Investment Banking Trader Career


This paper focuses on the investment banking trader career, investment banks will have several function in the market which include providing advice to investors which assist in the purchase of securities and also financial assets, investment banks will not accept deposits or even grant loans and this is the major difference with the commercial banks, advising on mergers and also acquisitions, helping corporations in issuing securities in the market and finally they act as intermediaries in trading for their clients.

Major investment banks include J.P. Morgan, Goldman Sachs, Citi Group, Morgan Stanley, UBS, Lehman Brothers Deustche Bank and Credit Suisse however the largest investment bank of the mentioned banks is J.P. Morgan, its headquarters is locate in New York dating back in 1824 when the company acquired banking status to perform banking activities.

Investment banking services include commodity trading, equity trading which are the shares of companies and finally futures and option trading. These are just some of the services they offer in the market and their main difference with the commercial banks is that they do not accept deposits by the clients as savings and also those they don’t offer loans.


Investment Banking Trader Career

The roles played by the investment banks in the market clearly indicates the type of activities in the bank, employment into an investment bank is usually very competitive and this is because the rewards and high plus other benefits, the firms also offer various personal development programs which enable workers to personally advance in the future.

This paper discusses the various daily activities that are present in an investment bank, training programs in the investment bank, and requirements for one to be recruited into the industry, compensation and reward system and finally the problems faced by the investment banks.

Investment banks:

An investment ban can be defined as a form of bank acts as an intermediary between investors and capital companies and firms, their main purpose is to provide capital requirements of companies and firms in the market, for this reason they will trade in stocks and bonds, they will also undertake structuring and evaluations on mergers and acquisitions, below are the major functions of investment banks


Investment Banking Trader Career


a. Advisory services:

An investment bank will offer advice to clients regarding the various investments and business planning, advice will also be offered on strategic planning and financial restructuring in order to achieve a fair proposed transaction, this service is important in the market because most investors and business are not aware of risks involved and also potential profits in the market.

These services are offered by those employed and for this reason we can conclude that an individual may be chosen to undertake advisory services in the organization, this services requires good communication skills and also a wide knowledge of the market regarding the various risks and profitability of these options.

b. Trading and sales of stocks and option:

An investment bank will sell and trade in stocks and new offering in the market, this service is offered to clients who wish to hold securities by buying or selling these securities to them, this process involves the calculation of risk involved in holding stocks sold to them by clients and communicating this information to the clients regarding what they will offer for the stocks. This process requires the hedge of risks of holding such options and also information on the prevailing prices in the market.


Investment Banking Trader Career

This service therefore requires that an individual interested in joining the investment bank as an employee must be good in mathematics and also must have the ability to undertake accurate predictions regarding prices in the market in order to avoid losses that may be occurred due to improper decision making, for this reason therefore the recruitment process is very competitive and only the academically qualified applicants are considered.

c. Capital raising services:

The investment bank acts as an intermediary between firms and investors, for this reason therefore it will help a company to raise capital through sales of stock and bonds, this way the company is able to raise capital and acquire assets and at the same time expand operations, this an important role plaited by the bank in that it will place such projects attractive through the advisory services to investors. Through this the company wills successful raise capital because the stocks or bonds are attractive to the investors.

These services therefore require that an employee placed in the organization should have good communication skills and also have the ability to convince clients and investors on possible profits associated with a certain investment option.

d. Merger and Acquisition services:

The banks will also represent firms in the process of mergers and acquisition; it enables the success of such mergers through identification then structuring and finally execution of mergers and acquisition. The bank will analyze and evaluate entities to be bought or to be sold and finally device proper structures of mergers between firms, this services are offered by representatives of the banks and they require background knowledge of the firms and also their


Investment Banking Trader Career

business undertaking, evaluation of assets require good mathematical backgrounds of the personnel and also good communication skills that will enable successful completion of mergers and acquisition that the bank is chosen to undertake.

Investment banking structure:

The structure of an organisation is also an important factor to consider when discussing the investment banking industry, the form of structure will determine the level of efficiency and productivity of workers, in the investment banking industry most of the firms are structured in a way that there is there is the front office, back office and the middle office all which undertake different tasks. Graduate trainees of the bank will usually be rotated to the different division of bank as a way of introducing them to the functions of the bank, this rotation also acts as a way of evaluating which division one is likely to perform better and effectively. This process therefore enables the bank to employ appropriate individuals for the available job position.

The structure also allows the bank to function effectively because the roles of each division is well defined and if anything goes wrong that leads to losses then the management will be in a position to identify the causes and also provide solutions to the problem that are likely to be experienced in the future. The various divisions also allow the bank to undertake special training to the employees of each department increasing specialization and also division of labor, this helps to increase productivity and efficiency.

