An investment bank is a type of financial intermediary that performs a variety of functions such as underwriting, facilitating mergers and acquisitions, or brokerage services for institutions. The work of an investment bank begins right from the counseling before the underwriting sessions, and stretches right till the securities are properly handled and distributed. These institutions play a very crucial role in market transactions on behalf of, or for private and public investors, governments, and corporations. There are some that also provide highly professional services in assisting their clients with industrial know-how on various parameters.
Industries from diverse sectors like media and telecommunications, real estate, industry, finance, health care, consumer products, and various such segments are provided assistance by investment banking services. Along with these, they also deal in the securities trading services, credit counseling, financial engineering, and merchant banking. The primary source of income for investment bankers is the commissions, fees, and gain margins on transactions provided for the above mentioned institutions.
The role of an investment bank as a mediator is to directly familiarize the nature of the investment and the entity being invested in. In case of conventional banking, people deposit finances in the form of cash, assets, and so on with a bank. The bank in turn can lend to a borrower under some standard norms to utilize it in his own way. In the case of investment banking, there is a direct familiarization of both the investor and the borrower. This means that an individual or institutional investor has an option to choose his type or division of investment into any given entity looking out for funds.
Investment banks provide companies with expert guidance and formulate strategies on their behalf for disinvestment, and also to merge or acquire new entities. Good investment banking involves procedures to maintain and upgrade the quality of services and keep a close watch on the emerging trends in the market, where their customer's money can be invested. It also incorporates risk management services in order to streamline the flow of capital, check its overuse, and come up with a detailed analysis of credit risks.
A big firm should ensure a number of parameters before tying up with an investment bank, in order to ensure sizable profits. The bank should have a long-standing reputation of providing quality and consistent service. It should be accountable for all the transactions done through it. You need to do a thorough market research, compare and contrast the functioning styles of different banks, the consistency of their workforce in staying with a particular deal, or the reputation of their previous clients.
The investment banking market was increasing leaps and bounds, until the recession struck. Banks all over the world are trying to recoup the losses. The US is the biggest market, followed by Europe, Middle East, Africa, and Asia. Its global hubs are a few economically sound centers like London, New York, and Tokyo. However, it is not restricted in its scope to a few regions of the world. It caters to a global community, which makes it highly sensitive to global ups and downs, along with innovative fluctuations. A career as an investment adviser is both a challenging and a highly rewarding career option.