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Investment Banking vs Wealth Management – An Analysis

Investment Banking and Wealth Management are two very popular career options for individuals interested in the financial sector. Though these two fields seem to possess similar interactions, they are distinctly different from one another. Investment banks provide financial services to governments and institutions. They do not work with individual clients. Whereas, Wealth management helps individual client or firms manage their finances, providing various financial services to them. In this article on Investment Banking vs Wealth Management, you will learn in detail what is investment banking, its services, what is wealth management, the services provided by wealth management, and what are the major differences between them.

 

Investment Banking vs Wealth Management

Before understanding how Investment Banking is different from Wealth Management in the blog below on Investment Banking vs Wealth Management let us understand both of them individually.

What is Investment Banking? 

Investment Banking is a type of company offering financial services to various institutions, governments, and organizations. It works as an intermediary handling all their complex and large financial matters on their behalf.

Investment banks generally work as a broker, or financial advisers, helping the corporations issue shares of stock in an IPO (Initial Public Offering) or additional stock purchasing.

Investment Banks provide advice to various corporations relating to pre-underwriting, underwriting, and after distributing the securities. Investment Banks examine the company’s financial statements and publish a prospectus to investors before the securities are available to the public for purchase.

Usually, the clients of Investment Banks are pension funds, corporations, governments, hedge funds, and other financial institutions and financial banks.

Investment banks help corporations make major financial decisions like mergers, acquisitions, issuing bonds, underwriting, IPOs, or purchase & and sale of stocks.

Some of the famous investment banks are Goldman Sachs, JP Morgan Chase, Citigroup, Barclays, Credit Suisse AG, BNP Paribas, AXIS Capital, Citi Investment Banking, and Greenhill.

Read This, Investment Banking Courses In The World

Investment Banking Services:

Let us now understand how the services are different in Investment Banking vs Wealth Management

Merger & Acquisition

The primary service provided by investment banks to corporations, governments, or institutions is merger and acquisition. Investment bank researches the estimated value of an acquisition on behalf of the organization. They also negotiate with the third party and decide the fair price on behalf of the company.  It works as an intermediate between the company and the third party for smooth functioning

Underwriting

Investment Banks provides underwriting service to companies and works as intermediates between investors and the company. The company wants to raise capital for the business and the investors want to invest their money in good-earning firms. Here the investment Bank helps the company to gain new capital and helps them to go public via the IPO process.

Sales and Trading

Most of the investment Banks have a separate trading department that helps to execute shares, stocks, and bond transactions on behalf of their clients which are generally huge corporations, institutions, or governments.

Asset Management

Investment Bank plays an important role in managing the assets of various big institutions, organizations, or governments. They manage their pension funds, stocks, real estate trusts, debt instruments, and financial portfolios. Many large institutions have substantial amount of asset holdings and it requires proper management of them. Investment Bank makes it easy for the firms to manage all these assets.

Advisory Services

How the firm will raise its capital is one of the key decisions to be taken for any firm or company. Investment Bank provides guidance and advice to the companies regarding this matter. Investment Banks also provides advice on merger & acquisition, how to raise funds, issuing bond, and borrowing from the public.

Raising Capital

Any company or institution thinking of expansion, merger, acquisition, project funding, or debt reduction would require a large amount of capital. Investment banks help these firms by raising capital on their behalf in the form of debt and equity. Investment banks take care of all the formalities required in raising capital like document designing, registration, issuing prices, issuing underwriting, listing on exchange, stock allotment, etc.

Check these Prominent Investment Banking Courses in India:

Research

Investment Banks have a large number of team that gathers financial information about companies. They share this information with other companies or investors for easy buying and selling of stocks. This information is often shared internally but investment banks can earn revenue by selling these reports to firms or corporations. Investment Banks continuously try to research the financial market and offer the latest data based on that.

Initial Public Offerings

When a company decides to expand its business, it needs to raise funding through IPO. Investment banks help the company gain that capital by preparing a prospectus for interested investors stating the terms and conditions of the offering along with the risk it carries.

