Investment banking is a financial institution that helps individuals and corporates to raise financial capital by acting as their agents and advisor. If executed correctly, it’s a very lucrative business with high-profit margins.
Looking to start your Investment Bank?
It’s easy; let us give you a step-by-step guide on how to start your own Investment Bank. Like any other business, before starting any venture, you should look out and analyze inside out the similar investment banks operating in your vicinity. This is essential as you should know your competitors’ strengths and weaknesses to complete them better. You should also look out for the mistakes that they have made and try to avoid them.
The investment banking industry is among the active line of business in the financial services industry. These banks provide a wide range of services, including wealth management of high-net-worth individuals, proprietary trading, managing discretionary or non-discretionary portfolios and broker-dealer trading services. Financial markets in the United States of America are the largest and the most liquid in the world. In 2018, finance and insurance represented 7.4% (approx. USD 1.5 trillion) of the US gross domestic product. The investment banking industry has shown tremendous growth in the past decade. It will continue to experience growth in most parts of the world, especially in the developed world, such as the United States of America, the United Kingdom, Germany, Australia, etc.
Services you can specialize in
Most investment banks usually provide a wide range of securities, wealth management and financial advisory services to their private and corporate customers. Some may have more experience than others in the services listed above. However, some niche services have also been developed over time which requires specialized skills. These include:
- The issuance or underwriting of stocks and bonds in primary markets directed to oversized and retail investors
- Brokerage or trading in secondary markets on behalf of clients who wish to purchase or sell those securities
- IPOs (Initial Public Offerings) represent the first offer of shares of companies that want to be listed on a stock exchange
- Management services for companies and investors that intend to buy or sell other companies through mergers or acquisitions, or public offerings
- Consultancy services to companies on risk management, financial control, liquidity management, corporate strategy and other services
- Wealth management for high-net-worth individuals by offering investment opportunities in financial assets to enhance returns in the capital market.
In addition to the above services offered by the investment banks to their customers, they also participate as private investors in the markets by taking their trading positions, resulting in net worth of profits or losses.
How to start then?
Select the most appropriate legal structure depending on your target market, i.e. national or international. Generally, a partnership or limited liability company (LLC) relies on the scale of the business partnerships for small-scale moderate start-up capital. In contrast, LLC is incorporated where you intend to grow your business and have worldwide clients.
Finding an excellent catchy name is an issue faced by all new businesses. Investment banks are not immune to it; selecting a name is essential to go with your creative business practices.
Basic Insurance policy cover is the elementary requirement of all businesses operating in the United States of America. It varies according to the industry you work in. You must have an adequate budget for insurance policy coverage and consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your investment banking and securities dealing services firm.
Investment banking is highly regulated; you cannot start a business in the USA without proper documentation. Some primary documents include a certificate of incorporation, business license and certification, business plan, Non-disclosure agreement, etc.
Physical interaction with clients is of prime importance in investment banking. Hence it would be best if you had a well-furnished office in a good location, preferably in an epicentre of the business district to attract clients.
Your clients will rely on you to handle all their investments and manage their wealth. You need a compelling personal and company profile to provide them with comfort and attraction. Highlighting the required qualification and experience in investment banking is vital, along with success stories. An essential aspect of marketing is the caveats and risk management in case of investment loss.