network of contacts. Even in a situation where you have to quit investment banking, there are several other opportunities including consulting and management. Your resume will appear fantastic if you work in investment banking, and you will be highly marketable to any firm. If you want to have a better work-life balance, it is very simple to move into different departments within the bank. As they are familiar with business operations, many bankers launch their own businesses that operate in quite unrelated areas. Everything gets easier if you begin your career with an extremely difficult task.

Quick Progression to Expert Level

Having a full-time job does have its benefits. The greater advantage is working regularly on projects. In some fields, three years of intensely extended, the compressed effort can be equivalent to a lifetime of experience. Early-thirties individuals can become partners and take on financial responsibility for millions of dollars. Working in investment banking produces experience quickly.

Disadvantages of Investment Banking Career

A career in any field has certain setbacks which make it challenging. To have an informed idea and make informed choices for your career pursuits, learning the disadvantages of Investment banking career is a plus point. This will also help you identify your skills and caliber in coping with the challenges that may come along with pursuing an Investment Banking career. Let us discuss a few of the disadvantages of Investment banking as a career.

Long Working Hours

To perform as an Investment Banker, you are required to commit a significant amount of time. This might take the form of regular working hours that go beyond the standard 40-hour workweek, including working weekends and extra-long shifts during the week. Extended hours can contribute to the high compensation received as an investment banker, offering a financial trade-off for the extra work obligations, even though this can be difficult for experts in the sector.

Increased Accessibility

The notion that a client or an employer can avail easy accessibility to an investment banker on call during irregular working hours adds to the stress additional to regular working hours. This could be handling calls and emails, sending emails, answering questions, or conducting research on a subject. In these circumstances, being accessible to your employer or client can help you give them better service. By doing this, you could be able to make a better impression and raise your earning potential as well as your job chances in the long run.

High Levels of Competition

Investment banking may be a very competitive industry due to the high pay available within the sector and the competitive nature of investments. Due to the stiff competition, these professionals may experience heightened pressure to perform at a high level and find it challenging to seek out peer assistance or counsel. Being able to perform well under pressure is advantageous when working as an investment banker. Making close connections with your peers might provide you an advantage by giving you access to resources that can help you achieve.

High Levels of Repetition

An Investment banker's tasks may be challenged by torpor. A lot of the work an investment banker does might be rather repetitious. For instance, each organization may respond differently to research and report-writing about them. However, the actions an investment banker takes to do this are probably the same regardless of the company. This could be a disadvantage if you like your job to be dynamic when thinking about this career. However, if you value stability in your career, you might find routine activities appealing.

Known for Stress

One of the most stressful careers in the whole financial services sector, investment banking is demanding work. Bankers may be in charge of a company's whole financial future, meaning that one poor choice could result in their dismissal. Clients have unreasonable demands and expectations of you since they pay the bank enormous fees. Time is frequently an issue, and market forces can be against you. Additionally, there is a lack of collaboration in the environment, with people doing whatever it takes to advance. You'll be exhausted a lot of the time, which adds to your stress. The reputation of having a fair amount of unpleasant and disagreeable employees at investment banks can also be stressful.

Know the Tasks performed in an Investment Banking Job

Investment bankers in simple terms are financial consultants that assist businesses and other organizations in raising capital for a range of purposes, including business expansion. They frequently perform a wide variety of jobs each day, and some typical duties include:

Examining a company's books of accounts before its initial public offering (IPO)
Investigate marketing trends to apply to a company's financial condition
Carrying out financial modeling to forecast a company's performance and profitability
Establishing a company's organizational structure in order to sell bonds, equity, or stock to raise money
Presenting potential investors with investment opportunities in a company
Giving a client contact details for possible investors to expand their pool of available funds
Planning and negotiating mergers, acquisitions, and other business transactions

We have come to the concluding part of the topic which has covered the benefits of investment banking and its drawbacks. This article will serve as a guide to choosing a career path and venturing into the field of investment banking.