Equity Research

Investment Bank helps investors to make investment decisions regarding which shares to purchase, where to invest, which stocks are to be kept steady, and more. Investment Bank studies the current equity market based on the financial data available to them and informs the investors based on that data, which equity is beneficial and profitable in the current times.

Example of Investment Banking in Investment Banking vs Wealth Management

Let’s consider an example of investment banking in the context of a merger and acquisition (M&A) deal:

Scenario: Acquisition of Steel Corporation by Dharma Inc.

Dharma Inc., a large multinational corporation thinks of acquiring a small firm Steel Corporation.

They believe that if they acquire Steel Corporation their market value will increase and they will get a better market position compared to their competitors. It will also help to grow their shareholder’s value.

So, Dharma Inc. decided to use an investment bank’s help for an easy acquisition process.

Investment Bank tries to conduct thorough research on Steel Corp. They do a complete study on Steel Corporation’s financial statements, properties, legal contracts, obligations, assets, or any liabilities.

The investment bankers of the investment bank try to find out the fair price or value of Steel Corp and discuss the same with Dharma Inc. They will also assess the current market value, what value Steel Corp. is ready to give, and what benefits Dharma Inc. will get.

After discussing with Dharma Inc. about the conditions and value put up by Steel Corp. Investment Bank tries to arrange their meeting so that they can negotiate any changes in the deal.

Investment Bank forms a legal contract mentioning the price, purchase price, structure, type of transaction, or any other legal formalities that must be met. The contract involves stock information, stock exchange information, cash payments, credit transactions, and the important possessions of the company. The investment bank tries to create the contract in such a way that it is understandable by both parties and it gives the most advantage to Dharma Inc.

After the contract is been made, the Investment Bank tries to get all the necessary approvals from the government or other legal authorities following all the rules and regulations imposed by law for the acquisition procedure.

Then the Investment Bank forms a detailed consolidated plan with Dharma Inc. The plan sketches details regarding how both the companies will run the operations, what are their roles, and working patterns, what are the causes of the acquisition process, what will be the role of Steel Corp. once the deal is closed, and all the legal details about the contract which are to be followed by both the companies.

Once the documents are approved by Government and the parties are in mutual consent, the acquisition gets completed. Dharma Inc. takes over Steel Inc. and the acquisition process is completed. Here the task of the investment bank gets over for the acquisition process.

But investment banks can still work for Dharma Inc. by providing financial advice to them regarding their financial decisions, asset management, post-acquisition profit, stock exchange, and forecasting any financial changes that are going to take place.

Investment Banking Courses Across India:

 

Clients of Investment Banking: Investment Banking vs Wealth Management

  • Governments
  • Corporates
  • Hedge Funds
  • Pension Funds
  • Large Companies
  • High Net Worth Individuals

How Much Does an Investment Banker Earn in India? : Investment Banking Vs Wealth Management

Designation Average Annual Salary
Investment Banking AnalystINR 14.6 Lacs
Deputy ManagerINR 9.0 Lacs
Investment Banking AssociateINR 14.1 Lacs
Process AnalystINR 3.6 Lacs
Operations AnalystINR 4.9 Lacs
Research AnalystINR 4.7 Lacs
Relationship ManagerINR 4.9 Lacs
Business AnalystINR 9.7 Lacs
Team LeadINR 8.6 Lacs
Investment Banker with less than 1 year of experienceINR 2.0 Lacs
Investment Banker with more than 9 years of experienceINR 51.0 Lacs

Source: AmbitionBox

Investment Banking is a sector that is always in demand. This sector serves as an attractive career choice for individuals possessing an interest in the finance field. As the world is emerging towards digitalization, this sector guarantees to secure the jobs of individuals as investment banking is a field that requires humans compared to AI and machines.

Now let us understand what is wealth management in detail.

