Investment banking and asset management offer lucrative career paths for ambitious, high-performing economics and finance students. Jumping into either of these fields often means making a lot of money right out of school. Investment banking, asset management, and other similar financial fields also have prestige, particularly in cities like New York.
Although they both participate in the financial sector, the job duties and day-to-day lives of investment bankers and asset managers vary greatly. These two careers cater to different personality types. The starkest difference is that, for the most part, investment bankers operate on the sell side while asset managers are on the buy side.
Investment bankers sell financial products and asset managers buy them to manage for their clients. These two professionals are often on opposite ends of the same transaction: An asset manager purchases an investment product on behalf of their client from an investment banker. Investment banking typically requires greater sales skills while asset management requires greater quantitative and analytical skills. That said, the most successful professionals in either career have a good mix of both traits.
Key Takeaways
- Investment banking and asset management are both potentially lucrative financial careers.
- Investment bankers work with companies to raise capital or acquire companies through M&A.
- Asset managers build and maintain investment portfolios for individuals and organizations.
- A bachelor's degree is a minimum requirement in both fields, while certification helps individuals move up higher in the industry.
- Starting salaries and work-life balance are important considerations whether you choose to go into investment banking or asset management.
Investment Banking
Investment banking is a specific division of banking related to the formation of capital for companies, governments, and other entities.This field can involve equity and security research and makes buy, sell, and hold recommendations.
Job Opportunities
Among the roles in the field, investment banking positions include:
- Consultants
- Banking analysts
- Capital market analysts
- Research associates
- Trading specialists
Each of these positions requires its own education and skills background.
Regardless of where they end up, almost every investment banker starts as an associate or analyst. Many of these professionals may hope to put in enough years to reach a role as a vice president or managing director.
Responsibilities
Companies of different sizes and governments hire investment bankers to facilitate complicated financial transactions. Some of the main responsibilities of these banks include buying and selling securities and underwriting. They may also be key players in raising funds or capital for their clients.
Some of the specific tasks that investment banks undertake include:
- Issuing debt, such as a bond offering
- The facilitation of
- The underwriting of new securities
- Spearheading initial public offerings (IPOs)
- Heading up reorganizations
- Making broker trades for institutions and private investors
- Providing guidance to issuers regarding the issue and placement of stock
- Executing complicated financial transactions
- Helping with other complicated finance needs
Note
Investment banking firms are also market makers that provide liquidity or connect buyers and sellers to make the market.
Asset Management
Asset managers help clients reach their investment goals by managing their money. Clients of investment managers can include individual investors as well as institutional investors such as:
- Educational institutions
- Insurance companies
- Pension funds
- Retirement plans
- Governments
Investment managers can work with equities, bonds, and commodities, including precious metals like gold and silver.
Along with high-net-worth individual (HNWI) portfolios, asset managers manage hedge funds and pension plans and—to better serve smaller investors—create pooled structures such as mutual funds, index funds, or exchange-traded funds (ETFs), which they can manage in a single centralized portfolio.
Responsibilities
Asset managers can have varied roles and responsibilities, depending on the firm, which can include:
- Financial statement analysis
- Portfolio allocation such as a proper mix of bonds and stocks
- Equity research and buy and sell recommendations
- Financial planning and advising
- Estate and retirement planning as well as asset distribution
Qualifications and Requirements
Education
Neither investment banking nor asset management imposes rigid, across-the-board educational requirements. In the past, it wasn't unusual to see individuals working without a college degree. But many successful professionals now begin their careers with just a bachelor's degree in fields like business, accounting, math, economics, and finance.
Those who want to move higher on the ladder tend to have more advanced degrees like a master of business administration (MBA) or another related degree.
It often helps to get your degree from a prestigious school or one that serves as a recruiting ground for investment banks and asset management firms. Many firms look for candidates who graduate from top business schools like Stanford, the University of Chicago, Harvard, Northwestern, Dartmouth, and MIT.
Certifications
Professionals who pursue special certifications can often command higher salaries and may find themselves moving to higher positions.
For example, the Chartered Financial Analyst (CFA) is one of the most widely recognized financial designations while the Chartered Management Accountant (CMA) designation often helps professionals land management positions like a chief financial officer (CFO).
Licensing
Licensing is often mandatory depending on job duties. The Financial Industry Regulatory Authority (FINRA) requires anyone engaged in the sale of securities to maintain specific licenses for each security. These licenses include Series 7, Series 63, and Series 3. Individual firms that hire professionals for each career may also impose their own educational and licensing requirements.
Special certifications and designations are not mandatory. But they certainly help financial professionals advance in their careers.
