Ruairi O'Donnellan

Becoming an Investment Banker: 8 Key Skill Areas

Becoming an investment banker typically requires years of academic study and hard work.

Even after years of study, transitioning to the banking world can be a difficult period for even the best graduates.

This article looks at the needed skill areas to understand the transition from a backpack-wearing college student to a fully-fledged investment banker.

Related course: Skills for Investment Bankers

1 The College/Workplace Transition

Transitioning to a new environment can represent a sea-change for any college graduate, and making the leap to the world of investment banking can be particularly challenging.

For instance, one of the biggest transitions for investment banking recruits is the difference in how their time is allocated.

An analyst's time is usually scheduled by someone known as a "staffer."

Transitioning from college or university where your time is your own to having someone else control your calendar can be a big culture shift for many.

Similarly, when you start working in banking, you are always "on."
People will judge what you do and say, and how you appear all the time.

Related article: 12 Trading Tips for Beginners

There are senior bankers who are judging your performance…when you show up for a meeting,…when you speak at presentations or other events,…when you are briefed for a new job,…and even when you request time off.

This is a massive change from college where, if you like, you can attend lectures anonymously and take exams in sweatpants having just rolled out of bed.

So, from being the most experienced as a senior at college, you immediately become one of the least experienced people in the firm and will be starting over establishing your "brand."
New call-to-action

2 Deals

Corporate transactions such as mergers and acquisitions (M&A), debt and equity issuances, and refinancings are often complex transactions that require the knowledge and skills of a range of banking professionals.

Investment banks put together specialist deal teams to pitch for such business and – in the event that they win the pitch – to work on the transaction itself.

Investment banks advise companies on corporate transactions such as mergers and acquisitions, debt and equity issuances, and restructurings. These companies may be existing or potential clients.

When a bank is pitching for business, it puts together a deal team to undertake analysis and prepare presentations for the client, among other tasks.

Related article: 9 Behavioral Finance Books Every Budding Trader Should Read

The size and nature of this team depends on the type of work or project that the bank is pitching for.

For instance, if a client is seeking to acquire a large, listed, multinational business then the deal team will likely comprise tens of people from different offices and possibly even different firms.

However, for smaller-scale refinancing transactions, the deal team is likely to be much smaller, consisting of just a handful of people who work on the same desk in the same office.

While context is important, investment banking is structured in such a way that there is a broad consensus as to the members of a deal team and the different types of task they perform.

3 Pitch Book Development

A pitch book is a document used by investment banks when pitching to clients or investors. Junior analysts working at these banks spend a significant amount of their time creating and editing pitch books for senior bankers.

Central to most pitches that bankers make to clients or investors is their "deck" of information.

 This deck, referred to as a pitch book, is a detailed institutional presentation that is traditionally produced using Microsoft PowerPoint.
As you might expect, a pitch book is designed to help bankers win and close deals by advertising their credentials, knowledge, and suitability.

Related article: What is ESG Investing?

It is often used during presentations as a reference point for senior bankers as they talk to clients or investors about their ideas and recommendations.

 Often, pitches made by bankers come to nothing but they can help to build relationships that one day lead to involvement in a deal.
 Junior investment banking analysts spend a huge amount of their time compiling information to be included in a pitch and formatting the pitch book.

 They also spend a lot of time revising it as directed by senior bankers. There are usually many iterations of a pitch book, but only the final version is presented to the client or investor.

Analysts working on pitch books gain valuable experience of formatting in PowerPoint, with some of them spending as much, if not more, time formatting and revising pitch books than they do performing valuations and other calculations.

By the time they leave their role to become an associate or move elsewhere, they will have gained significant knowledge and awareness of how best to present financial data and other information when pitching to clients or investors.
Pitch book development is a key skill of investment bankers

4 Time Management

Working hours for junior investment banking staff can be notoriously long, but the need for analysts to work long hours and pull all-nighters is sometimes compounded by poor time management and planning.

After college, one of the biggest shifts for graduates entering the investment banking world is the difference in how their time is allocated. An analyst's time is usually scheduled by someone called a "staffer." Staffers determine which analyst should be allocated to which job and for how long.