What is Wealth Management? : Investment Banking vs Wealth Management

Wealth management is a financial advisory service for individuals or families. Wealth Management offers a holistic approach to protecting and growing its clients’ money over the long term. Wealth management generally involves planning to meet individual needs and goals. Wealth management goes beyond traditional financial management and encompasses a range of services including capital planning, budgeting, tax planning, estate planning, and risk management

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Wealth Management Services

Financial Planning:

Wealth Management helps individuals set their financial goals and achieve same. The wealth managers work with their clients in setting a comprehensive financial plan that supports their family goals, individual goals,  income sources, cash flow, retirement plans, and overall financial situation. This plan helps to set their current and future wealth.

Risk Management

Wealth managers help clients in analysing their risks about business or family and strategies to prevent those risks. This can include insurance analysis, business risk management, asset protection, and plans to prevent any natural calamities.

Investment Management:

Investment Management generally includes an investment strategy relating to asset allocation, portfolio monitoring, global diversification, and defensive portfolio strategies to manage risk and optimize performance.

Tax Planning:

Wealthy individuals often face complexity in taxes. Wealth managers work to optimize tax efficiency by identifying strategies to minimize tax liabilities, taking advantage of tax-advantaged investment opportunities, and ensuring compliance with tax regulations.

Retirement Planning:

This entails evaluating retirement income needs, optimizing retirement account contributions, and developing strategies to maximize retirement benefits.

Estate Planning:

This includes strategies for estate tax reduction, family gifting, charitable trusts, and estate administration. The wealth manager plans these strategies as such it gets transferred to their heirs with minimum state taxes.

Legal and Regulatory Compliance:

Wealth managers stay informed about legal and regulatory changes that may impact their clients’ financial situations.

Education and Communication:

Wealth Management for individuals is often provided by financial institutions, investment firms, or dedicated wealth management firms. The aim is to provide a high level of personalized service and expertise to help individuals navigate the complexities of managing substantial wealth and achieving their financial goals.

Also, this is For Further Guidance Related To Investment Banking,

Wealth Management Example: Investment Banking vs Wealth Management

John Smith, a successful 45-yеar-old executive, recently received a significant bonus and wants to ensure that he maximizes his wealth while planning for his future and the well-being of his family. Here is the wealth management process of John Smith conducted by his wealth manager.

Wealth Management Process:

Initial Assessment:

Wealth managers conduct a thorough assessment of John’s current financial situation, including assets, liabilities, income, and expenses.

They discuss John’s short-term and long-term financial goals, such as retirement planning, education funding for his children, and real estate planning.

Financial Planning:

Based on the assessment, the wealth manager develops a comprehensive financial plan tailored to John’s objectives. The plan includes strategies for budgeting, tax planning, risk management, and investment allocation.

Investment Management

The wealth manager creates a diversified investment portfolio aligned with John’s risk tolerance, time horizon, and financial goals. Regular portfolio reviews and adjustments are made to ensure the portfolio remains aligned with market conditions and John’s objectives.

Risk Management

They are evaluating John’s insurance coverage to protect against unforeseen events, such as disability or premature death. Then the wealth manager implements those strategies to minimize risks and protect John’s wealth such that he gets the most benefit out of it.

Retirement Planning

The wealth manager then develops a retirement plan for John that considers his desired lifestyle, retirement age, and the income needs of the entire family after retirement. The manager also optimizes the account so that John can get maximum tax advantage.

Tax Planning

The wealth manager helps John in implementing tax-efficient investment strategies to minimize tax liability. They also advise John on tax-advantaged investment options.

Estate Planning

Assisting John in creating an estate plan that includes wills, trusts, and beneficiary designations. Ensuring smooth transfer of assets to John’s heirs while minimizing estate taxes.

Regular Review and Adjustments

After making the entire wealth management plan for John, the wealth manager conducts periodic reviews to assess the progress. The manager adjusts the wealth management plan based on changes in John’s life, current market situation, financial markets, or economic conditions.

