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Edited By: Andrew Gonzales
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#business #careers #investmentbanking
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There are not many industries that are as hated and misunderstood as investment banking and it’s easy to see why. Investment banks are not banks and they don’t usually invest in anything either, so what do these guys actually do?
The average salary for a first-year investment banking analyst at Goldman Sachs is one hundred and twenty-three thousand dollars a year, and the median bonus received on top of that is eighty thousand dollars a year. An analyst performing at the top of their cohort can work their way up to associate, VP and then managing director in less than ten years. MD’s doing their job well can make a million dollars a year from base plus bonus.
A seven-figure salary before thirty is why so many people want to become investment bankers even if they don’t know what the job involves and that can be a huge mistake.
A survey of first year Goldman Sachs analysts brought working conditions at these banks into the spotlight. The average analysts reported working ninety-five hours a week and getting less than five hours of sleep a night.
Individuals reported showering once a week, too afraid to leave their desks because they would be shouted at by their superiors.
So what tasks are these smelly analysts completing in their ninety-five-hour weeks? The role of an investment bank is to link up investors and companies seeking their investment.
The name investment bank makes a lot more sense when you think of a “bank” as a middleman. The word bank comes from the Italian word banco which means bench, like the benches that merchants sat on in market squares.
An investment bank is just a middleman between wealthy investors and investment opportunities.
To make matters more confusing some of the biggest investment banks like Goldman have all diversified beyond just investment banking services. Goldman now has four primary divisions. It has a propriety asset management division where the bank uses its own money to invest in the markets like a hedge fund.
It’s second division is regular investing and lending like any normal bank further adding to the confusion between a bank and an investment bank.
It’s third division is institutional financial services. These guys provide coverage to investment funds with margin loans and trade executions. You can think of this like a robin hood account for the biggest investors in the world.
If you have ever watched the show Industry, institutional financial services is what most of the plot is focused around NOT investment banking. Goldmans fourth division is just for investment banking that is kept totally separate from the rest of the bank’s operations.
There are also smaller firms in the industry often called bespoke or boutique firms that JUST do investment banking.
The actual tasks completed by the people working in the investment banking divisions of banks like Goldman or a boutique firm like the one I used to work at It’s a lot more excel and PowerPoint than six screen Bloomberg terminals and high-octane sales calls. An investment banker is all about putting deals together, a lot like a real estate agent but for companies instead of condos.
5% of the time the client will be a buy side customer looking to buy a company. The buyers fall into two categories, strategic buyers and financial buyers. Financial buyers are just looking for a good return, these clients will be private equity funds, hedge funds or family offices that want exposure to a company that is not publicly listed.
One client that I dealt with wanted to sell two hundred million dollars’ worth of equity in his company to buy a sports team. My team was able to conduct strategic analysis and found that instead of selling his shares he could get a loan from the company, pay it out through a dividend and buy his sports team without selling his company.
As an analyst or associate you will have very little to do with step one which is landing these deals anyway, if you are lucky you might be invited to a client meeting by your MD or VP who are the senior employees responsible for securing the business.
So it’s time to learn How Money Works to find out what you would actually do if you became an investment banker and you were just handed your first deal to work on
I don’t really get the point of promoting the stocks to be bought.
Surprising that investment bankers are just glorified salesmen. I guess thats pretty much every businessmen too
People literally died in their office is enough to tell me Im not cut out for that kind of life.
Only a matter of time before their jobs can be done by AI. TikTok…
I would actually fit this job perfectly
Any video related to money on YouTube
Le scammers in comment section : this is my place
Thanks, great video
As a wise man once said-
"We're not lawyers, we're investment bankers. We just call you for the paperwork. We didn't go to Harvard, we went to Wharton, and we saw you coming from a mile away"
So what is buy in to get these awesome I-bankers to tell me what to invest/buy?
But then don’t need work so long. There is only so many investments they can pitch and only so many to pitch to. In other words there is low cover turnover when dealing with that much money. Is all an excuse to distribute money to people they can trust in order to perpetuate the aura. They aren’t really doing anything meaningful at all.