Investment bank trader career:


Investment Banking Trader Career


Recruitment is the process of selecting suitable applicants for a job, Recruitment into the investment banking industry is based on performance and also the skills an applicant possess, selection of workers into the investment banking sector requires a high grade for one to be successful, successful candidates are required to have a degree in either finance, economics, accounting or any business related degree. The degree holder should have a 2.1 grade where first class holders are given first priority. Additional requirement include a level qualifications with ABB/AAB marks taken in subjects which included Mathematics, Economics and math related subjects.

The reason behind the setting of the high standards in the recruitment process is to ensure efficient and effective labour selection in the market, highly qualified individuals are more likely to be more productive when well managed and well trained, and high productivity of labour will lead to the realisation of internal economies of scale whereby an individual will perform tasks more effectively and efficiently. An organisation or firm that recruits productive labour will experience an increase in profits and productivity.


Training is undertaken on the successful applicants, training involves the provision of information on the various processes in the organization and also it acts as a way of increasing the effectiveness and efficiency of the workers in a firm. Velga (1999) depicts the importance of training in an organisation, companies that undertake training experience an improvement in the skills of their workers and therefore the workers contribution at work increases, this is because training equips workers with abilities to perform their work more efficiently and effectively and also helps them to make proper decisions within the organisation.


Investment Banking Trader Career

Youndt (1996) states that training is fundamental for the success of an organisation, he also states that an organisation should practice training programs as well as job rotation. In the banking industry training is therefore important in the success of the investment bank, workers attain more skills and knowledge to undertake their daily routines and therefore increase the effectiveness and efficiency of workers within the organisation. Most of the existing investment banks will train their worker regularly as a way of gaining competitive advantages and also as a way of achieving the set goals and objectives.

Compensation and motivation:

Employees of investment banks are highly paid, traders will earn a salary package of 35 thousand to 40 thousand pounds depending on the organization and also performance of a trader, new graduate trainees will earn 5 thousand pounds for the ten week training program. A golden package is also offered after 6 months of employment by most banks this will amount to 4 to 8 thousand pounds depending on the bank and performance of the individual. Housing allowances and transport allowances are also offered to the employees depending on their performance.

The salary package signify the level of motivation and also job requirement, the higher the salary the more motivated the workers become. This way these banks are able to maintain high


Investment Banking Trader Career

skilled individuals and as a result more effectiveness and efficiency.

Pensions are also offered to the retired employees but the people in this industry will not always work as traders all their life due to job stress and also the high number of people who loss their jobs due to poor performance and also switching jobs, however the pension fund is available to all the employees in the bank.

The salary package also explains why entering the trading career is so competitive, competition is 800:1 and this shows that many individual want to join investment banks as traders. However in the recent past employment opportunities have increased and the number of employees that work in these banks has also increased.

Risks and disadvantages:

Despite the various advantages associated with the investment bank industry there are also the various risks associated with these jobs, this include the risk of loosing your job due to high competition and also poor performance, many employees in these banks will not work as traders all their life due to some disadvantages associated with these jobs.

The investment bank has the ability to manipulate the market for its own benefits or employees may perform acts in the bank that will lead to huge losses, for these reasons therefore in most countries there’re set regulations that govern the manipulation of the market and that give guidelines for pop roper running of these banks.


Investment Banking Trader Career

One 0f the problem with the investment banking industry is that they will undertake equity market research and in most cases place the investment banks option in a favorable position despite this being not the case, for this reason therefore investors may end up loosing funds by deceiving them to invest in certain securities and stocks, however many countries now have placed laws that govern such acts and the prices of stocks are determined by the market and not individuals.

Also in the past investment banks have been said to sell stock having stated a misleading risk profile which placed some stocks as favorable, these practices are viewed as unlawful and the proprietors of such acts are prosecuted in many countries.

An investment bank trader may also be tempted to undertake front running, this is the practice of ordering securities before the clients orders and therefore affecting the stock market, this is a selfish act practiced by traders whereby they may end up earning a lot but it is considered unlawful by many countries and may lead to loss of a job and other financial losses to the investors.

An employee in this banks should always perform their duties effectively and efficiently and should not be influenced to undertake selfish acts are for personal benefits, one should also be very careful in to undertake their job in a professional manner to avoid losses are incurred by investors and also the banks itself. Despite all the advantages associated with this career there are many cases of individuals undertaking unlawful acts that lead to huge losses.


