Reality of INVESTMENT BANKING role after IIM | Success at a Cost!!??

Summary

In this video, the IIM Guy sheds light on the world of investment banking, a highly coveted career choice among MBA graduates. He explains the primary role of investment bankers in raising capital for companies through IPOs, mergers, and acquisitions, and clarifies misconceptions about the field. The video also addresses the demanding nature of the job, with long hours and high-pressure environments, and the significant financial rewards, including substantial bonuses. Furthermore, it highlights the competitive nature of securing such positions, often reserved for top talent from prestigious institutions, and the impact on personal life due to the intense work commitments.

Takeaways

• 🏦 Investment bankers primarily assist companies in raising capital, often through IPOs, mergers, acquisitions, and issuing stocks and bonds.
• 💼 The role is prestigious and highly competitive, with a limited number of positions available, particularly for front-end investment banking roles in India.
• 💰 Investment bankers are compensated with high salaries and substantial bonuses, which can significantly exceed their base pay, making it a lucrative career.
• 🕒 The job demands long working hours and intense work pressure, often leading to a compromise on personal and family time.
• 🌐 Post-2007, foreign placements for investment banking roles have decreased, making it harder to secure such positions.
• 🏢 Top business schools like IIMs are the primary recruiting grounds for investment banking roles, with a preference for candidates with strong academic and professional backgrounds.
• 📉 The investment banking industry experienced a downturn following the 2007-08 financial crisis, which affected its growth trajectory.
• 🚀 Investment bankers are often motivated by the potential for high earnings, with bonuses sometimes exceeding their base salary.
• 🎓 To excel in investment banking, one must not only secure admission to top B-schools but also perform exceptionally well to be considered for top roles.
• 📈 The field is highly competitive, with a focus on deal-making and the ability to generate significant profits for both the banker and their clients.

Q & A

What is the primary role of an investment banker?

An investment banker primarily helps companies raise money, often by managing IPOs, acquisitions, mergers, and issuing stocks and bonds.

How does the commission structure work for investment bankers?

Investment bankers and their companies receive a commission for their work, which can be substantial, especially when they are involved in large deals.

What are the typical starting salaries and bonuses for investment bankers?

Investment bankers may start with a salary of 30-40 lakhs, but their bonuses can be significantly higher, sometimes exceeding their base salary, leading to total earnings of up to 1.5 crores or more.

What are some of the realities of working in investment banking mentioned in the script?

The realities include the high demand and competition for roles, the significant amount of money that can be earned, the long hours and work pressure leading to a potential reduction in family time, and the necessity of being highly qualified and competitive to secure a position.

How has the investment banking job market changed over time, as per the script?

The script mentions that before 2007, there were many foreign placements for investment bankers, but after the Lehman Brothers scam and the subsequent recession, the number of such roles reduced, making it harder to get into investment banking.

What is the significance of the number of investment banking roles in determining the prestige of B-schools?

The number of students placed in investment banking roles is used as a measure of the success and prestige of B-schools, with top schools often having more placements in these sought-after positions.

What is the role of an investment banker in an IPO?

An investment banker plays a crucial role in an IPO by managing the process, including deciding the company's valuation, and helping the company raise capital by going public.

How does the script describe the work-life balance of an investment banker?

The script describes the work-life balance of an investment banker as challenging due to the demanding nature of the job, which often requires working 16-18 hours a day and can lead to personal sacrifices, including family time.

What is the 'day minus' phenomenon in the context of B-school placements mentioned in the script?

The 'day minus' phenomenon refers to the practice where top companies, including investment banks, start their recruitment process before the official placement season begins, often targeting the best candidates from top B-schools.

Why does the script suggest that not all MBAs are suited for investment banking roles?

The script suggests that not all MBAs are suited for investment banking roles because the field is highly competitive and often requires a strong academic background, relevant work experience, and a drive for high earnings, which not all MBA graduates possess.

Outlines

00:00

💼 Investment Banking: Roles and Realities

This paragraph introduces the role of investment bankers, emphasizing their importance in the financial world. Investment bankers are primarily involved in helping companies raise capital through various means such as IPOs, mergers, acquisitions, and issuing stocks and bonds. The video highlights that investment banking is a prestigious and well-compensated field, often pursued by MBA graduates. It also touches upon the historical context, noting the growth of investment banking post-2005 and the impact of the 2007 financial crisis. The paragraph concludes with a discussion on the realities of investment banking jobs in India, including the decline in foreign placements and the limited number of roles available, which has made securing such positions more competitive.

