How Investment Banking is Different From Asset ManagementJuly 16, 2019
One of the biggest and obvious differences between asset management and investment banking is that assets are managed in asset management which is fundamentally managing investments that clients have and wish to invest for better returns, while investment banking deals with the raising of capital funds needed by companies, organizations, and even governments. While Asset management is about investors IB is about raising capital for activities that are basically about expansion and infrastructure building.
Investment Banking resorts to many ways to raise funds like acquisitions and mergers, stock purchases, initial public offerings etc to raise capital. It could be on the sell or buy side of the investment. For example on the sell-side of investment banking activities include capital-raising stocks and bonds issues among others while the buy-side involves activities like advising clients for private equity, insurance, mutual funds among others.
Investment Banking also has trading equities, marketing assistance to clients, securities research, derivatives, dealing in commodities and fixed-income securities as part of its activities. Asset management is a dedicated division for investments of its client’s funds in derivatives, equities, commodities, currencies, securities, etc., to earn higher returns and grow their size through issues and investments based on the risk-preferences and client needs.
Asset Management Vs Investment Banking as a Career Choice:
Both IB and AM do require sound financial knowledge and though not mandatory a degree/ graduation in economics, finance, business administration, math, etc does give you an edge. So do the certifications in the field when they come from a reputed institute like Imarticus and serve as measurable indices of skill and experience in the required concepts of IB or AM. There may be the odd-man-out in both fields who starts as an Intern, through to Associateship, VP, MD job roles etc.
Both the Asset Management and Investment Banking fields require these essential skills.
• A minimum of graduation in finance, law, economics etc.
• Proficiency in PowerPoint presentations, Excel techniques, Office and Word suites.
• 80 plus long hours every week.
• Being an effective learner and team player.
• Effective organizer with an eye for details.
• A quick learner who takes instructions well.
• Excellent conceptual knowledge of finance and accounting tasks.
• A practical IB or AM course.
• Certification of your practical skills.
• Great skills in financial modelling.
The ladder to climb:
Here is the figurative AM/ IB ladder of career progression. Starting as an intern and working your way up to the licensing in the US is very popular.
• 2 to 3 years as an Intern Financial Analyst in both fields.
• AM/IB Associate.
• VP- Investment Banking/ Asset Management.
• IB/AM Director.
• MD, CFO etc.
Scope for jobs:
Both areas have great scope for the unending demand of aspirants seeking bank- job prospects. The US Labor Department predicts a decade of growth of 12% starting from 2014. This is so as the financial instruments too, are evolving fast based on market requirements and both the technology and concept applications get complex and new-age. AM does score marginally over the IB aspirants in terms of jobs and scope as the investor base has grown tremendously with digital transactions, availability of online products, and ease of investment has increased too.
There is hardly any difference in the pay packages of the AM and IB. In early 2004, the median AM salary was 168,000 USD while that of the professional IB was315,000 USD. A decade later the figures for the AM was 263,000 USD versus the IB salary of 288,000 USD. Investopedia reports suggest the median 2015 banker’s salary was in the range of 75,000 to 85,000 USD. The performance bonuses added to take it to 140,000 USD for bankers in the early first year. AM pay packages varied between 55,000 to 100,000 USD with a flat cut in the funds managed by them. The financial crisis, global shifts in capital markets and new financial products will see the gaps close according to an FT article source.
In terms of career prospects, salaries, job roles and working conditions there is a lot of overlap between the asset management and investment banking sectors. However, AM has a slight lead in job prospects. Join the financial courses at Imarticus Learning if you are interested in being an AM or IB and have the inclination for it. Their reputation is superb and they offer a host of benefits including certification for aspirants. All the best in your banking career!