Why Investment Banking? A Career Guide


why investment banking

Investment banks are among the prestigious banks to join and have an incredible experience. Joining an investment bank requires passing through multiple interviews. 

During interviews, investment bankers usually ask why you choose investment banking. They want to know your real aim in selecting an investment banking career

Some questions are generally asked to test your knowledge/view on investment banks, while others will determine whether you stand a chance to get the role. So, your response will decide whether or not you are fit for an investment banking role.

Simple answer to – Why investment banking?

Your answer should give interviewers your skill awareness. How well you understand working roles will also be noticed in your response. Below are some excellent responses:

  1. Investment banking offers many learning opportunities. These learning opportunities include financial modeling, Excel, and valuations. Others include understanding private equity and corporate finance. 
  2. Investment banks offer opportunities to work dynamically with different teams. It also provides opportunities to work with the largest companies in the world. Investment banks offer opportunities to work with intelligent and motivated senior colleagues.
  3.  Investment banking offers exposure to excel, PowerPoint, modeling experience, and Capital markets.
  4. There is exposure to steep learning curves in investment banks’ business models and industries.
  5. There is exposure to capital markets, corporate development, and financial Forecasting in investment banks.
  6. There is exposure to various client services and opportunities to work with intelligent people.
  7. Opportunity to work in different investment banking divisions to have various unique experiences.
  8. Opportunity to have relevant experience working with the largest companies in the world. 

3 Hints interviewers will get from your response

Whenever this interview question is asked,” Why investment banking.” Think carefully before answering the question. Your answer will determine 3 things:

  1. How well do you understand the industry?

Interviewers will test your knowledge on how well you know the industry. A relevant understanding of financial management and private equity will be tested. Skills in financial modeling and asset management will also be tested.

  1. Extent of knowledge on the role applied

Interviewers will know whether you know what investment bankers do. You will be working long and late as part of your role.

They will also know whether you understand staff hierarchy. Interviewers will see whether you understand there is a high workload with little time to chill.

  1. How well do you understand yourself? 

This will help the interviewer see your ability to connect education, ambition, and work experience. Interviewers will see how well your financial skills and attributes will work. They will also know your reasons for applying for specific roles.

3 Positive reasons to venture into investment banking

  1. Exposure to high-profile transactions

The transaction profile is the details of the transaction. High profile means transactions are top secret until revealed by banks. Revealed transactions appear on the front page of the business section. Keeping transaction details secret will give the total owner control and prevent identity theft. A successful investment banker should be able to keep all transaction details a secret.

  1. Financial modeling and valuation work

There are many opportunities to excel in valuation and financial modeling work. Bankers do not invest but spend long hours on valuation work. Knowledge and experience gained can help in starting a new career. There is exposure to many financial models, such as budgets and consolidations.

  1. Motivated by extreme challenges and steep learning curves

A steep learning curve is a good feature of investment bankers. A banker should be motivated to take up every challenge without panicking. Not only that but excelling in every challenge is also essential. Motivation and excelling in challenges are crucial strategies to being a successful investment banker.

3 Negative reasons to venture into investment banks

As much as there are positive reasons for venturing into investment banks. Negative reasons exist as well, and some of these reasons include:

1. Exposure to financial modeling 

Many people might join investment banks because of exposure to financial modeling. Investment banks’ ability to build various models for financial transactions is a unique feature. As much as bankers undergo mundane things, they also learn a lot.

2. Attracted to the pay 

Some people might be attracted to an investment bank due to the banker’s salaries. People should know that nothing comes easy. These huge salaries are associated with bulk work, dedication, and commitment.

3. As a means of stepping stone to something else 

People might use investment banks to generate hedge funds for getting into other things. Funds generated can be for getting into private equity or other things. When a company hires you, they have a mindset of you staying with them. Always go into any work with commitment and dedication and nothing else.

7 Services offered by investment banks

There are essential roles an investment bank is expected to perform effectively. Some of these roles include: 

  1. Underwriting 

Underwriting is essential in investment banks. Banks used underwriting to raise capital from investors to their clients. Money raised can be in the form of equity and debt securities. Underwriting advisory services are in 3 phases. These phases include:

Phase 1: Planning 

This phase is essential in understanding investment rationale and investors’ demand.

Phase 2: Demand and Timing

Factors essential in raising Capital successfully are considered in this phase. These factors are critical to assessing the timing and demand of an offering. The factors include

Phase 3: Issue Structure

At this final phase, the investment banks will build a plan for how to position the issue, whether locally or internationally. The final price and sales process are determined also including the investors that would participate in the issue. The factors include: 

  • Investors’ experience
  • Current news flow
  • Current market condition
  • Current investor appetite
  • Precedents and benchmark offering
  1. Mergers and acquisitions 

Mergers and acquisitions services are a unique feature of any investment bank. This is a consolidation of assets and companies through financial transactions. Mergers and acquisitions are corporate finances

The leading roles of mergers and acquisitions include seller representation and buyer representation. Investment banks aid sellers in projecting themself and designing merger targets. On the other hand, they also aided in the merger’s success. They usually calculate the value of a company. Then, they built a strategy for the merger and acquisition of two companies. Their primary role is issuing new securities to the market

Mergers and acquisitions are also essential in asset management. Clients usually have satisfying details to help decide whether to release assets.