On top of this, for each job being staffed there will be a team of more senior people who filter tasks down to the analyst. These tasks are almost always time-sensitive and need to be done on someone's schedule (not the analyst's). This means the skills that well-educated graduates have learned in reaction to managing their own schedules and ways of working must be re-learned.

A junior banker's time is outside of their control and, for those who enjoy working to their own schedule, this can be a jarring transformation.

The early years of an analyst's career are very well suited to those who are happy to be given a set list of tasks and to work to them according to a predetermined schedule.

5 Client/Relationship Management

For investment banks, effective client management involves becoming a trusted advisor and financier to their clients.

This, in turn, enables clients to achieve their strategic objectives. All bankers, from junior analysts up, have a role to play in this.

There are many client service requirements that are key to any business relationship management success.

These include:

  • Knowing your client and its requirements very well
  • Following up on client requests/questions quickly and effectively
  • Establishing credentials and experience
  • Regular, but not too frequent, contact to build rapport
  • Value-added advice and communications
  • Attendance at industry events and conferences
  • Winning industry awards and recognition

Ultimately, strong business relationships are built on the client’s trust. Investment banking teams try to build trust through meeting with the clients many times.

Often, there are several meetings between such teams before any potential transactions or business is available.
Client management is an important skill for investment bankers

6 Commercial Awareness

Commercial awareness – the ability to understand a business and what makes it successful – is a highly-valued skill.

Related article: Trading and Investing: A Beginner's Guide

In simple terms, commercial awareness is about understanding the business of an investment bank and how it fits into the broader business world.

There are several aspects to this.

One of these is understanding the bank itself and its commercial priorities.

For instance:

  • How is the organization structured?
  • What is its mission or aim?
  • What are the factors that enable it to be successful?
  • What banking activities is it involved in?
  • What products and services does it offer?
  • What are its main sources of revenue?

A second key aspect is an awareness of the wider commercial context and the challenges the bank faces in that regard.

For example:

  • How does the bank interact with others in the industry – clients, competitors, regulators, investors, and so on?
  • Who are the bank's clients, what industry or sector do they belong to, and what solutions do they need?
  • Who are the bank's main competitors and what are the competitive challenges the bank faces at the moment?
  • Finally, what potential impact could various market, economic, or political events have on bank’s profitability and business strategy?

One final important aspect to consider in relation to commercial awareness is your role in the bank. Questions to consider in that context include:
  • What is the purpose of your role?
  • How does it fit into your department or business unit and the bank as a whole?
  • What skills and attributes do you bring that can help the bank to achieve its goals and be successful?

7 Negotiation Skills

Winning and closing deals is a consequence of good negotiation. But even the best investment banking advisors are not necessarily great negotiators.

Deals can sometimes collapse not because of the underlying motivations and financials but due to misunderstandings, poor communication processes, and relationship management issues that arise during the negotiation process.

With large amounts of money at stake and emotions often running high, even small missteps on behalf of negotiators can kill deals.

8 Personal Branding

It is often said that when it comes to your reputation, perception is reality. If this is true, then it is important to understand what the perception of you is, and to manage it carefully.

For a successful investment banking career, it is very important that you develop and uphold your own brand.

During your time at work, you are paid to perform tasks on your employer's time.

Related article: Understanding Cryptocurrencies - The Importance of Financial Literacy for the Part Time Investor

While investment bankers often work in groups of similarly-aged coworkers in a relatively young environment, the job is not simply an extension of how you behaved and performed at college.

Senior bankers at your firm will judge what you do and say, and how you appear, all the time.

To impress them and progress your career, there are a number of key skills and attributes that can be identified.

One of these is attention to detail.

Working as an analyst requires excellent attention to detail to ensure that all information and data collected and presented is both accurate and complete.

Another important trait is flexibility and adaptability.

Analysts usually work to deadlines set by other team members, so they must be flexible and adaptable as the needs of the senior bankers change, which they often do.

A third important quality is initiative.

Good analysts display initiative in researching areas with which they are unfamiliar, and ask questions before embarking on new projects and tasks.

Finally, while it may sound obvious, it is vital that analysts have good technical financial knowledge, and have the ability to apply this to differing situations.
New call-to-action