Two of the most prominent and competitive fields in the financial services sector are investment banking and asset management, which often draw highly qualified people from prestigious universities. Candidates must also have excellent writing and verbal communication skills, good math aptitude, financial knowledge, and strong academic credentials. However, having a business degree is not always necessary. For jobs that call for specialized industry knowledge, expertise in fields like healthcare, technology, or telecommunications may be a good fit.
Another way to build up solid industry credentials is through professional degrees. Regulators typically demand a minimal level of competence, which may be proven by passing particular tests. Particularly investment banking requires more time than the typical 40-hour work week, although both professions have high profit potential. Additionally, both can present fantastic exit strategies.
Here, we present the most distinctive differences between asset management and investment banking.
Main difference between asset management and investment banking
The money of their clients must be managed by asset managers. They oversee investment mandates with varying objectives, levels of risk, and acceptable instruments. As one of the most significant difference between asset management and investment banking, the clientele can be fairly diversified. The clientele can include insurance firms, wealth managers, financial advisors, nonprofit organizations, and individual investors, in addition to organizations like sovereign wealth funds and pension funds.
Moreover, investment managers oversee portfolios that include a variety of assets, including equities, fixed income, real estate, infrastructure, and more sophisticated techniques like private equity or debt, commodities, and derivatives. Typically, institutions or high-net-worth individuals known as accredited investors are the only ones who can purchase more complicated and riskier goods. Individual investors are often offered liquid, pooled products like mutual funds or exchange trade funds (ETFs) that allow daily or intraday trading.
Climbing the ladder in asset management
Compared to investment banking, asset management has a more flat hierarchy. Typically, recent graduates begin as junior analysts and work their way up to senior analyst positions. The next step is portfolio management, when fund/portfolio managers choose investments and develop portfolios while continuing to keep an eye on their current and potential holdings. Diverse companies have different organizational structures, and some like to divide management duties by having a head of research function while others maintain reporting lines to portfolio managers.
Additionally, sales teams are used by asset managers to handle client relationship management and product distribution. This includes the marketing and data teams who create presentations for customers as well as portfolio managers. The head of distribution typically oversees the management of the sales teams, which are distributed around various regions, such as EMEA or APAC. Local teams are led by a committed manager who can leverage the company’s larger resources to offer clients marketing materials and informational resources.
Investment banking 101
Capital raising for clients includes both public and private businesses, as well as institutions and governments. The main difference between asset management and investment banks is that the latter can help clients create new debt and/or equity securities and support them during the sales process. They could run bond sales or launch initial public offerings to raise equity cash (IPO). Other tasks include executing broker deals for institutions and private investors, restructuring businesses, and providing assistance, advice, and facilitation during mergers and acquisitions (M&A).
Day-to-day operations in investment banking are highly broad and rely on the function and seniority of the position. Equity analysts carry out research and offer buy or sell recommendations for brokerage firms, while other professionals engage in market-making activities by bringing buyers and sellers together and supplying liquidity. Their activities differ from investment banking by an ethical barrier to prevent the exchange of information and conflicts of interest. Job titles thereafter progress from vice president and senior vice president to managing director.
Depending on their trading volume, the number of offices they have, and the number of staff, investment banks are categorized depending on their size. They can be divided into four groups: middle-market banks, regional boutique banks, and bulge bracket investment banks (smallest to largest). Large US companies like JP Morgan, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley are in the latter category, as are HSBC and Barclays from the UK, BNP Paribas and Societe Generale from France, UBS and Credit Suisse from Switzerland, and Deutsche Bank from Germany.
Educational background
Both investment banking and asset management require exceptional individuals who can exhibit good numeracy, intellectual curiosity, and great verbal and writing communication abilities when it comes to education and skills. Although a bachelor’s degree is required for all positions, many people elect to pursue graduate degrees to further their careers after gaining some experience, such as an MBA or Master of Finance. Getting professional certifications is another technique to show that you have more competence. The Chartered Financial Analyst (CFA) designation, Chartered Alternative Investment Analyst (CAIA), or Chartered Wealth Manager credentials are highly regarded among asset managers, where this path is more common.
Both investment banking and asset management involve specialized understanding of markets and economics, financial statement analysis, and financial modeling. Take our online investment banking course to receive the same training in accounting, financial modeling, and valuation as new employees to the top 4 investment banks if you’re hoping to start a career in investment banking or asset management.
Opportunities for exit
Working in investment banking provides a person with financial knowledge that they can use in various fields such as asset management, private equity, venture capital, and hedge funds. Asset management will be preferred by those looking for a better work-life balance, while private equity and hedge funds may provide even higher compensation than investment banking.
