Top Alternatives To Investment Banking (Expert Guide)

Investment banking is by many regarded as the top of the financial world. Jobs in that area are particularly hard to come by as many graduates with immaculate CVs and grades are pursuing a career in one of the most competitive and pressured industries. 

For many, landing a role in investment banking is attractive purely because of the financial rewards such a job brings. Investment bankers typically earn quite a lot of money. They typically make salaries in the range of $ 100,000 to $ 200,000, and they often receive bonuses that are a significant percentage of their salaries.

Investment banking can be summarised as the part of the financial service industry that helps companies conduct equity and credit research, and raise capital by underwriting and selling securities. In short, the whole value chain from selling, trading and financing to advising companies strategically on mergers & acquisitions is what is regarded as investment banking. 

Truth be told, my first job out of university was in investment banking where I joined a major US bank’s graduate corporate finance training programme. After a gruelling 10-week programme I was given a role in debt capital markets, basically advising companies on their public debt-raising strategies. I set out on this career path because I thought that it was the best job to be had. I can honestly say I met a lot of great people but as a career, there are so many good alternatives, of which I also ultimately chose one to pursue my working life in pursuit of a better work-life balance. 

Key Points

• Investment banking is a competitive and pressured industry
• Investment banking can be summarised as the part of the financial service industry that helps companies raise capital by underwriting and selling securities
• Commercial banking, asset management, private equity, venture capital and hedge fund management are comparable to investment banking
• The average investment banking career lasts 10 years
• The skills required to pursue a career in investment banking are very transportable to anything else you want to do, either finance or non-finance related
• Merchant banking is the other traditional name for investment banking

What is similar to investment banking?

Several financial services are similar to what’s happing inside an investment bank, including commercial banking, asset management, private equity, venture capital and hedge fund management. 

Commercial banking

Commercial banking is a financial service that provides loans and other services to businesses. Commercial banks typically make loans to businesses that are used to finance their operations. In many ways, this is the classical banking institution model where people’s deposits are safeguarded and loans to businesses are granted.  

Asset Management

Managing assets is a financial service that helps companies, pension funds and individuals invest their money. Asset managers can be typically stand-alone businesses but are typically part of investment banks, large commercial banks, or large securities firms. The largest asset manager in the world is BlackRock. 

Private Equity

Private equity is a part of the financial industry that involves the buying and selling of privately held companies, i.e. company stock which is not listed on a public exchange. Private equity firms typically invest in non-public companies that are struggling and need capital to turn around their fortunes. The largest private equity firm in the world is Blackstone Group. Which is a New York-based firm that was founded in 1985.

Venture Capital

Venture capital is a type of investment that is used to finance the start-up of new businesses. Venture capitalists typically invest in smaller companies that are in their early stages of development and have high growth potential. The currently biggest venture capital firm in the world is Sequoia Capital, which is a Silicon Valley-based firm that was founded in 1972.

Hedge Funds

A hedge fund is typically an investment fund that is investing their partner’s and clients’ assets usually involving a higher degree of risk in search of higher returns. Hedge funds typically invest in a variety of assets, including stocks, bonds, commodities, and options. They typically apply a degree of leverage in order to achieve better returns. The largest hedge fund in the world is Bridgewater Associates. Bridgewater Associates is a Connecticut-based hedge fund that was founded in 1975.

Is it worth becoming an investment banker?

There is a general perception that people on Wall Street earn more money when compared to non-financial jobs. According to Business Insider, the average bonus for a Goldman Sachs employee was $95,000 in 2020. The average salary was $ 428,000 compared to the US average of $ 56,516.

As a purely financial consideration, it is worth becoming an investment banker as you can expect a relatively attractive entry salary and multiples of those figures the further you progress in your career. As in anything, this compensation doesn’t come for free. I can definitely confirm that I have definately worked longer hours and therefore encountered more stress and competition than in investment banking. Now, that is tolerable when you’re young and have the energy. Many of the friends I have met and are still in investment banking are still working 10-12 hour days and sometimes even weekends. Might be for many, but it wasn’t for me. So make sure to lay out clear pros and contras and most importantly investigate your personal life and whether your character and nature are suited to such a fast-paced job. 

