So they had a big hand in the financial crisis, they’ve got most of Washington in their pockets, they’re really confused, and everyone who works in one seems to be a millionaire. They have names like Morgan Stanley, Goldman Sachs, Lazard, and, in the recent past, Lehman Brothers, Merrill Lynch, and Bear Stearns. It takes around ‘100’ years to make a good one and they are the envy of Ivy League business students and MBAs everywhere. They’re investment banks, not to be confused with mom and pop banks, and here’s what they look like on the inside.

So let’s talk about what we’re seeing, hopefully in a way that doesn’t make you cringe. At first glance, we have four main sections in our image:

1) Investment Banking

2) Sales and Trade

3) Operations

4) Capital Markets

*Actually, you will see many other features such as prime brokerage, asset management, etc. but the big ones are up.

Let’s talk about what they do and to make it more interesting we can also talk about their personalities and how much money they make!

Our first stop will be the investment banker, the investment banker usually specializes in one industry and may specialize or belong to another group such as Mergers and Acquisitions. These are like financial advisers for companies. They help companies raise capital (through debt/equity offerings), tell companies to buy other companies and take private companies public; And they don’t do it for free, they charge high fees. The general character of an investment banker is quiet and reserved. Unlike merchants (whom we’ll talk about later), they don’t use cheeky words and never unbutton their shirt collars.

Because investment bankers only make money when a company moves money, whether it’s to buy a company or raise money, they constantly want corporations to move money. To do this they have to give companies ideas of what they should do at all times in the form of small and careful presentations called pitch-books (in terms of the PIBS industry). Many of these ideas never see the light of day, but because bankers have to think through hundreds of pitches for each one that comes to fruition, they never sleep and are at the beck and call of a company processing a deal: the lower. they are on the totem unless they sleep. You start as an analyst, then you become an associate, if you’re good the next step is VP and if you can make it rain Director or even CEO.

In 2010, as a beginning analyst, you can expect to earn a salary of $70,000 and earn a bonus of about 80% and more, you can also expect to work 90-120 hours a week during offers. After two years as an analyst, he returns to earn his MBA and become an Associate. He now has a salary of around $100,000 and his bonus structure remains the same. If you’re good, you’re a VP and you’re making half a million dollars a year and a good CEO who can really make it rain could make eight, nine or ten million a year (there are those poor suckers who only make a couple of million). ). Oh, and what about that little red line in the image, which is called “The Great Wall of China”. Because bankers have access to customers’ private information (they need it for their pitches), they are not allowed to be around other people in the bank who could benefit from that information. Therefore, all banks have two large escalators and two large banks of elevators that never mix.

Merchants are a completely different entity not to be confused with bankers or salesmen. Merchants and vendors work together on a trading floor, but that’s the only thing they have in common. Traders mostly specialize in a certain product or region and trade for clients (flow trading/market making) or for the bank itself (proprietary traders), although these are a dying breed thanks to the Dodd- Frank and the Volcker Rule. .

Since Frank Partnoy already described the difference between a merchant and a salesman in his book “FIASCO”, I can steal your work!

“Dealers are the men with rolled up sleeves and loose ties who hold multiple phones each and periodically smash a phone against a desk, computer or sales assistant, then grab another donut from a monstrous box.”

“In contrast, the salesperson calmly adjusts his cufflinks while holding a phone to each ear and alternately pressing the hidden mute buttons on his phones, having multiple composed conversations at once. A good salesperson can chat with a customer simultaneously , discuss tonight’s Knicks play with your bookie, order your assistant to steal a donut from the dealers, and explain to your wife where you were last night until 4:00 am, and no one will notice the others conversations or nearby chaos. (from the park).

People in sales and trading earn similar salaries to their counterparts in banking, but their bonuses are based on the number of clients and how much they trade or how fair their trades are in the market. This allows them to be ridiculously profitable. A good owner-trader can earn more than the CEO of a big bank in a good year and the guy who controls the money is the one who really runs the bank. Think of Michael Milken of Soloman Brothers in the 1980s. Best of all for owner dealers (the high-flying sportsmen of dealers), you’re gambling with company money!

Those in charge of capital markets are there to help sound the markets when bankers need to increase debt. An investment banker will say something like “Johnson & Johnson wants to raise $10 billion in debt, they want something that has a fairly short maturity. How much is it going to cost them?” The capital markets will work with a group called the “Syndicate” to quote the market value for the bankers. Of course, this is after the investment banker has told ‘100’ different companies that they need to increase debt and finally one has listened. A good capital markets guy keeps a pulse on the market and knows how much everything costs at the moment. Capital market workers are paid slightly less than bankers, mainly because they are further away from clients.

Then there are the Operations guys. This is all the bank has that looks a bit like a normal company. This is management, legal and administration. Most banks have separate huge buildings to house the actual trading people who actually settle your trades as well as clean your accounts and make sure everything runs smoothly. These buildings aren’t as glamorous as the buildings for bankers and merchants (ie Goldman Sachs moves all of its trading people to a large building in New Jersey) and the pay is a fraction of any other position.

So those are the basics of investment banking, it can be as complicated as you make it, but the knowledge above will put you leagues ahead of the average person!


Leave a Reply

Your email address will not be published. Required fields are marked *