Skills Set Differences
Many of the big banks reshaped their corporate culture since the Great Recession to make the atmosphere less cutthroat and more family-friendly. But the fact remains that investment banking and asset management can be demanding career choices.
Investment Banker
Because 70+ hours week are an investment banking norm, particularly during the first few years, investment bankers should be aggressive and highly energetic, which is why a tireless work ethic is key to this role.
Investment bankers must have strong people skills as phone conversations with a diverse mix of client personalities are constant during these long hours. They should also have a love for the markets as there is a need for strong quantitative acumen.
Asset Manager
These professionals are more often tasked with the technical work of managing clients' portfolios. Although not nearly as often as investment bankers, asset managers are also required to make sales.
People skills are important, as clients want to be comfortable with the person managing their money, having an almost preternatural ability to track the markets and spot lucrative investment opportunities is even more important. For students who excel in math and statistics but may not have elite sales skills, asset management often confers an ideal fit in the finance world.
Salary Comparison
Compensation for many of those working in the financial industry tends to be calculated as annual salaries. And many banks often pay (successful) employees big bonuses.
For instance:
- The average starting salary range for an analyst at an investment bank was $189,000 to $334,000 as of June 2024, according to Glassdoor estimates. That figure, though, doesn't include year-end bonuses, which could start at almost 100% of their salaries.
- The average salary for an asset manager, on the other hand, was about $80,985. Bonuses in this field vary widely and are based on an employee's success, goals, and position.
The Bureau of Labor Statistics (BLS) calculates and publishes data on wages and the job outlook for many different fields. Although it doesn't have a specific category for investment banking, this field is included among jobs in the Securities, Commodities, and Financial Services Sales Agents category. According to the latest figures, these professionals earned an average salary of $76,900 in 2022 and the field was expected to grow 7% (which is faster than average) between 2023 and 2033.
Asset managers fall under the Financial Managers category with the BLS. These professionals earned an average annual salary of $156,100 and the job outlook was 17% between 2023 and 2033, which is even greater than average.
After two to three years as an investment banking analyst,the persontransitions to an associate position, before getting in line to become a vice president and then director or managing director, eventually earning several hundred thousand a year in salary and bonuses.
Many asset managers are fee-based, which means the bonuses they earn on top of their base salaries represent a flat percentage of the money they manage and do not vary based on the performance of that money.
A reputable asset manager with a lot of assets under management (AUM) has the potential to make several hundred thousand dollars per year.
Work-Life Balance
Anyone who places work-life balance at the top of their priority list for choosing a career has an easy choice between these two careers.
Work-life balance is a misnomer in investment banking because work is life. Investment bankers are expected to prioritize work. This is not a Monday to Friday, 9-to-5 gig. Employees who are not comfortableworking 80-hour weeks rarely last long in the industry. Even Sundays are not guaranteed off days for an investment banker.
Asset managers keep more reasonable hours. While a person's exact working hours vary based on their employer, 40-to-50-hour weeks are pretty standard in the industry, with occasional Saturday work required. The bonus here is that you tend to get weekends off for the most part.
What's the Difference Between Investment Banking and Asset Management?
Investment banking involves the creation of capital for different clients, including governments, companies, and high-net-worth individuals. Investment bankers provide various services, including underwriting, help in the sale and purchase of securities, mergers and acquisitions, and broker trades among other things. Asset management, on the other hand, helps clients reach their investment goals through the management of money. Asset managers provide their clients with investment advice and make recommendations.
How Do You Become an Investment Banker?
In order to become an investment banker, you need to get at least an undergraduate degree in business, finance, economics, math, accounting, or another related field. It also helps if you pursue special financial certifications and designations like the Chartered Financial Analyst. Getting these will attract more potential employers, allows you to command a higher salary, and move up in the financial world. A graduate degree is helpful but not mandatory in most cases.
What Do I Need to Become an Asset Manager?
You'll need at least a bachelor's degree in business, accounting, finance, or another related field if you want to work as an asset manager. Consider getting special financial certifications and designations if you want to work in special areas of the field or if you want to work with top names. They can also help you reach a higher salary range. You may want to consider higher education like a graduate degree, but that's not always necessary. And you will need to become licensed by federal and state authorities to conduct certain financial transactions for your clients, such as buying and selling securities and mutual funds.
The Bottom Line
Investment banking and asset management are lucrative, prestigious, and selective fields in which to work. Receiving an offer in either field means you've done something right. Which career is a better fit between the two comes down to your skill set and priorities. More aggressive professionals with great persuasive skills and who live for their jobs tend to do better in investment banking. Those who are more cerebral, quantitatively inclined, affable but not natural-born salespeople and prioritize a healthy work-life balance are probably better off as asset managers.
