Investment banking is a common career path for Columbia students, though positions became fewer and more competitive after the 2008 financial crisis and folding of Lehman Brothers and Bear Stearns. It involves working in a "front office" division within an investment bank, whether in the actual investment banking division, asset management, or sales & trading.
Career time line
Undergraduates who want to work at an investment bank are best off starting in a summer internship program. Investment banks that recruit via Columbia's Center for Career Education generally conduct information sessions about their programs in November/December, require resumes to be submitted by early January, and conduct interviews in January and February. Most students who get a place on one of these programs will be between their junior and senior year, though a small number of students get a place earlier in their time as an undergraduate. These summer analysts (or summer interns) receive about a week of training then fulfill the same role as full-time analysts for anything from 6 to 12 weeks. Many summer interns receive full-time offers from their investment bank, but those who don't are nevertheless in a much better position when they apply to other banks for a full-time role.
The main Columbia recruiting cycle is for the full-time analyst roles at investment banks (and management consultancies). A vast range of students participate: summer analysts who want to find something better than their full-time offer, summer analysts who failed to get offers, students who failed to get a summer analyst position, and students who have only just considered a career in investment banking. Similar to summer analyst recruiting, investment banks that use CCE conduct information sessions in September, require resumes to be submitted by the end of September, and conduct interviews in October. Offers generally expire by the end of November. Most investment banks recruit many more students at this stage than for their summer internship programs. Recruited students are then free to relax for the rest of the academic year and a large part of the summer. Upon beginning, they undergo a week or more of training. Analysts are then expected to work for 2 to 3 years before either being promoted to associate level or being kicked out to go to business school. Most European banks choose the former; most US banks choose the latter.
Associates are generally recruited directly out of business school, just as analysts are recruited directly out of college. They also go through a first recruiting cycle to become summer associates, then a second cycle to become full-time associates. Once hired, they relax for the year, get a few months off in the summer, are briefly trained, then start work. On the upside, if they are abused or overworked by VPs and MDs, they can offload some of the abuse and work onto analysts. On the downside, they do not have any defined end goal, such as 2 to 3 years for analysts, at which point their suffering will end.
VP, SVP, AD, MD, etc.
There are usually 2 to 3 ranks of people above the analysts and associates. These are variously known as Vice President, Senior Vice President, Associate Director, and Managing Director. Above these people are the Chairman and the board of directors, but those roles are not directly involved in earning fees. The aforementioned higher ranks within the firm provide it with reason to exist. In the Investment Banking division, they win business for the investment bank and hand it out to people lower down for processing and completion. In the other divisions, they occupy similarly important roles.
- Private equity.
- Hedge fund.
- Become CEO/CFO of a big corporation.
- Hide in a ditch for 2 years, then re-emerge for round 2.
Life/role of a person in an investment bank
Hours worked by people in investment banks vary from about 60 hours per week to over 100. Sales & Trading analysts are often at the lower end of the scale because their work depends on when their particular markets are open, with a few additional hours to prepare for the next day or the day ahead. Asset Management analysts are often at the middle of the scale. And Investment Banking analysts almost always work the longest hours, working up to 115 hours per week when completing deals.
Investment banks like to pay low basic salaries to make it cheaper to fire people; and large bonuses to give people a strong incentive to work hard. The high total compensation motivates a lot of Columbia students to pursue a career in investment banking.
Summer analysts in New York are typically paid a salary of $60,000 pro-rated, plus a housing allowance of $1,000-$2,000. This makes for weekly pay of about $1,200. However, many summer analysts receive overtime for work over 40 hours per week, and in these cases can expect to earn up to $2,000 per week.
First-year analysts typically receive a basic salary of up to $70,000 per year plus a signing bonus of $10,000. The signing bonus is typically paid during the student's final semester at college, or with the first paycheck. Standard benefits include health insurance, life insurance, travel insurance, on-site gym membership, meal allowances, and up to 20 days of holiday per year (just as a joke by someone in HR).
The opportunity to make lots of money comes with the end of year bonus, which usually depends on a mix of company or division performance, team performance, and personal performance as judged by the people you've worked for. Bonuses are therefore fairly meritocratic. The top first-year analysts at the top firms can receive bonuses of up to $110,000, resulting in total compensation of up to $170,000 per year. Most salaries are not this high, but nevertheless considerably higher than a 22-year old straight out of college could earn in almost any other industry. Compensation increases by up to $20,000-$30,000 for second-year analysts, and again for third-year analysts.
Salaries then increase exponentially going up through the organization. The best investment bankers in the world earn over a billion dollars a year for their firm (usually in M&A fees) and make tens of millions of dollars per year.
Role of an asset management analyst
Asset management is not investment banking. However, many investment banks have asset management departments. The compensation and roles of asset management analysts are far less consistent from company to company compared to investment banking analysts. The role of asset management analysts vary dramatically depending on a firm's investment approach, asset class, and reliance on analysts for investment decisions. Generally speaking, asset management analysts are somehow integrated in the investment decision making. Quantitatively focused asset management firms typically have analysts performing correlation and/or time-series modeling on asset classes and macro relationships. Fundamentally focused firms have analysts perform fundamental analysis on corporate financial documents. High frequency trading firms have analysts perform a range of duties from derivative pricing to return valuations on varying hedging strategies. However, the prior descriptions will vary dramatically depending on the firm's/portfolio's asset class and investment strategy.
Unlike investment banking, analysts are typically not entry-level positions at asset management firms. Asset management firms call entry-level investment personnel "Research Associates." As a result, analysts at the top asset management firms or hedge funds are compensated more than investment banking analysts. However, investment returns and/or total assets under management are the greatest determinant of compensation and may vary dramatically each year.
Role of a sales & trading analyst
- Investment banking: Monkey Business
- Financial markets: Liar's Poker
- Private equity: Barbarians at the Gate