What do IB analysts actually do?

Investment bankers are responsible for a wide range of duties including raising capital, providing advisory services for mergers and acquisitions (M&A) and other corporate transactions, completing valuation work, and marketing the value of the banks’ expertise to client companies.

INVESTMENT BANKING ANALYSTS

Investment banking analysts are the workhorses of an investment banking team; they are typically straight out of top undergraduate programs, and join the bank for a two-year analyst program starting in the late summer after graduation, with the possibility of a third year option in certain instances.

The Bulge Bracket banks will send their analysts through approximately two months of intensive technical job training to prepare for the workload ahead. This involves going through classroom-style teaching, learning the ins and outs of accounting, financial statement analysis, corporate finance and valuation, and financial modeling, with specific training in needed computer applications such as Microsoft Excel and PowerPoint.

Generally, the role of an analyst is to perform the bulk of the analytic work needed to facilitate these corporate transactions, and this typically involves a lot of work with presentations and models.

• Presentations, or Pitch Books, are simply marketing material for the bankers to present to their corporate clients. These PowerPoint presentations get printed and are bound for meetings with clients/companies. Pitch Books will generally be 30-40 pages in length, though in some cases can be substantially longer; they will show the bank’s qualifications, recent industry data, sample transaction and analysis information, and advisory recommendations.
• The analytical work consists of building and perfecting financial models for any given corporate situation. We will get into this in further detail later, but this work will typically include Discounted Cash Flow (DCF) analysis, Comparable Companies and Comparable Transactions (Comps), M&A models, and/or LBO models.
• Analysts will spent substantial time repeatedly building and evaluating different financial alternatives for the client. One example might be running M&A models and showing the accretion/dilution effects to earnings based on different allocation scenarios for debt and equity in the proposed transaction.

If your biggest fear is being on call 24 hours a day and potentially working through the night, then investment banking is almost certainly not for you. Investment banking analysts generally work 80-110 hour workweeks – expect to have very little free time outside of the office, especially during the first year on the job. (Yes, that includes most weekends!) While the hours are strenuous, the cost is worthwhile for those who treat investment banking as a stepping stone for their career: junior bankers who excel in their position generally have a wide array of lucrative opportunities in front of them at the end of the analyst program. It is very common for investment banking analysts to work a few years in the industry and then transition into roles in such areas as Private Equity or Hedge Funds, which we will discuss in more depth later in the series.

If you’re looking to launch a career in the investment world, the role of junior analyst is the place to start.

This comprehensive guide will tell you everything you need to know, from the general responsibilities you’ll undertake, to the key skills you’ll need to highlight to potential employers.

What Does an Investment Analyst Do?

As an entry level position, an investment analyst’s role is to provide key decision makers with the insight they need to make and manage profitable investments.

Investment analysts are employed by various entities, including:

• Investment banks
• Private equity firms
• Pension funds
• Investment management companies
• High wealth individuals
• Stockbrokers
• Charities
• Large corporations and private companies

The exact responsibilities you’re tasked with will depend on the nature of your employer, but in most cases, you’ll work as part of a wider team, responsible for researching and analysing economic trends, investment opportunities and/or existing investment performance.

You’ll use your skills in data gathering and interpretation, along with your financial acumen, to make recommendations to senior staff, portfolio managers or clients.

Daily activities undertaken by an investment analyst include:

• Research into a company's financial standing to determine its investment potential – for example, analysis of cash flow statements, balance sheets and profit and loss
• Gathering information on the economy, financial markets and pertinent world events, and evaluating potential impact on investments
• Building financial projections using methods including merger, discounted cash flow, consolidation and leveraged buyout models
• Compiling detailed reports and presentations for use in deals and pitches
• Making informed investment recommendations, clearly communicating risk and potential for each
• Reviewing all work carried out by yourself and your team to ensure accuracy and compliance

Most investment analysts specialise in one area, like a specific industry, such as healthcare, manufacturing or a specific geographical zone.

The Work Environment

Life as an investment analyst requires a lot of commitment. Historically, working hours could total up to 100 per week, including early starts, late finishes and weekends.

There’s been more of a focus on a healthy work-life balance in recent years, but you should still expect long days, sometimes of 10 hours or more.

You’ll need to be flexible, since there’s often a need for all hands on deck in the last-minute stages of any investment deal, and travel may sometimes be required to fulfill your role.

It’s also a highly pressurised environment. You’ll regularly be working to tight deadlines with high-stakes consequences, so it’s certainly not a role to consider if you’re of a nervous disposition.

Despite all this, this is a profession that sees some of the highest graduate salaries, and the role itself is likely to lead to a very lucrative career.

As an investment analyst, you can expect to have a plethora of well-paid opportunities in the future, provided you’re willing and able to put in the groundwork.

What Skills Do You Need to Be an Investment Analyst?

To successfully land an investment analyst role, you’ll need to demonstrate a combination of both hard and soft skills.

Soft skills are the inherent qualities you possess that make you a natural fit for this line of work, while hard skills are the technical abilities you’ll have acquired through education and work experience.

Key Soft Skills

• Communication – Investment analysts need to clearly communicate complex information, and work effectively as part of a team, so strong communication skills are a must.

• Self confidence and decision making – Because you’re responsible for supporting key decisions, you’ll need to be confident in your ability to formulate, present and justify recommendations.

