Career Advice: Investment Banking or Asset Management?

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.

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 out 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 mergers and acquisitions (M&A)
• 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
  

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.

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 80- and 90-hour weeks 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 $135,000 to $234,000 as of Dec. 2023, according to Glassdoor estimates. That figure, though, doesn't include year-end bonuses, which could start at about 50% of their salaries.
• The average salary for an asset manager, on the other hand, was a little over $92,855. 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 $67,480 in 2022 and the field was expected to grow 7% (which is faster than average) between 2022 and 2032.

Asset managers fall under the Financial Managers category with the BLS. These professionals earned an average annual salary of $139,790 and the job outlook was 16% between 2022 and 2032, which is even greater than average.

After two to three years as an investment banking analyst, the person transitions 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.

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 comfortable working 80-hour weeks rarely last long in the industry. Almost every Saturday is spent partly at work. 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.

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. Professionals who are more aggressive, have great persuasive skills, and 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.