I am a words person, meaning finance is a mysterious universe to me. In fact, literally all of my knowledge of investment banking comes from the 2000 black comedy-horror, American Psycho, which revolves around a 1980’s New York investment banker – Patrick Bateman – who embarks on a manic killing spree after becoming enraged by the superior business card of his co-worker.
As I’m nearing thirty and still think of Mr. Bateman whenever someone mentions banking, I figured it was time to educate myself from someone who is not a homicidal fictional character. Thus, I reached out to Robert R. Johnson, PhD, CFA, and CAIA, the President and CEO of the American College of Financial Services and co-author of Investment Banking For Dummies , Invest with the Fed , Strategic Value Investing , and The Tools & Techniques of Investment Planning . Read our conversation below.
Robert R. Johnson, PhD, CFA, CAIA
President and CEO, The American College of Financial Services
Can you briefly summarize your professional background?
I earned a PhD from the University of Nebraska in 1988. While earning that degree, I joined the faculty of Creighton University and achieved the rank of Full Professor in 1996. That same year I left Creighton and joined The Association for Investment Management and Research (AIMR which later became CFA Institute) to head the Chartered Financial Analyst (CFA) Program curriculum. I spent 15 years with the organization, and eventually became the Deputy CEO. Upon leaving CFA Institute, I rejoined the faculty of Creighton University. In October of 2014, I was fortunate to be named the President and CEO of The American College of Financial Services, a non-profit, degree-granting institution founded in Bryn Mawr, PA in 1927. I am co-author of Investment Banking for Dummies, Invest With the Fed, Strategic Value Investing, and The Tools and Techniques of Investment Planning.
What initially drew you to finance?
Simply put, happenstance. I was struggling to declare a major in college and a friend of mine convinced me to give the business school a try. Once in the college of business I found that finance and investments interested me and that I had some aptitude for the field.
Explain investment banking in one sentence.
In Investment Banking for Dummies I wrote, “Investment banking is the fuel of capitalism. Investment banking has been mankind’s solution to pairing up people with money and the people with ideas.”
What skills and character traits make a successful investment banker?
Investment bankers must have or develop superior analytical skills. Many of the financial modeling, quantitative and valuation techniques can be learned in university degree or professional certification programs. These programs also emphasize financial statement analysis, as a deep understanding of financial reporting is an asset to investment bankers. Both written and oral communication skills, including the power to persuade, are critical to success.
In terms of character traits that are helpful for investment bankers, a skeptical nature is beneficial as investment banking often involves analyzing different scenarios and performing “what if” simulations. Finally, high ethical and professional standards are more important now than ever before, as Wall Street increasingly has a reputation issue that needs to be addressed.
Are certain degrees or exams required to become an investment banker?
There are no degrees or examinations required to become an investment banker. While investment bankers come from a variety of education backgrounds, many went to top business schools and hold various professional certifications.
Professional certifications such as the Chartered Financial Analyst (CFA) designation are highly coveted by investment bankers as it signals to employers that these individuals have the skill set to provide value to investment banking firms.
What are the different types of investment banking? What are some common positions?
Investment bankers put the for-sale sign on corporate America. They facilitate mergers and acquisitions, leveraged buyouts, private business sales, and initial public offerings. Investment banking analysts provide recommendations that help investors decide whether they should buy or sell securities. Finally, investment banking firms trade securities for their clients.
Common positions include analysts, associates, vice presidents and managing directors/partners.
What is the pay like?
The best and the brightest in the field – including master’s and Ph.D. graduates from the top business schools work for investment banking firms. First year analysts can command pay packages in excess of $100K annually. More experienced analysts can earn up to $500K per year. Directors and firm Principals can be in the $500K to $1mil range, with Managing Directors and Partners at large multinational investment banks earning multiple millions annually. The unique aspect of investment banking pay is that the amount of salary is often dwarfed by the amount of bonus, particularly for experienced investment bankers.
Are there any major obstacles to becoming an investment banker?
Yes, investment banking positions are very difficult to secure. For years, the best and brightest from Ivy League schools flocked to Wall Street and the competition for investment banking positions was fierce. The investment banking employment market is still very competitive, but Wall Street is no longer first choice for many Ivy League graduates as it has been supplanted by Silicon Valley.
What has been the highlight of your career?
This is easy. In 2011 when I was with CFA Institute we hosted the finals for the CFA Institute Global Research Challenge in my hometown, Omaha, NE. I had the privilege of sitting onstage and interviewing the Oracle of Omaha, Warren Buffett. For someone who grew up in Omaha and respects Mr. Buffett and what he stands for, it simply doesn’t get any better than that.
Do you have any advice for someone who wants to become an investment banker?
Don’t become an investment banker because it can be a lucrative profession. Do it because you love what investment bankers do. I was given wise counsel by a former colleague you said, “Find your passion. If you enjoy doing something you will do it often and get good at it. If you get good at it, people will likely pay you to do it.”
Explain an investment banker's average day.
The average day of an investment banker depends upon the position of the individuals. Many people are introduced to investment banking via summer internships where individuals showcase their talents in hopes of landing a full-time job. Analysts are typically individuals straight out of college who commit to a two-year stint. Both interns and analysts are doing a great deal of background work and put in incredibly long days. Directors and principals are structuring deals and working with client firms. Partners and managing directors run the investment banking business.