Ah! What happens in an investment bank?

So they had a big part in the financial crisis, they have most of Washington in their pockets, they are really confusing and everyone who works in one seems to be millionaires. 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 business majors in the Ivy League and MBAs around the world. They are investment banks, not to be confused with your mom and family’s 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 Trading

3) Operations

4) Capital markets

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

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

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

Because investment bankers only make money when a business moves money, whether it’s to buy a business or raise money, they constantly want corporations to move money. To do this, they have to give companies ideas of what to do at all times in the form of neat little presentations called field books (in terms of the PIBS industry). Many of these ideas never see the light of day, but because bankers have to think of hundreds of proposals for each one that comes to fruition, they never sleep and are entirely at the disposal of a company processing a deal, the lower you are. they are on the totem the less you sleep. You start as an analyst, then you become an associate, if you are good the next step is vice president and if you can make it rain a Director or even a Managing Director.

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

Traders are another entity that should not be confused with bankers or salespeople. Traders and vendor work together on a trading floor, but that’s the only thing they have in common. Traders for the most part specialize in a certain product or region and trade for customers (flow trading / market making) or for the bank itself (owner traders), although these are a dying breed thanks to the bill. Dodd-Frank and the Volcker Rule. .

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

“Merchants are the men in rolled-up sleeves and loose ties who hold several phones each and periodically smash a phone against a desk, a computer, or a business assistant, and then pull another donut out of a monster box.”

“In contrast, the salesperson calmly adjusts his cufflinks while holding a phone to each ear and alternately pressing the hidden mute buttons on their phones, having multiple compound conversations at once. He plays with his bookie, orders his assistant steal a donut from the merchants, and explain to his wife where he had been last night until 4:00 am, and no one will find out about the other conversations or the nearby pandemonium. ” (from the trading floor).

People in sales and commerce earn similar salaries to their counterparts in banking, but their bonuses are based on the number of customers and how much they trade or how fair their transactions are in the market. This allows them to be ridiculously profitable. A good merchant owner can make more than the CEO of a large bank in a good year, and the guy who controls the money is the one who actually runs the bank. Think of Michael Milken of Soloman Brothers in the 1980s. Best of all for proprietary merchants (the high-flying jocks of merchants), he’s playing with company money!

The capital markets guys are there to help spot the markets when bankers need to borrow. 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 will it cost them?” The capital markets will work with a group called “Syndicate” to price the security in the market for bankers. Of course, this is after the investment banker has introduced ‘100’ different companies that need to get into debt and one has finally listened. A good type of capital markets keeps their pulse on the market and knows how much everything costs at the moment. The salary of a capital market worker is slightly below that of a banker mainly because they are further away from clients.

Then there are the guys from Operations. This is all the bank has that looks a bit like a normal company. This is management, legal and administration. Most banks have huge separate buildings to house the really brave trading people who really sort out their trades, clean up their accounts, and make sure everything gets done. These buildings are not as glamorous as the buildings for bankers and merchants (that is, Goldman Sachs relocates all of its operations people to a large building in New Jersey) and the pay is a fraction of any other position.

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

From http://unmaskingfinance.blogspot.com

Leave a Reply

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