Unless all I-Bankers really do is move a pool of money to one another. The more hours working means faster velocity of money. Like you get cash from Firm A. You give to Firm C. Firm C gives Firm D the Firm D gives back to you. And repeat. More hours worked means this moves faster. So when some one needs for split second they have then onto next.
They f money out of people and get away with it.
Guess they invest
This sounds like a bunch of bolonie like when the rich tell you money isnt everything its like trying to tell people theyre suffering alot for that absurd amount of salary
Something I think you skipped over that I would highlight as someone in FP&A is that when we're trying to buy or sell a business, we (corporate finance) are already working full-time at the business, and organizing and answering the thousands of pages of requests in due diligence without anyone else would be a nightmare.
It's also a reason why the hours are so long in IB; because if there's questions we need to discuss they probably gotta call me outside of office hours, add on timezone differences and it's not unusual to be talking to someone in new york at 9pm while I've just gotten home on the west coast.
This is an excellent video
Extremey well done. I had an opportunity to go into investment banking until my dad got sick and I chose to take care of him. Always wondered what it would have been like
Sir this is just a suggestion and a request please do try to include the links of the sources from where one could further study and research about the topic, it would be more beneficial in educating the people, and for broader audiences like research scholar, entrepreneurs, people interested in knowing more, and students, it may even help you get a few more sponsors (like the website you will use for research) for your time and effort, it's a win-win for both you and your viewers, please do consider. Thank you.😊 Really need these contents.
so in simple terms "Investment Banking is like giving people signals and they pay you comission" like in trading when someone sells signals they basically doing Investment Banking cause they are selling investment opportunities to those with leverage ite?
lol I like how you use the traders setup for the thumbnail
– xoxo, trader at Goldman Sachs
Don’t even bother trying to become a true investment banker if you have not gone to an ivy…they don’t bother with you. Plus it’s only 120,000 in New Yorks which is a joke. They bleed you out and could care less about you. Even if you get lucky and bust your ass maybe you get to move up past an analyst. The majority get stuck at that level and then they burn out. Nobody cares….find another way to make good money and live free and happy. Start a company and put your hard work into it. Trust me…in the end that’s what IB analysts end up doing…that or get into trading and then go to a hedge fund out the city. Then you make sick money but you better have contacts…without those you are useless. You also better have a way of getting information on company’s ahead of your competition….but you won’t…Welcome to finance.
These investment bankers and mutual funds peddle mutual funds regularly. I understand all investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. But if I can make more return on investment with individual stock at a given time, should I still choose mutual fund?
'How they earn their $500,000'
Simple answer, they dont, the average salary for an investment banker makes about 100k.
The concept of investment banking isn’t evil or bad. But when you get organizations like HSBC and Wells Fargo running borderline criminal enterprises it’s hard not to question if modern day investment banking has gone down the tubes
Is 95 hour work weeks even worth it at $200k total comp? I'd reckon prob not.
Excel will be your only friend.
They screw you out of every dime that’s how!
They do NOTHING of value to humanity.
I had problem comprehending trading in general. I tried watching other YT trading channels, but they made the concepts more complicated. I was almost giving up until when I discovered your channel. I love the way you break down the content and explain everything in detail. The videos are easy to follow
Thanks!
tbh, what a useless and needlessly difficult job. Thank god i didn’t go into investment banking 😂😂
In other words……they sell something to someone who buys something so they can buy something 😊
I was able to achieve $350,000 a year by 30 while working about 35-40 hours a week. To me this is a better win than 95 hours a week at $500,000. In my experience, after about 230k your lifestyle doesn’t change much unless you’re going to get into the millions per year.
The funny thing that I did this job 30 years ago before tech took over. Yahoo finance can basically do the same work load in 15 minutes that corp fin analysts did in 3 days. The advisory business hasn’t changed much in 30 years so the long hours don’t add up with today’s tech advantage. You can start from nothing and create a sell side pitch deck in 12 hours that would have taken a week decades ago. I’m thinking there is way more face time these days than actual work time.
Please stop putting loud music in your videos.
As Ken Lewis said, and I’m paraphrasing, “I don’t know why they paid me so much for doing so little.” I do acknowledge though that many at these banks earn their keep through hard work.