• An analytical mind – It goes without saying that an investment analyst needs to be analytical, so you’ll be adept at objective evaluation and take a logical approach to problem solving.

• Determination, motivation and initiative – You’ll be working in a fast-paced, pressurised environment, will need to take responsibility for your own workload and remain energised in the face of any challenges sent your way.

Key Hard Skills

• Financial statement analysis – This sits at the core of all investment decisions, so you’ll need to demonstrate skills in interpreting balance sheets, income and cash flow statements.

• Financial modelling – You’ll be responsible for making financial projections for various possible scenarios, so will need experience in techniques, including discounted cash flow and leveraged buyout models, for example.

• Investment strategies – To assist in improving portfolio return, you’ll be tasked with exploring varying investment strategies, so you’ll need a keen understanding of the potential outcomes of each, and how they may impact on investment objectives.

• Risk management – An analyst's role involves security of all existing investments, and as such, you’ll need to be aware of all potential risk factors and how best to mitigate them.

• IT skills – As well as general IT skills, proficiency in Microsoft applications such as Excel and PowerPoint are required, since you’ll be using these on a daily basis.

The above skills list is not exhaustive. Depending on the employer, you may also be asked to provide evidence of portfolio, credit analysis, asset allocation or private equity experience. In some cases, a second language may be beneficial.

All employers will also expect you to hold a vested interest in economic and current affairs, and above all, a commitment to career development.

How to Become an Investment Analyst

This is a profession that requires impeccably high standards, so you should be aiming to achieve a minimum 2:1 in a finance or business related degree, such as economics, accounting, statistics or business administration.

Since they play such an integral role in the job, you should also look to master Excel and PowerPoint skills, though in most cases this will form part of your degree program anyway.

A master’s qualification, such as an MBA is often helpful when it comes to securing your first job as an analyst, but it is not essential.

During education, seek out work experience, such as a summer internship. These can often turn into full-time analyst positions since many employers use them to pre-select their next intake of graduate analysts.

You won't be doing exactly the same work as a full-time analyst, but you will work on real world projects, taking on a number of key responsibilities to support existing analysts.

Competition for these internships is extremely high, so any other work experience you can obtain prior will be beneficial to your application.

On completing your education, you’ll need to apply for a graduate scheme. Again, competition here is tough.

The application process is likely to involve an assessment of your qualifications and experience, aptitude tests, an assessment centre and several rounds of interview.

If successful, you’ll spend an allocated amount of time in your analyst role and receive ongoing training and support.

In investment banking, graduates typically spend three years at analyst level before being considered for associate posts.

Salary and Typical Career Development

Despite being renowned for its intense workload, the world of investments is also known for being one of the most highly compensated careers.

A typical starting salary for an analyst working in London is between £30,000 and £40,000; these figures are likely to be less outside of London, but possibly more in other financial hubs like New York, Tokyo or Hong Kong.

A key aspect of remuneration in this profession is bonuses; an annual bonus will often match or exceed an individual’s basic salary. Possible bonuses for analysts in the first three years range from 10% to 100% of salary.

After five or more years in the industry, salaries jump to over £70,000, with bonuses of up to 150%. Senior-level positions see salaries of over £110,000, with bonuses often reaching 200% of the salary.

The position of analyst is renowned for being short-term, and used as a stepping stone to other positions which offer higher rewards for fewer hours and less admin-style work.

You could aim for a more senior position in investment banking or a job in a different financial sphere, like hedge funds, corporate development, venture capital or private equity.

Opportunities for career development in the form of qualifications are plentiful.

Your company will likely want you to achieve financial certification in the form of the Investment Management Certificate (IMC) if you are working for an investment management company or the Chartered Financial Analyst programme (CFA) if you are working for an investment bank.

The latter takes four years but is considered to be comparable to a master’s degree.

How to Know if the Role of Investment Analyst Is Right for You

Before you look to gain entry into this challenging profession, it’s well worth taking stock of a few things to ensure it’s the right path for you.

Ask yourself the following questions, and be honest in your answers:

What Are My Career Aspirations?

Whether or not the role is right for you will largely depend on your long-term career goals.

One of the benefits of being an investment analyst is the range of opportunities it gives you in the long run, and it certainly lends itself well to future progression.

However, if your ultimate goal is a role in finance outside the investment sector, there may be better suited entry paths that exist in a less pressurised environment.

How Much Commitment Am I Willing to Make?

Long hours and personal sacrifices are part and parcel of this role, and if you’re not prepared to take them on board, it’s not right for you.

The good news is that if you can handle the commitment, it’s likely to be short term – two or three years of grunt work is usually enough to see you progress to a role that, whilst still taxing, is less so than that of an analyst.

Does My Personality Suit?

Investment analysts need to be made of strong stuff. You’ll work well under pressure, be resilient, determined and a good team player.

A lot of the work at this level can seem quite menial, so you’ll also be comfortable with repetitive tasks.

Try taking a career personality test to see if your characteristics suit.

Final Thoughts

The role of analyst is not to be taken on half-heartedly. Breaking into the industry is difficult and requires considerable dedication. Once working as an analyst, you will find yourself with very little free time.

The role of the analyst is to support senior staff with anything they need, and some graduates are often disappointed when they start out and realise how mundane some of their day-to-day responsibilities are.

However, if you’re focused on a long-term career in investments and can look past the initial hardships, a role as an investment analyst can lead to a highly lucrative and exciting future.

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