  1. Risk management 

Risks are expected to be encountered in investment banks since all processes involve capital. There are many investment banking divisions to handle risks that might arise from transactions. Investment banks limit the excess risk to avoid loss in trade. They usually do this by:

  • Helping the company recognize areas that might encounter loss 
  • They control credit risk by spreading counterparties and choosing trading exchanges

There are different types of risk to be encountered by every business. These risks include: 

  • investment risk
  •  legal risk
  •  compliance risk 

An investment bank internally controls all of these risks.

  1. Research 

Investment banking firms are also involved in equity research. This research is essential in rating a company and helping investors decide.  Equity research is important in capital market banks because it details the company’s rate. You can buy, sell or hold your asset based on the company’s rating. 

Capital market banks are involved in many types of research. Examples of research include microeconomic, qualitative, fixed-income, and equity research. Investment banks share research reports with clients to aid in generating profits. Research reports are also essential in asset management for clients. 

  1. Merchant banking 

Merchant banking entails a process where banks do consultancy for their clients. Consultancy by capital market banks acts as a financial engineer for business. Capital market banks provide many consultancies. These consultancies are in managerial, marketing, legal, and financial matters. The consultancy results are crucial for the following purposes:

  • Leasing services 
  • Portfolio management
  • Asset management
  • Managing public issues of companies 
  • Money market operations 
  • Raising finance for a client 
  • Provide special aid to startup companies and entrepreneurs 
  • Handling government consent during industrial projects
  1. Structuring derivatives 

Derivative products are those products that usually offer a good margin and high return. As much as they provide high returns, they are associated with multiple risks.

Capital market banks usually prepare single and multiple securities for the derivatives. To structure a derivative, investment banks need a technical team to work on derivatives. Capital market banks also help in providing features and options for derivatives. The options provided are essential for generating an excellent return for investors.

  1. Investment management

Investment management is an important function of capital market banking. This is essential in guiding investors in purchasing and managing portfolios. It is also crucial in trading various securities. 

Reports are prepared, and financial securities are decided based on the company’s performance. Advises are also provided based on investment amount, client objective, and periods. 

There are many segments in investment management based on customer demands. Components include wealth management, private wealth management, and private clients. Capital market banks also tip investors on asset management based on customer portfolios.

What are the roles of investment bankers? 

Investment bankers perform many essential roles which include: 

  • Helping the government, individuals, and corporations in managing projects
  • Having an excellent investing climate to ascertain the risk associated with projects 
  • Saving clients time and money by handling risks associated with projects
  • They advise financial institutions and businesses on development planning in the financial sector
  • They also tailor recommendations to the present state of economic affairs
  • Investment bankers also design various financial models for clients

What is the staff hierarchy in investment banks? 

Every investment bank operates based on a rigid staff hierarchy. Staff hierarchy is more strict than most corporate or financial institutions. The standard investment banking career order is as follows: 

  1. Investment Banking Analysts 

Nearly all newly recruited bankers start as analysts. They usually work for 2 to 3 years before applying for higher ranks. Higher-ups usually call analysts monkeys sometimes and give them orders. Analyst life is generally filled with excel, PowerPoint, research, and little sleep. An analyst is also a computer technician and a personal assistant.

  1. Investment Banking Associates 

Most bankers from this category come from top MBA programs. Others are chosen due to impressive performance from another local financial firm. Analysts groom others for a few years. 

Investment banking associates are treated differently based on their yearly experience. Investment banking associate work is mainly based on communication. They spend time processing communication between senior bankers, analyst teams, and others.

  1. Vice President (VP)

Vice president carries the first legitimate title for senior bankers. They have their thoughts and opinions and are treated with respect. Their work is centered on pitching books and managing client relationships. VP usually coordinates a team of associates and communicates with clients. They are known for creating and maintaining good client relationships.

  1. Senior Vice President 

The senior vice president is also called an executive director or principal. The responsibility of the senior vice president is prospecting new business.

  1. Managing Director 

A managing director oversees and manages all bank affairs. Their primary role is to provide a way to make lots of money for banks.

Investment Banker Salary and Bonus Report: 2023 Update

why investment banking Investment Banker Salary and Bonus Report: 2023
Source: mergersandinquisitions.com


“Why investment banking” is a question that cannot be bypassed in every interview. The bankers usually ask to know your aim of joining the bank. There are many good answers to this question.

Your response might prove if you are competent or not. Exposure to financial modeling is among the good aims of joining the bank. Being attracted to a salary is a bad objective for joining the bank. 

The bank offers many essential services, including research and underwriting. Investment bankers play many crucial roles, including tailoring recommendations to investors. There is a staff hierarchy in investment banks with unique salaries.


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