05:03

💰 The High Stakes of Investment Banking

The second paragraph delves into the financial aspects of investment banking, acknowledging the high salaries and even higher bonuses that come with the role. It explains that while the base salary might be substantial, it is the variable compensation from deals that truly drives the income of investment bankers. The paragraph also discusses the intense work pressure and long hours, which often lead to a compromise on personal and family life. A personal anecdote is shared about the CEO of a P2P lending firm and the sacrifices made for the sake of a large bonus, illustrating the demanding nature of the job. Additionally, the paragraph mentions the upcoming anniversary of Physicswallah and the offers available for those interested in their coaching services.

10:03

🏆 The Elite World of Investment Banking

The final paragraph addresses the exclusivity and competitiveness of investment banking roles, particularly at the front-end level. It clarifies misconceptions about what constitutes 'investment banking' by distinguishing between front-end and back-end roles, with a focus on the前者. The paragraph also discusses the selection process for these roles, emphasizing the importance of a strong academic and professional background, often from top institutions like IITs and SRCC. It concludes with a reference to a movie character, Hrithik Roshan's portrayal of an investment banker in 'Zindagi Na Milegi Dobara,' and the lifestyle aspirations often associated with the profession.

Keywords

💡Investment banking

Investment banking refers to the professional service of helping companies raise capital, manage mergers and acquisitions, and issue stocks and bonds. In the video, it is described as a prestigious and highly sought-after career in which professionals earn large commissions and bonuses. The video emphasizes the complexity and high-stakes nature of the job, especially in major deals like the Walmart-Flipkart acquisition.

💡IPO (Initial Public Offering)

An Initial Public Offering (IPO) is when a company first offers its shares to the public, a process managed by investment bankers. The video explains that investment bankers help clients with IPOs, including determining the company's valuation and overseeing the entire process, which is a key part of raising money for businesses.

💡Mergers and acquisitions

Mergers and acquisitions (M&A) involve companies combining or one company buying another, with investment bankers facilitating the deals. The video mentions high-profile examples like Walmart acquiring Flipkart, illustrating the important role investment bankers play in managing complex financial transactions and structuring deals.

💡Commission

A commission is the fee investment bankers earn for their services in helping companies raise capital, manage IPOs, or facilitate mergers. The video highlights how investment banking firms and individual bankers take a significant commission from the large deals they oversee, which contributes to the high financial rewards in this profession.

💡Bonus

A bonus is an additional financial reward given to investment bankers based on the successful completion of deals. The video explains that bonuses in investment banking can often exceed 100% of a banker’s fixed salary, making it a lucrative but high-pressure career where financial incentives drive long working hours and high performance.

💡Front-end investment banking

Front-end investment banking refers to the core functions of an investment bank, such as working directly on major deals like mergers, acquisitions, and IPOs. The video highlights that there are only around 150 to 200 front-end investment banking roles in India, making these positions highly competitive and prestigious, especially for graduates from top business schools.

💡Work-life balance

Work-life balance refers to the equilibrium between professional responsibilities and personal time. The video describes the reality that investment banking is a demanding career, often requiring 16-18 hour workdays, which can severely impact family time and personal relationships. The speaker gives an example of a top employee delaying personal decisions due to the financial pressure of earning a bonus.

💡Foreign placements

Foreign placements refer to job offers outside one’s home country, often in prestigious international firms. In the video, the speaker discusses how foreign placements for Indian business school graduates, especially in investment banking, were common before the 2007 financial crisis but have since become more limited.

💡Variable salary

A variable salary in investment banking is the part of an employee's compensation that fluctuates based on performance, often including bonuses tied to successful deals. The video emphasizes that while investment bankers have a fixed salary, their variable earnings can far exceed this, driven by the volume and value of the deals they handle.

💡Lehman Brothers scandal

The Lehman Brothers scandal refers to the collapse of the Lehman Brothers investment bank in 2007, which played a major role in triggering the global financial crisis. The video mentions this event as a turning point that slowed down the rapid growth of investment banking and reduced foreign placements in Indian business schools.

Highlights

Investment bankers help companies raise money by taking a significant commission.

Investment bankers manage IPOs, acquisitions, and mergers, which are significant sources of their income.

The job of an investment banker involves high stakes and can significantly influence the economy.

After the 2007 Lehman Brothers scam, there was a noticeable slowdown in the growth of investment banking.

Foreign placements for investment bankers have reduced, making it harder to secure roles.

There are only about 150-200 front-end investment banking roles available in India.