Investment Banking Trader Career

Human resource and economics of employment:

From the above discussion it is evident that the investment ban inking industry clearly understands the significance of applying human resource and economics practices in the organization, human resource and development strategies will cause employees become more committed and highly motivated towards the organisation. Consequently employees contribute more towards improvement of the company performance. Human resource practices in the organisation include selective employment whereby employment is made on the basis of academic performance and personal abilities; the other practice is the training of graduate recruits and also its workers regularly.

Another human resource practice is the existence of a good salary package and also a reward system, these employees that perform well are rewarded and this lead to high motivation of the workers to further improve in their job performance, the reward system also involves the promotion of workers to higher positions in the organisation and also higher salary packages.

The structure of the organisation is also an important human resource strategy, this helps in the effective monitoring of each division in terms of performance and training workers on a specific job requirement leading to increased specialisation.

In economic terms a firm should produce optimally in order to gain competitive advantage and also attain highest possible profits, the investment banks do not employ too many workers and this in economic terms shows optimal employment of workers, in a firm the number of workers will depend on the number of task and also the level of production, a firm should not employee too many workers nor too few workers, there is always the optimal number of workers that a firm should employ depending on the production level of the firm.

From the above discussion it is clear that motivation increases productivity of labour, the


Investment Banking Trader Career

diagram below demonstrates the shift in the production and marginal production and gives the most optimal points of production:

From the above diagram as the number of labour units increase then the marginal productivity of labour declines up to a point where the marginal production value is zero and starts to fall to negative, a firm will therefore prefer to produce optimally at the point where marginal productivity is zero to realise scale economies, the banking industry firms also employ optimal number of employees and this is why entry as an employee is difficult.

Specialisation and division of labour is an economic term that refers to the placement of workers in specific terms, in the investment industry the firm will employ workers to specific position which they are well fit to perform, this ensures internal economics that are realised by the firm as a result increased productivity and efficiency.

Another factor evident in the labour market is the relationship between labour hours and wages, as the wage rate increase then workers will work more, however there reach a point where when the wage rate is too high workers will work less labour hours, the following diagram demonstrates the relationship between working hours and wage rate:

From the above diagram as the wage rate increases then the labour hours increases, however there reach a point were as the wage rate increase workers work les hours, the investment banking firms will use this economic concept to produce optimally and provide adequate wage rates to the employees.


Investment Banking Trader Career

Benefits are paid with reference to performance, those workers who perform their tasks effectively and efficiently are compensated resulting to motivation and therefore increased productivity, a firm must break even and if it fails to break even for a long period of time then it will shut down, for this reason the salary level depends on the amount of profits realised, the high salary level for this reason shows that the investment trading g industry is a profitable industry. For this reason therefore the firm makes profits and in cases of losses the responsible individuals are laid of to make way for more competent individuals who help the firm to realise profits.

Due to the high salary level we conclude that the investment industry is a very profitable undertaking, however in a free market these firms in the long run will not make as high profits as in the short run, for this reason we can conclude that the market type is restrictive i9n nature with barriers to entry into the industry, these barriers include the minimum amount required to start up the firm and also other requirements that restrict other firms from entering the industry, this barriers to entry ensures that the exciting firms in the industry make high profits and are able to coexist in the long term.

Future of investment banking:

Investment banks in the present have specialised activities that differ from other banks, in the further we expect the investment banks to increase in the market as a result of increased demand for these services that they offer, as a result there will be an increase in employment opportunities in the market and therefore more people will be in a position to acquire jobs in investment banks as traders.


Investment Banking Trader Career


In the above discussion we can conclude that investment banking career is not as simple, there are complex tasks and activities that individual in the bank perform, this is not a job for everyone and only qualified individuals are considered for the job, academic requirement are high for one to qualify as a graduate trainee, after the selection of the graduate trainees the selected individuals undergo a training program that equip them with the job requirements for each job in the bank. After training rotation is undertaken whereby the trainee is required to pass through every division in the bank as a way of evaluating which division each individual well fits in terms of performance and abilities.

Salaries offered in this career are very attractive and this is why many individuals want to join investment banks, however despite high compensation and rewards the job is very demanding and most of employees suffer stress and as a result they will not work as traders all their life. There is a high risk of loosing ones job as a result of underperformance and also mistakes that lead to huge losses either to investors or the bank, for this reason the recruitment process requires highly qualified individuals and also highly motivated individuals into the firm.

The recruitment process shows the level of understanding and practices of human resource management and economics, in human resource terms the organization is able to motivate workers and also ensure that productivity of the workers is acquired through proper training. In economic terms the firm will employ only a certain number of employees who are well fit for the job, this helps achieve specialization and division of labor that increases productivity and also efficiency and effectiveness in the firm.


Brian Snow (1997) Macroeconomics: Introduction to Macroeconomics, Rout ledge publishers,


Investment Banking Trader Career


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