Before going to, what do investment bankers do, we need to understand in detail about the investment bankers. A person who helps the government, organizations, and corporations in generating more capital for them is known as an investment banker. He works as a part of any financial organization, and helps them. He is not the owner, and his main concern is to raise the capital of any entity. Usually, they work at investment banks, for example, JPMorgan Chase and Bank of America Merrill Lynch.
Either they are registered with an organization or not, but for large purposes, it is to help the organization and assist them in any financial transactions. Such financial transactions are overwhelmingly complex and mandatory for any organization. Such transactions are either based on the merger, acquiring and sales and one time transactions. They might issue the securities and raise the capitals. Insecurities, there are security exchange commission required securities that are required during some transactions.
They are financial advisors and act in the capital market, and the people raise money in the capital market by supporting and helping them. They are highly paid and undertake a large number of financial activities. That’s why they know how to gain as much as they can through a financial opportunity.
Saving time and money by advising is the first responsibility of an investment banker
When a company, organization, or individual is seeking the investment opportunity or starting a new project, they need some solid stats to rely on. So, what is this advice, in large part, coming from investment bankers? Why do they? Just because of his or her knowledge, an investment banker is a person who has complete knowledge about financial situations. This is because they are the person who has a figure on the pulse of the industry trends, investments and they are expert in financial forecasting approaches as they are experts and have a strong background in financial situations and current threats in the industry. So, they are very important at the time when companies decide to start new projects. Thus, all the business, either profit, and non-profit organizations have eyes on the investment bankers when they are deciding about new projects. So, in this way, investment bankers save their time and money as well.
When you are pricing your financial instruments
When an organization or business is trying to sell any financial instrument or investing somewhere, here, investment bankers navigate with the authorities and regulatory bodies. After holding initial public offerings, the investment bank purchased whole or partial shares as an intermediately. Here the bank works on behalf of the company who is going to be public. So, investment banks can sell public shares in the market, and in this way, the liquidity is created. Here investment bankers hold the share and advice for the pricing. He/she works as intermediates of the bank and investing bodies. So, they always need it at this time.
Facilitates the transactions at cross organizations
Sometimes, organizations need financial relations with other organizations; here, investment bankers facilitate the financial transactions among them.
- They facilitate transactions between two firms
- They facilitate transactions between firms and markets
- They facilitate the transactions within the same organizations
The purpose of the transactions is different; that’s why organizations need investment bankers because of their below-mentioned traits.
Top skills that are required to every investment banker in doing a good job in financial institutions
There are three types of skills required for a job, usually; obvious skills, educational skills, and experienced skills. For the highly paid investment bankers, the below mentioned skills have more importance, and such skill makes them valuable.
Relationship Building skill is mandatory for them; this intangible skill helps them in climbing the stairs and open new ways for a bright future. They should know about how to deal with extreme and complex situations, be energetic, and express a positive attitude, building good relations with clients and customers. Add to this; they earn a commission or a specific fee with the amount they raised, so they essentially need client retaining skills.
Going globally is also a part of their obvious skills, as people are connected around the globe. They are only connected because of the trade, business, and industry. By globalization, they would understand the multi-cultures, their behaviors, and investment opportunities. This will open new doors and opportunities for them, and they will know how to communicate in a couple of languages. So, knowing more than one language is a big opportunity for them; for this, they can also participate in abroad study programs, join foreign summits and conferences in their specific area of study.
Other roles of an investment banker
In addition to the above-mentioned skills, there are a lot more duties and tasks that they might have to perform during their jobs.
Assisting new clients with acquisitions and merging
They advise their customers about new investment opportunities and assist them. Such opportunities are usually found on the basis of the economic situations of the world, merging of organizations, and the happening of the other critical situations in the country. Likewise derivatives, and other unique opportunities for the investment.
Investment banker’s role in bond financing – arrangement of finance
Suppose a multinational company decides to expand its business by launching a new factory, they need finance. They can issue bonds, and investment bankers would help and advise them in doing so. On the other hand, if we talk about the government sector, they are going to finance a hotel near the airport. They need finance for it. They would do the same, by issuing bonds, they can do this, and they also need an investment banker. So, it is an example that an investment banker working with private as well as government companies is advising about the bonds financing. Add to this, here are the things to do for an investment banker;
- Preparing the security and exchange commission essential documentation for the issuance of the bonds
- Prepare a plan from start to end about the issuance of the bonds
- Set the price of the bonds that help in raising the capital
- Maintaining the demand of the bonds by setting the price of the bonds
- Work with the issuer of the bonds in managing all
Investment banker’s role in equity financing – arrangement of finance
When a company decides to issue IPO or initial public offerings, they need the services of the investment bankers. They play an imminent role when an organization needs more equity finance for some purposes. Such funds are required for the raising of the capital for the growth and new projects. Here are the things that an investment banker can do in managing all this;
- He advises the company about the procedures and set their need of the equity finance they actually need
- He decides the terms in compliance with the issuer and makes them publicly available.
- He also analyzes the risks associated with the issuance of the capital equity
- He followed the principles issued by the security and exchange commissions in order to get them in confidence.
- He also set the offering prices
- This is because high prices reduce demand. Ultimately the organization gets a low amount of capital equity. No one would agree to buy the equity. Moreover, it is essential to set the right prices against them.
- If you set the price lower than the standard price, then it means you are losing your money. This money can be your loss, and you have to set the right price so you could get the optimal rate of the financial statements.