Investment bankers can earn a starting salary of 30-40 lakhs with the potential for much higher bonuses.

The high variable salary in investment banking is a significant motivator for long working hours.

The competitive nature of investment banking leads to a hectic work life with reduced family time.

Investment banking is not for everyone, as it requires a significant commitment and can impact personal life.

Equity research and midend/back-end roles are not considered traditional investment banking roles.

Top B-schools like IIMs see investment banking as a prime career path, with stringent selection criteria.

Investment banking roles are often secured by those with a strong academic and professional background.

The number of investment banking jobs offered can be an indicator of a B-school's prestige.

Investment bankers are often portrayed in media, such as in the movie 'Zindagi Na Milegi Dobara', highlighting the high stakes and pressures of the job.

For those who value money and are willing to work hard, investment banking can be a lucrative career choice.

Transcripts

Welcome back to the channel the IIM Guy.

Today's video is very important.

Many people ask, they want to know

what investment bankers do.

Investment banking is a very privileged job

and a very sought-after job.

Everyone doing an MBA thinks about it.

Today, I'll tell you what an investment banker does

and 5 realities about investment banking.

To tell you in the shortest and simplest way,

an investment banker helps companies raise money.

A client/company who can afford investment banker

is helped in raising money.

That's an investment banker's job.

Investment bankers take a lot of commission for this.

Investment banking companies take commission.

Investment bankers get a huge bonus for their work.

What's the work like?

Raising any kind of money. How is that done?

Launching an IPO raises money.

Managing all the work related to the IPO

like deciding valuation is done by investment banker.

If a company is acquiring another company,

like Walmart acquired Flipkart.

Investment bankers would've worked on this.

All the newspaper headlines read by people,

the finance work was done by investment bankers.

To acquire companies - investment banker.

Companies merging also need investment bankers.

Managing the deal and the merger.

This brings up money.

A company merging with another.

How the profits and ownership is split

is done by the investment banker.

Other than this, issuing stocks and bonds

is also the job of an investment banker.

This is an investment banker's job in short.

But the deals in these are very huge.

Wherever a lot of money comes in, economy rises,

an investment banker's work exists.

That's why an investment banker's term and work

came up a lot after 2005-06.

It rose after 2002-03 and grew a lot by 2007

until the Lehman Brothers scam happened.

There was a Lehman Brothers scam in 2007

due to which there was a recession in the US

and it trickled down to many countries.

So, the growth slowed down.

Before that, there are 2 things about Indian Bschools.

Number one, there were a lot of foreign placements.

Foreign placements were mostly investment bankers.

To get investment bankers companies like Goldman

Sachs, Standard Chartered Bank, Deutsch bank

mostly took I bankers.

They used to offer crores package at that time.

Even in today's time it's a very good package.

They used to offer crore packages then.

After 2007, foreign placements reduced.

This is the first reality.

Nowadays, it's harder to get investment banking roles.

Before, people used to get foreign placement

from IIM Ahmedabad, Bangalore, Calcutta, Lucknow

and even Kozhikode.

In today's time, there are only 150 roles

for front end investment bankers all over India.

Around 150 to 200.

The number might be a little different but not by a lot.

Front-end investment banking is the main role.

Doing the main work that I mentioned.

Actually performing acquisitions for Walmart etc.

Actual work of investment bankers is only 150-200.

What does this mean?

It means 2 things. One, less foreign placements.

There were fewer roles so foreign placements reduced

Second, you can find this role only in ABC.

Somewhat in XLY, L, FMS but very few.

150 is still a very high number that I've told you.

MBAs alone don't do investment banking.

Good CAs. good CFAs.

Good MBAs will get many roles but not all 150.

Second reality, there's a lot of money in this.

Everyone knows this.

I'll tell you why there's a lot of money.

You'll get a starting salary of 30-40 lakhs.

But no one gets rich from salaries.

The same thing applies here.

Investment bankers get a lot of bonuses.

They get money for every deal.

Their variable salary is very high.

Their salary is 40 lakhs but they might earn 1.5 crores.

It has been seen many times.

This is not a surprising figure, they earn that much.

That's why they work more.

Why would any person work more?

Why does a businessman work a lot?

He knows that more work will return as more money.

The lesser he works, the more he'll lose.

It's the same with investment bankers.

There's a fixed salary of 30 lakhs

but money is the biggest motivator.

When the bonus itself is more than 100%,

and variable salary is high, investment bankers work.

This is the second reality.

It's connected to point 3, everything is connected.

What's the third reality?

Why is there a lot of money?