Can you do anything after investment banking?

The average investment banking career lasts 10 years. Mine was only 2 years for example as I quickly figures that Asset Management was really the area that interested me most. Many friends of mine have quit their investment banking careers for other finance and non-finance-related endeavours. 

One of the qualities of investment banking is that it really is the springboard for your career regardless of what direction you want to take it. So if you want to go into management consulting, start a tech company or teach, the world is your oyster. Looking at the class of roughly 50 people who started the corporate finance programme with me, I’d only count about 10 of them who are still bankers. 

Often, people would start in investment banking after an undergraduate degree, and work in the sector for a number of years before returning to grad school and getting a master, PhD or MBA degree. 

What are the exit opportunities for investment banking?

The exit opportunities for investment bankers are typically very good. Investment bankers often go into other financial services, such as asset management, commercial banking, or private equity. Others find their way in different industries, such as consulting or technology. 

Being in relatively close contact with clients throughout your investment banking career also offers you endless networking opportunities. It, therefore, shouldn’t come as a huge surprise that many get offers from the very clients they work for. 

What can you do besides investment banking?

The skills that are required to go after a career in investment banking are very transportable to anything else you want to do, either finance or non-finance related. The fast-paced nature and quick decision-making process are skills acquired which will make someone a suitable candidate for any managerial position in any industry. 

Financial knowledge is of course necessary to become a banker but furthering your career will only cement a deep knowledge in finance & accounting-related areas.

Problem-solving is certainly a key feature with which one is constantly bombarded in investment banking. The stress that comes with finding solutions for your clients, managers and counterparts is part of the many facets of how this business run. There is certainly never a quiet moment when you’re in the hot seat.  

What is the other name of investment banking?

The other and somewhat more traditional name for investment banking is merchant banking. Merchant banking is a financial service that helps companies raise capital by underwriting and selling securities. Investment bankers typically work for merchant banks, large commercial banks, or large securities firms.

Is investment banking similar to consulting?

Many aspects of investment banking include the core tenants of traditional consulting, whereby strategic advice is given to companies about either raising capital, merging or acquiring potential suitable targets in order to bolster their industry position.

In many corporate transactions, consulting and investment banking services will both be needed in order to support a company’s management team to decide on important aspects of their business. 

So investment banking can include a lot of the consulting business, especially on strategic matters. Consulting, however, can not cater for financing aspects and capital raising and trading in a broader sense. 

Is investment banking similar to sales?

Broadly speaking, investment banking is ultimately a selling business. Selling of advice and strategic deals. Selling of a bank’s capital raising capabilities and funding capacity. As such, it is a selling proposition across the entire investment banking value chain. 

Sales, in a traditional sense, includes all of the aspects mentioned above including the selling of products and items which are not necessarily produced by the company selling them. Investment bankers are only selling their services exclusively and charging you nicely for it. 

Conclusion

Investment banking is a career that is by many regarded as the top of the financial world. Jobs in that area are particularly hard to come by as many graduates with immaculate CVs and grades are pursuing a career in one of the most competitive and pressured industries. 

For many, landing a role in investment banking is attractive purely because of the financial rewards such a job brings. Investment bankers typically earn quite a lot of money. They typically make salaries in the range of $ 100,000 to $ 200,000, and they often receive bonuses that are a significant percentage of their salaries. 

Investment banking can be summarised as the part of the financial service industry that helps companies raise capital by underwriting and selling securities. In short, the whole value chain from selling, trading and financing to advising companies strategically on mergers & acquisitions is what is regarded as investment banking.

The skills required to pursue a career in investment banking are very transportable to anything else you want to do, either finance or non-finance related. The fast-paced nature and quick decision-making process are skills acquired which will make someone a suitable candidate for any managerial position in any industry.