Underwriting of the deals and minimization of the financing risk
When an organization is hoping to raise capital, there are many risks associated with it. Because investment bankers are responsible for raising them as they get commission and fixed price against the raised capital. So, it is their responsibility to carry the risk associated with them and take measures against it. For this, investment bankers undertake the undertaking of the decided deals. In order to manage this risk, they sometimes buy the securities from the issuers. After buying such securities, they can sell them to others like public and organizations buyers. This reduces the risk associated with them. Actually, investment bankers bought the securities at one price, and then bankers can add up an additional profit amount in them. In this way, they sell the securities to other public. This difference in price is their profit, and this is sometimes huge in numbers. They compensate for the risk that was associated with them.
Moreover, investment bankers usually work with the syndicate. These syndicates are the investment banks to whom bankers work in buying the securities. Syndicates include more than one bank and sometimes a group of investment bankers. Investment bankers work with syndicates because the undertaking risk could be a divide among a group of banks. So, the risks mitigate and diminish up to a great extent.
Add to the above discussion. Sometimes investment bankers only work on marketing your securities. They do their best offers and only market your securities, but they do not undertake the underwriting. If this is a case with you, then investment bankers only get paid by selling the securities. For example, they would have a chance to get a commission on the number of securities they sell. But this is the rare case and depends on what commitment and undertaking are undertaken between the issuers and investment bankers.
Investment banker’s role in private placements – arrangement of finance
When it is difficult for you to follow the security and exchange commission guidelines, and you have no time for their documentations. In this scenario, an investment banker can raise capital by other means; these are known as private placements. There is no cost involved for the public offerings, and here the private sector is involved. Here is an example that will elaborate on this concept. There might be institutional investors involved in purchasing the securities. These could be retirement fund companies and insurance companies. So, there are no SEC requirements that are involved in this scenario; that’s why it is faster and can be done in less time. So, if a business needs to raise its capital in less time, then private placement should be the first choice for investment bankers. Add to this; there are other rules and regulations for the private placement that are required to follow.
Investment banker’s role in merging of a business
Merging a company is like combining two companies, one company bought the other company. So there are at least two companies that are involved here. The companies need prices, the right price of the merging. So, both companies need investment bankers to set a deal in between. Here, different investment bankers are hired for the services of both companies.
Investment banker’s role in acquisitions of the company
Investment bankers are sometimes asked to acquire a company. When a company is bought or purchased, both companies require investment bankers. A company that is being sold needs investment bankers for the price calculation of their assets. On the other hand, the buying company and interested in buying the company need to set the offer. Here both companies hire different investment bankers. Here a conflict arises sometimes; two different companies investment bankers can’t stand at the same range easily. Sometimes, they have to fight a long battle against the offers and prices they set. So, it is a lengthy process, and investment bankers need it in this process too.
Research and day to day analysis
When it comes to financial decision making, the huge risk is involved in it. For this, Investment bankers do research all the time and update themselves with the new happening and opportunities in the field of finance. They get all the relevant information and analyze the market reports and other databases. This requires several hours a day, and this is mandatory for them. They also compare the stocks of a few companies, their published reports, and profiles. Add to this, they also have to update them about the productions, technologies, and new innovations that can impact their respective business.
Evaluations and financial modeling is another essential task
People ask, “What do investment bankers do?” The most important task is to shape the research they conducted and make it in a proper form on which basis one can derive the results. For this evaluation of the data, good mathematicians and stats experts are required. This is their day to day work requirement; In order to draw the carts, forecasting and predicting the performance of a company, they are required MS Excel expertise. Here one investment banker can shape the data they need for financial decision making.
Presentation on the investment opportunities
Such presentations comprise the proposals outlines, graphical representation of the data analysis, and forecasting. Add to this, all the risks, benefits, pros, and cons are mentioned in them. So, they work many hours in building them in a representable form. Such presentations also include the comments and advice from the seniors and more experienced persons. They might have strict deadlines for the data presented, that’s why they are also experts in MS PowerPoint, and it is their duty to show the data in a manageable and understandable way.
Administrative tasks assigned to the investment bankers
In addition to the above-mentioned tasks and duties of investment bankers, and in the reply of the phrase “what do investment bankers do?”, there are also some administrative duties imposed on them. That might be necessary in order to keep the flow of the work. These are not defined but might the following;
- Meetings with clients, organization and planning
- Arrangement of the transportation and traveling for the meetings purpose and companies data analysis
- Making notes, agendas of the meetings and minutes of the meetings are also prepared by them
- Edit reports, print reports, revise them, extracting meaningful information from the reports and provide a reference of the reports
- Managing their own teams, their tasks and updates to them
- Arranging other things like coffee, dinners with clients, most of the times they are also called mini admins
Investment banker’s day to day responsibilities
Sometimes it is asked about the investment bankers, do they have something other than accounting, finance, and workload. Its answer might be no, as there are too many work responsibilities in their lives. Most of the time, they have to work around seven days a week to manage their tasks. In addition to the above-mentioned duties and roles. They advise on how to raise capital in the markets, assisting their day to day clients, merging and acquisitions of the large entities, advising customers and clients on new investment opportunities is a very risk-taking factor. So, after this, you have an answer to this famous phrase, “what do investment bankers do?”
It is very easy to say, “what do investment bankers do?” they have a large number of duties pertaining to financial advice, risk-taking, support, help, and enhancing the liquidity of the company. Add to this; they need a highly intellectual level, expertise in MS excel and power points, and day to day management of things. They have to take care of their teams, manage transportations, and perform all the mini admin tasks.