What Do Investment Banks Do?

An investment bank isn’t just the average bank on the street corner where you can open up a checking account and deposit your paycheck. Instead, it is a specialized financial institution that offers a wide range of services for individuals or organizations handling large amounts of money.

In other words, investment banking is for large business corporations and specializes in handling the money in their accounts. While there are some regular banks that offer investment banking services, it is still a different sector of banking altogether.

Investment bankers are individuals who work for the institution in a number of ways, providing complex services for those needing a secure handle on their accounts.

What Services Do Investment Bankers Provide?

Let’s take a deeper look at some of the ways in which investment bankers perform their job duties. They typically perform one of four services:

1. Financial Analysis

Numbers talk. And it’s up to the investment banker to make those numbers talk the right way. When handling a huge business, there are a lot of factors that need to be considered when looking at the numbers. Professional expertise is required to correctly analyze the company’s finances in order to make good conclusions and insights. This can also help with informed investment decisions.

2. Management of Clients

Investment bankers (typically those in senior positions) are in charge of managing the client itself. This is one of the most important roles, as this is the key to keeping customers happy so the money continues to flow in. The day-to-day duties of someone in this position require the creation of reports, presentations, and demonstrations. Daily phone calls are also to be expected.

3. Data Management

Data determines everything. Without sufficient data, it is unclear how a client’s money should be handled. A good investment banker is someone who can truly crunch numbers all day, collecting data from as many sources as possible. Just as important as data collection is data storage, and it needs to be done right. Investment bankers get good at creating a system of data management that can help clients with everything from billing to balancing.

4. Being a Liaison

Dealing with clients often means dealing with third-party entities as well. There are teams of people involved with large-scale accounts, and the investment banker’s role is to communicate as effectively as possible. Being a good liaison means keeping up-to-date on the most accurate pieces of information while also being accommodating to the client’s needs.

How Do Investment Banks Make Money?

Providing financial analysis, management, and communication services is a very valuable thing, especially for high-profile clients. Big businesses need the help of investment bankers just as much as investment bankers need a paycheck from big businesses. The two work together in a mutually beneficial way.

The three main ways that investment banks make money include:

  • Charging a commission based on the amount of work done or the value of work done.
  • Adding a consulting fee that asks clients to pay just to have the initial review process.
  • Charging interest on any funds that have been raised due to the work of the investment bank.

Part of investment banking requires the granting of loans. These loans can come with an interest rate that the clients will ultimately have to pay the bank in return. The bigger the client, the higher the investment – and the bigger the payout in the end.