Wealth management to investment Banking
Wealth management and investment banking are two of the most popular career choices within the financial sector. While there is a significant amount of overlap and interaction between the fields of investment banking and wealth management, the two jobs are distinctly different.
An investment banker mainly offers financial services and advice to corporate entities, rather than to individuals as wealth management firms do. Investment banking is the area of the financial sector that handles mergers and acquisitions (M&As) and business restructuring. It manages spinoffs, stock splits, share buybacks, initial public offerings (IPOs), and secondary stock issues or bond issues. In addition, investment bankers may handle the short-term investments of their corporate clients.
The best investment bankers excel at the financial management of businesses and persuasively negotiating complex multibillion-dollar deals. They are adept at leveraged buyouts and at helping clients resist attempted hostile takeovers. Investment banking can provide considerable excitement from time to time, but also consists of periods of relative inaction.
Investment bankers must be able to understand the important industry-specific factors that drive the success or failure of a business. While market analysts are experts are evaluating stocks, investment bankers must be experts at the fundamental evaluation of businesses. In addition to having a solid head for numbers and basic accounting, investment bankers must also be able to think creatively to devise the best possible means of arranging financing and structuring business deals.
In terms of the actual functions within investment banking and the job responsibilities of investment bankers, there are two types of investment banker positions: account managers and operations specialists. Account managers act in the lead position of developing and maintaining relationships with clients and seeing that their needs are properly met. Operations specialists execute investment banking services, such as an IPO or stock buyback.
The field of wealth management is concerned with providing financial services primarily for high-net-worth individuals and ultra-high-net-worth individuals, although less wealthy people who expect to join the ranks of the ultra-rich may sometimes seek wealth management services, too. However, the requirements for private wealth management at most firms virtually preclude anyone outside the ranks of the rich from accessing such personal financial services. Typical minimum account requirements for high-net-worth individuals are in the neighborhood of $2 million, and minimum accounts for ultra-high-net-worth individuals frequently run as high as $10 million to $20 million.
Wealth management refers simply to money management, in all its aspects. Wealth management firms make money by charging fees for the various services they provide. In the area of investments, clients are often sold managed account services, discretionary investment accounts that are traded on behalf of the client by one of the investment professionals at the firm. In addition, wealth management firms provide clients with brokerage accounts, so clients can access virtually any type of investment. The firm can generate additional fees by selling clients investment products, such as IPOs or secondary stock issuances. In addition to investment services, wealth management clients are provided with tax planning, estate planning and retirement planning services.
The job of providing these services to a firm's clients is typically split between relationship managers and investment professionals. The job of the relationship manager is to know the client. The job of the investment professional is to know the investments that are considered by, and for, the client. It is the relationship manager who is primarily responsible for meeting the client's needs and wishes, and who most often meets directly with the client, although investment professionals are frequently included in regular, scheduled meetings with clients. In the case of ultra-high-net-worth clients, there may be an entire team of people assigned to a client's account, but there is still usually a single relationship manager assigned to oversee the account and to serve as the firm's primary representative with the client. The division of labor between the two aspects of wealth management can be seen as somewhat resembling the two aspects of relationship management and project execution that exist in investment banking.
There are certain commonalities that tend to exist in candidates for a career in either wealth management or investment banking, but there is really no hard and fast educational requirement, since there is no educational major that specifically prepares an individual to act as a wealth manager or an investment banker. A degree in business, either a bachelor's degree or a Master of Business Administration (MBA), provides a basic foundation for a career in the banking or financial service industry. A degree in accounting or economics may be equally useful.