emperor550

I'm interested in a career in the IBanking field. Right now this is mostly based on the fact that they make a lot of money and I'm not afraid of working long hours. So enlighten me, what does an investment banker actually do?

uc_benz

Consult the Vault Guide to Finance. It will tell you all you wanted to know.

mackinaw

This is a mindless way to choose a career. That said, for excitement I'd rather play poker for a living.

sakky

Normally, I would agree with mackinaw that you shouldn't choose most careers for the money.

However, in the case of investment banking, I make an exception, because it really is true that most people choose that field for the money.

Here is an article describing a first-hand experience of a guy who's getting his MBA at Chicago and is doing a MBA summer internship in IB. It describes the kinds of things you may see in an analyst job (however, analysts are at a lower level). In particular, I would point out the following quote of the guy's:

"Doctors and lawyers can pretend that they are doing their job out of compassion and for justice. Bankers do it for the money. Money is the good part of banking and I saw plenty of it around me. You might be telling yourself that you really like banking work and that money is secondary. Remember that when you are in the office staring at a copy machine on a Saturday night. Sure, some people really love the job. But most of us would probably quit working obscene hours without equally obscene bonus checks. If any would-be consultant or lawyer tells you that their pay is comparable, tell them to shove it. It's not even close."

http://www.chibus.com/media/paper408...s-131886.shtml

emperor550

Yes it is a mindless way to CHOOSE a career. Luckily I'm only a senior in HS. Looking at income ranges of a possible career and then investigating to see if it is right for me seems perfectly fine.

Thanks for the link, sakky, I'll look at it.

wingardiumLeviosa

My cousin is an i-banker in NY. Sure, she makes good money but after one year of i-banking; she's quitting and working for a non-i-banking job in Conneticut. She just can't put up with the i-banking pressure. Funny how she's been able to deal with it for almost a full year (almost every single day for the full year for 18 hours a day) and now just realizes how much she hates her job.

BTW, when I say she works long hours, I really do mean that. She averages 3 hours of sleep a day. Everytime I look into her eyes, I see this sleep deprived individual who does her job for the sheer prospect of prestige and money.

She was a graduate from an ivy school and in nature, she is very outgoing. Finally, she's had it. Next year, she is really going to have fun. She's getting married in 2 years as a result of which she only has so much time before being committed to marital responsibility.

monydad

Investment bankers do a lot of different things, but one thing they do is help companies access the capital markets, to borrow money (float bond issues) or to issue stock. Their familiarity with the market for a company's stock puts them in a position to analyze and assist with mergers and acquisitions, so they are in these businesses as well.

There are definitely many people who are interested in the field for the money, but like in most fields the most sucessful people love the job and are made to do it. Many of the others wash out.

A successful investment banker must be very smart, quick on his/her feet. They must be persuasive salesmen. To get hired they frequently need to be not physically unattractive, and there must be something interesting or unique about them. Good social skills and able to hold an engaging conversation about various interesting things they've done. Good in sports helps, particularly golf and squash. Good written and oral presentation skills are quite important.

There is much to like about being an investment banker, besides the money. You are dealing with big issues in this field. Advising on the capital structure, and sometimes the very survival, of huge companies. Your work makes a huge impact. Things you work on may be in the newspapers.

The work can indeed be very tough. The hours can be toughest for the first 4-6 years or so. If you make it to where you're directing others, then frequently they will be the ones left till all hours to finish a proposal or whatever, and you can go home. But the hours are never good. Many find the work so all-consumingly interesting that this is not a big problem for them. Many others leave the field. Willingly or not.

wingardiumLeviosa

Wow. This sounds like a really cool job. But unlike financial engineering (which I recently explored), i-banking is at loss to use advanced mathamatics to predict the business world.

Which is why financial engineering is WAY COOLER.

I heard that i-banking "can't even grease the wheels" of fin. engineering. The accuracy of the predictions in fin. engineerings is remarkable - certainly MUCH more than investment bankers can do with their Harvard mouths. Your i-banker can't use non-linear differentials and complex stochastic prob. theory to predict stock derivatives - all of which is normal for an financial engineer.