Flipkart and Walmart have deals in crores.

Whoever works on this will get a lot of money.

More money, more bonus.

The more deals you get done, more bonuses you get.

The third reality comes up now.

People work more, so family time reduces.

It's a hectic job with a lot of work pressure.

There will be very few deals.

Chasing deals, both sales and finance comes in.

So, it's a very competitive job.

There's very little competition in IIM.

Investment banking job needs a lot of hardwork.

You will have to work 16-18 hours everyday.

In March, you will focus on your bonus.

The bonus is upto 50 lakhs.

People ignore their family.

The company where I had my first internship,

many don't know, was a P2P lending firm.

I won't name it as I'm going to tell you something.

I saw that the CEO.

I got placed in the company pretty early.

I was an intern but a good one.

I was doing Masters in Business Economics then.

So, I got a good internship role.

I used to work with the CEO.

The CEO and the top employee there,

used to work till late at night.

I also used to be there till 9 sometimes.

They were talking.

The top employee said that his friend was divorcing

and he's telling his wife that

wait till March and then discuss divorce.

I'll get a huge bonus in March, wait for 2 months.

When there's a 50-60 lakh bonus,

people who give importance to money.

That's why he's getting divorced.

This was true.

I was 21 or 22 then and thought what a world it is.

There's a lot of money but what world is this.

So, this is the reality.

I didn't want to do a job like that.

I want time freedom and personal freedom.

I want to be my own boss.

I won't get that in I banking.

That's why I'm doing YouTube.

So, this is the third reality.

There's an important announcement for everyone.

PW is celebrating 3 years of Physicswallah

on 27th of May/

27th May is the foundation day of Physicswallah.

That's why they have a really good offer for you.

From 27th May to 2nd June,

mega offers and mega launches will be launched.

You know that Physicswallah coaching prices

are already at a low cost.

Their MBA Ekite 2023 batch

will coach you for CAT and GDPI at only 4999.

It's a fastrack course.

You can use my code to get a further discount.

AJ500 code will get you 500 rupees off.

The link is in the description.

You can use it for mega offerings at Physicswallah.

What's the fourth reality?

It is that other jobs are offered under title of I banking.

Equity research is not an investment banking job.

Midend IB is not an investment banking job.

Backend IB will be called investment banking job.

It is but it's backend.

I'm talking about frontend I banking jobs.

I don't know in detail as I haven't worked in finance.

But I'm telling you as much as I know.

When you go to top B schools, to IIMs

these companies come first.

When they come, that day is called day minus.

Not day zero or one, day minus.

When I was in IIM Bangalore,

IIM Vishakhapatnam's pool placement happened there

The first summer and final placement I saw myself,

I saw day minus.

That is, placements started before day zero.

Only a few people were being interviewed.

30-40 people got placed in I banking in IIM Bangalore.

The interviews went on till late at night.

The people were so happy.

The number of investment banking jobs defines

which is the best college in India right now.

I banking and consulting.

So, this is the situation.

Only the best go there.

Who are selected?

If your brand has SRCC, IIT.

If there's work ex, that should be from a top bank.

Goldman Sachs, McKinsey.

They are selected for investment banking.

It includes research work, sales.

A lot is dependent on this.

Company's life is dependent on this.

So, they choose the best for these roles.

This is the next reality.

People choosing this profession have to be good.

Going to Ahmedabad isn't enough, be the top there.

If you haven't topped in the beginning,

haven't gone to IIT, SRCC,

and are from a normal college or NIT,

it's difficult to get investment banking through IIM.

IIM Bangalore has 100+ people from IITs and SRCC.

Combine IIT, SRCC, and Stephens there'll be 100

I've seen the CVs in IIM Ahmedabad and Bangalore.

One-third of the batch have been achievers.

The selection criteria for IIM are like that.

Get good marks in 10th, 12th, college

and in CAT and then you'll be selected.

There's competition in such people, only top ones go.

If you're leaving LKI for ABC I banking,

then remember this reality.

Going there doesn't mean you'll get I banking.

These are all the points.

If you want to be Hrithik Roshan

from Zindagi Na Milegi Dobara,

he had an I banking job in the movie.

A lot of it was shown correctly.

The guy takes on calls during vacation,

thinks of retiring at 40 and buying a big house.

But where's family time?

He's fighting with his girlfriend.

He asks her to understand a deal's importance.

Getting deals done is life in investment banking.

There's a lot of money in it.

If someone loves money, aim for this job.

But work hard from childhood itself.

All the best, stay safe and take care.