How Much Does an Investment Banker Make? (With Tips)
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If you're interested in a career in the financial sector, working in an investment bank can be an attractive career path. Investment bankers manage and grow their clients' financial assets. Knowing more about this career, including their average salary, career prospect and relevant certifications, can help you determine if this is the right career for you. In this article, we discuss the answer to the question "How much does an investment banker make?", explore their roles and duties and explain how you may increase your earning potential.
What is an investment banker?
An investment banker is a financial specialist who gives financial advice to individuals, corporations and the government on achieving their financial or business goals. They may help companies raise capital by issuing debts or selling equity in a company for expanding and restructuring their businesses. Investment bankers also help clients go through an initial public offering (IPO) process. While the daily responsibilities of an investment banker may vary depending on their exact role, here are some of their common duties:
create presentation materials, such as pitch books and investment memorandums
perform due diligence, research, analysis and financial investigations
help clients oversee merger and acquisition processes
supervise and manage IPO procedures and determine IPO prices
examine and evaluate risks during different financial actions and provide suggestions to minimise the risks involved
help clients buy and sell investments, stocks and trusts to increase their capital
identify potential investment opportunities
prepare necessary legal and financial documents during different transactions
analyse a company's operational or financial performance
Read more: How to Become an Investment Banker
How much does an investment banker make?
Knowing the answer to "How much does an investment banker make?" can help you make strategic career decisions before working towards this career. The average salary of an investment banker is $1,192,305 per year. Investment bankers working in different levels of seniority and different sizes of banks may earn different salaries. Larger investment banks often offer better compensation. An investment banker's salary package often includes bonuses and commissions, so their income can vary depending on performance and experience.
What is a bonus?
An investment banker's salary package usually consists of a base salary and a bonus. There are different types of bonuses that are offered by investment banks to attract qualified candidates. Here are some different bonuses an investment banker may receive:
Stub bonuses usually apply to newly hired university graduates. New investment bankers generally receive their stub bonus five to six months after starting their job. Investment bankers pay stub bonuses because regular bonuses are generally calculated yearly ending on 31 December, but banks hire university graduates in the middle of the year.
Investment bankers receive year-end bonuses after working in a new company for over a year. Your year-end bonus is usually based on your job performance compared to your peers within the same bank. The amount can also vary depending on your rank, base salary and any notable achievements. Many investment bankers offer bonuses in cash, but some may offer stock compensation.
Many investment banks offer signing bonuses to attract more experienced and qualified candidates from their competition. A signing bonus is a lump sum paid to you when you officially sign your new employment contract with the new bank. Your potential signing bonus depends on many factors, such as your role, experience, client base and current market and economic conditions.
Investment bankers may also earn commission based bonuses when they introduce a client or deal to their employer. A commission is usually a set percentage of a transaction's value or a set amount. The higher the transaction value of a deal, the more commission an investment banker may potentially earn. Investment banks often offer more experienced and specialised investment bankers higher commission rates.
Types of investment bankers
There are different investment bankers that specialise in specific fields, such as:
Corporate finance: Investment bankers who specialise in corporate finance focus on helping enterprises and businesses in mergers and acquisitions. They also assess clients' profitability and provide financial advice on executing initial public offerings, improving market value and expanding business segments.
Equity capital markets: Investment bankers specialised in equity capital markets aim to help clients buy or raise capital, usually through publicly or privately issuing equity instruments, such as shares. They also provide clients with practical advice on how much capital they need and how to raise their capital through comprehensive research.
Debt capital markets**: Investment bankers focused on debt capital markets help companies raise funds through debt instruments, such as bonds and loans.**
The working environment of an investment banker
If you're interested in becoming an investment banker, you may want to know more about their working environment. Investment bankers usually work in an office environment on a team specialised in certain areas. For example, you may work on a team that focuses on servicing clients in the energy sector. Investment bankers sometimes travel to other offices or countries to meet clients or inspect a company's facilities. The investment banking industry is fast-paced and diverse, so investment bankers usually work longer than average hours, including nights and weekends. They often have new challenges to tackle daily.
Tips on increasing your earning potential as an investment banker
Below are some tips on increasing your earning potential as an investment banker:
Gain more experience
Investment bankers with more practical experience and a stronger portfolio of successful deals usually receive better salary packages, such as better commissions and larger bonuses. As you complete more deals, you may develop a larger professional network that may result in job referrals with higher compensation. Getting promotions to more senior investment banking roles that involve leadership and management duties often results in significant salary raises.
Pursue certifications and advanced education
Many employers expect investment banker candidates to have strong academic backgrounds. Investment banks also often hire graduates from disciplines aside from finance. You can consider enrolling in a master's programme or obtaining certifications in finance-related topics. Increasing your qualifications can help assure employers of your strong skill set and ability to excel in a role. Improving your resume may also lead to increased job opportunities and better salary packages.
Work in different companies and sectors
Working in different companies can help you increase your professional network and increase various skills, such as critical thinking, teamwork and problem-solving, as each company may have its own challenges. Working in different sectors helps expand your knowledge of different business models. New employers also often offer better salary packages if you're a highly qualified candidate. You can consider approaching professional recruiters to help source job opportunities with better compensation terms.
Negotiate for a better compensation
If you've gained some new certifications or improved your job performance, consider negotiating your compensation with your current employer. When negotiating, try to gather quantifiable evidence, such as the number of deals you've completed or the amount of revenue you've helped generate, to present your case and convince them why you deserve better compensation.
You can also monitor industry trends, such as if competing investment banks increased their bonuses. If you're able to secure a job offer with a better salary package, you can consider negotiating with your current employer to see if they're willing to match or improve upon the offer.
Similar jobs in investment banking
Here are some of the similar jobs in investment banking:
Average base salary: $339,258 per year
Primary duties: Some small investment banks may also hire financial planners to help provide clients with expert financial advice on growing or maintaining their assets. Financial planners perform market research, conduct risk analyses and design financial strategies to meet the needs of their clients. They also promote financial products offered by their employers to potential customers.
Average base salary: $369,732 per year
Primary duties: Investment consultants specialise in providing tailored financial advice to their clients. They may help their clients identify investment goals, formulate investment strategies or restructure their current financial portfolio. They may also prepare financial presentations and ensure their clients comply with regulatory guidelines.
Average base salary: $448,049 per year
Primary duties: Investment analysts primarily perform research-based duties to provide valuable information to senior investment bankers, fund managers and traders, so they can make more informed investment decisions. They assess and interpret a wide range of market information, such as financial reports and economic and political news. Many investment analysts specialise in certain sectors, such as retail or automotive. They may also focus on a specific geographical region.
Salary figures reflect data listed on Indeed Salaries at time of writing. Salaries may vary depending on the hiring organisation and a candidate's experience, academic background and location.
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