Is this true Moneydad? What do you think about it in comparison to I-banking? Your a very reliable source as far as I'm concerned.

Fin. Eng. however is a very talented profession. People can't just jump into it like i-banking. It's a one year, graduate.

wingardiumLeviosa

************* It's a one year, graduate program and is offered at few institutions in the country (relatively very new field). These places include Berkeley, Columbia, MIT, CMU, UMich, and like 10 other schools.

Cardinal

wingardium, although I know little about financial engineering, from what you described it seems very similar to just an advanced form of technical analysis for predicting stock behavior. That's not very applicable to the wheeling and dealing that is the M&A world most people think of when they describe i-banking. Fin. eng. seems more applicable to Sales & Trading, so it'd be "traders can't grease the wheels of financial engineers" not investment bankers. Further, the jury is still out on whether technical analysis is better than fundemental analysis (investing on merits, not on patterns or formulas). While the market may follow some general trend, don't forget that markets are human endeavors and humans can be irrational people. And as people learned from Long Term Capital Management, "The market can stay irrational longer than you can stay solvent."

monydad

The primary applications of financial engineering are on the trading floor. Financial engineers help value complex transactions. Options and other derivative securities can be valued mathematically by reference to the value of their underlying securities and various market data. The mathematics and modeling can be quite complex. . Financial engineers also compute the risk positions of the trading floor; so-called "Value-at-Risk".

Financial engineers are talented technologists. They are highly skilled at mathematics of finance, but may be less skilled at dealing with people, marketing, leadership, judgement, convincing a client to trust you. Synthesizing a bunch of non-mathematical factors into a coherent plan. Many of the biggest decisions that companies need to make are not subject to purely mathematical decision-making.

Financial engineers need not be expert in a wide variety of areas that investment bankers may need to be versed in: eg, how the credit markets and rating agencies may react to a certain borrowing plan or change in capital structure. Investment bankers may draw on a team of experts to martial the firm's efforts on behalf of a particular client. Financial engineers are one type of expert.

These are two sets of talented financial professionals with two somewhat different skill sets. There may be some overlap in skill sets, but there need not be very much.

An investment banker is typically a "line job" in the investment banking division. A financial engineer is typically a "staff job" in the sales & trading, or financial strategies, division. They provide valuable supporting input, but are typically not in charge.

Kosuke

how's the compensation for financial engineers? and how does one go on to get their MFE or whatever it's called? is it like i-banking where you work for a few years then get, or do you apply for and enter the 1 year program straight out of undergrad? hours and work environment?

wingardiumLeviosa

Thank you for your posts gentleman.

Monydad,

Who has a more responsible job - fin. eng. or i-banker? I remember you said that fin. eng. are "one type of expert" while i-bankers are "a team of experts".

Surely financial engineering isn't characteristic of the long, dreary hours of i-banking. Isn't fin. eng. more of an intellectual job?


What about money? Who gets paid more?

In your opinion, what is a more exciting profession of the two?

mahras2

I'll take a whack at this. Financial engineering attracts a different crowd than ibankers. Many fin. engineering guys end up going into the investment management business especially in quantitative trading funds or quant desks. These funds specialise in arbitrage, high frequency trading etc.

Trading is much more sophisticated now. Products are much more complex in nature and this has led to many fin. engineering guys to enter the trading floor as quant traders. Exotic options, FI derivs etc appeals to the fin engineering crowd.

As for being in charge, quants have been gaining much more prominence in finance and expect this trend to continue as products become more complex. Prop desks at ibanks are using quantitative techniques to gain returns and a lot of quants end up being in the head there. Quant hedge funds are managing much more assets now than ever.

As in any job, money depends upon your skill. The best quants and quant traders are highly compensated. Especially if you are lucky enough to get a position at a top notch hedge fund.

mahras2

Take a look at where these guys are headed from the Pton finance program: http://www.princeton.edu/%7Ebcf/mfaqapply.htm

As you can see a lot of quant-traders and a lot of analysts at quant asset management firms.