Throughout this process, the wealth manager acts as a trusted advisor, providing guidance and complete support to help John make informed financial decisions and achieve his long-term financial objectives.

Clients of Wealth Management: Investment Banking vs Wealth Management

  • Ultra-high net-worth individuals
  • High- net worth individuals
  • Family offices
  • Foundations
  • Employees of organizations

How Much Does a Wealth Manager Earn in India? : Investment Banking Vs Wealth Management

Designation Average Annual Salary
Senior Wealth ManagerINR 8.7 Lacs
Wealth ManagerINR 7.2 Lacs
Branch Sales ManagerINR 6.4 Lacs
Private BankerINR 13.6 Lacs
Relationship Wealth ManagerINR 6.2 Lacs

Source: AmbitionBox

Investment Banking vs Wealth Management

Investment BankingWealth Management
MeaningInvestment Banking is a type of financial service that serves corporations, governments, or institutions.Wealth Management is a type of financial service that serves individuals or families.
Services OfferedInvestment banking generally provides services like merger & acquisition, raising capital, underwriting, and financial advisory services.Wealth management provides services like estate planning, wealth management, and personalized investment strategies.
AudienceInvestment banks serve corporations, institutions, or governments.Wealth Management firm targets high-net-worth individuals or families.
FocusInvestment banking focuses on helping large firms and corporations to raise their funds and to manage the same.The primary focus of wealth management is to grow individual wealth and strategies to preserve it.
OwnershipIn investment banking, the ownership of various assets or entities is held by those firms or corporations that they work for.In wealth management, the ownership of various assets and entities remains with the firm as they target individuals.
Skills requiredFinancial modelling, strong analytical skills, deal-making abilities, and strong financial knowledgeFinancial planning, relationship building, communication skills, deep understanding of investment and financial market

Investment Banking vs Wealth Management: Highlights of the Investment Banking Course

Here is a list of a few institutes that provide the best Investment Banking Courses in India.

InstituteCourse StructureCourse DurationCourse Fee
IIM SKILLS
  • MS PowerPoint
  • MS Excel
  • Fundaments of Financial System
  • Derivatives Market
  • Technical Investment Banking
  • Different Marketing Collaterals
  • Technical Financial Modelling
  • Business Valuation
3 MonthsRs 39,900+ Taxes
Imarticus Learning
  • Introduction to Financial Markets
  • Trade Life Cycle
  • Risk Management
  • Asset Management
  • Reconciliation
  • Stock, Borrow, and Landing
  • Collateral Management
  • Anti-Money Laundering & KYC
  • Job-interview ready
2 Months full-time and 3 Months if done part-timeRs 1,40,000
IIM Learning
  • Financial reporting, analysis, and valuation
  • Financial Management
  • Investment & portfolio management
  • Investment banking 1
  • Investment banking 2
  • Merger & Acquisition
  • Options, Future, and derivatives
  • Economics environment
  • Spreadsheet Modelling
  • Industry Lecture
NANA
IntelliPaat
  • Preparatory sessions
  • Fundamentals of investment banking
  • Cash equities and fixed income
  • Foreign exchange and money market
  • Derivatives market
  • Reference data management
  • Corporate actions
  • Asset management
  •  ISDA and Reconciliation
  • Stock, borrow, and lending
  • Managing Collateral
  • Merger and acquisition
  • Trade life cycle
  • Risk management
  • Anti-money laundering
5 MonthsRs 98,040
Edu Bridge
  • Investment banking & financial system
  • Cash equities
  • Fixed exchange market
  • Foreign exchange market
  • Money market
  • Derivatives
  • Corporate actions and their types
  • MS Excel and PowerPoint
  • Trade life cycle
  • KYC and anti-money laundering
  • Reconciliation & its types
  • Reference Data Management
  • Risk and their types
326 HoursRs 69,000

Dont Miss,

Highlights of the Wealth Management Courses offered:

InstituteCourse StructureCourse DurationCourse Fee
NSE
  • Introduction to Planning
  • Wealth Management
  • Equity Investment
  • Risk Management
  • Debt Investment
  • Products & Services Investment Evaluation Framework
  • Risk Management through Insurance
  •  Elements of Taxation
  •  Risk Profiling
  • Asset Allocation
16 HoursRs 5000+Taxes
Udemy
  • Introduction and Wealth Accumulation
  •  Financial Planning
  • Asset Allocation
  • Risk Management
  • Estate Planning
  • Personal Finance
12.5 HoursRs 500
CRISIL
  • Macroeconomics
  • Financial Planning
  • Understanding Assets
  • Mutual funds’ key concepts
  • Insurance landscape and products
  • Quantitative technique
  • CRISIL MF Ranking
  • Portfolio Monitoring and Client Reporting
  • Indian Financial Market
  • Tax Planning
  • Understanding Investment Vehicles
  • Mutual Fund Transaction and Taxation
  • Taxation & Claims for Insurance Products
  • How to analyse investment
  • CRISIL ULIP Ranking
30-60 HoursRs 14,000
TIMES
  • Wealth Management
  • Estate Planning
  • Trusts Duration
  • Financial Planning
  • Hedge Funds
  • Mutual Funds
  • Commodity and Energy Market
  • Portfolio Management
  • Money and Banking
  •  Anti-Money Laundering
110 HoursRs 70800
Kredent Academy
  • Financial planning
  • Wealth Management & Economy
  • Investment and risk management: Equity
  • Investment and risk management: Debt
  • Investment and risk management: Alternate Assets
  • Investment Products & Services
  • Investment Evaluation Framework
  • Risk Profiling & Asset Allocation
  • Risk management through insurance
  • Elements of Taxation
  • Taxation of Investment Products
  • Estate Planning
2.5 WeeksNA

FAQs: Investment Banking vs Wealth Management

Q.  What is the difference between investment banking and wealth management in terms of job stability?

Investment Banking: Job stability can be affected by the economic conditions,  market fluctuations, and the performance of the investment banking division. Layoffs may occur during downturns.

Wealth Management: Generally, more stable, as the demand for wealth management services tends to persist even in economic downturns. Client relationships play a significant role in job stability.

Q. Which sector offers better long-term growth opportunities?

Investment Banking offers opportunities for rapid career advancement and high earnings, especially for those who are excellent at maintaining good relations with people and deal-making.

Wealth Management provides steady growth opportunities, especially as financial advisors build good relations with their clients over time.

Q. What are the career paths in investment banking and wealth management?

In investment Banking the career progression starts as an analyst, moving to associate, vice president, and eventually reaching managing director or partner levels.

In Wealth Management career path often begins as a financial advisor or analyst, followed by senior financial advisor, and portfolio manager.

Conclusion: 

Investment Banking is an important part of corporate finance providing valuable and research-based financial advice and services to various corporations, companies, and government entities. Investment Banking requires a set of skills for an individual to pursue it as a career. These skills include financial modelling, strategic thinking abilities, strong financial knowledge, and the ability to deal with complex financial problems.

On the other hand, wealth management revolves around personalized financial services for individuals and families, emphasizing long-term financial planning, asset management, and strong client-advisor relationships. To get a successful career in wealth management, one must possess interpersonal skills, a deep understanding of investment products, and the ability to develop financial strategies beneficial for the client.

The choice between these two fields, regarding a career or as a client seeking financial services, depends on personal preference, professional ambitions, and financial objectives. Both, Investment Banking and Wealth Management play a crucial role in the financial system. We hope this article Investment Banking vs Wealth Management will help you to learn the differences between Investment Banking and Wealth Management and will help you to decide your career path.

 

Hi, I am Mariyam. Since childhood, I used to express my feelings through words. Content writer by day and a fiction reader at night I am rejuvenating my childhood days. Writing has always been my passion, so here I am following my passion with my side hustles.

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