The Investment Banker has many shapes

This article was originally published on the 11th of April 2013 in dECK Magazine www.deck-magazine.com and was written by one of our staff members Mr Banks

After a few episodes of watching the series Suits a lot of my friends wished they were Wall Street lawyers chasing big law deals and clients alike. Some of you will agree with me that one or two fictional shows have compelled an interest within you to pursue some form of organised career. I guess at certain intervals some of you have tried figuring out what it really takes to be an investment banker?

My answer would be to say, “a lot” and also “a few” ,plainly speaking. Good analytical skills and a good mathematical base are an added advantage but l would say image is everything just to add on!No one can in their right state of mind leave their hard earned dollars with a shady looking individual. Bankers are known for their selective taste for the better things in life. Tailored suits, flashy cars and of course a house in the Hamptons if one is up to speed with holiday real estate. Good selling skills are a must and this is where one has to be cultured. Cultured, meaning able to draw the attention of well to do individuals and possibly carry a conversation long enough to have them interested in hearing about whatever product you may be selling. This is a very powerful tool within the interpersonal skills realm as no investment banker ever makes it if they are not good with people.

A sad truth is many investors, stakeholders and individuals alike look to the larger markets for talent. Personally, l see that view as of no value, pretty much every graduate with a financial back ground can sweat it out in the field. Exposure is of high essence as the academic gap grows if one does not have adequate experience. Secondly as glamorous as the fields looks most of the calculations within systems have already been predetermined by actuaries and mathematical geniuses. Firms spend a considerable amount of seed capital buying algorithm systems that can process trades within the second generating small profits but however turning over a billion dollars a day and thereby increasing the rating of both the investment banker along with his firm.

Do not get me wrong, the investment banker does have a steady education, but even he or she,as an individual, does not have the muscle to do the job of the system. However, the education is there to justify the firm’s choice of path and investment. The human element is always required to run the state of affairs of any established entity, humans have not come to a point to trust machines to do everything (no conspiracy intended).

To make it in the investment banking world requires another essential ingredient. Honesty! Indeed a lot of investment bankers fell by the way side due to honesty issues around them.

In December 2008, Bernard Madoff revealed that the asset management arm of his firm, Bernard L. Madoff Investment Securities, was "just one big lie”. In what he described as a Ponzi scheme, it's estimated he took his investors for a cool $65 billion over the course of nearly two decades. And he didn't just con fat-cat billionaires and celebrities (such as Zsa Zsa Gabor, Kevin Bacon and Steven Spielberg); humbler individual investors, banks and even charities lost money in the scheme. The scheme wasn't revealed until Madoff himself confessed his crimes.

In March 2009, Madoff pled guilty to the charges against him, and he was sentenced to 150 years in prison the following June. One reason that Madoff was so successful was that he was a highly respected, well-established and esteemed financial expert -- his reputation was bolstered by the fact that he helped found the NASDAQ stock exchange and served a term as its chair. Furthermore, at the same time he was running his scheme, he was also running a legitimate business. He earned his investors' trust because whenever they requested a withdrawal, Madoff's investment company got their money to them promptly.

Unlike other Ponzi schemers, he didn't tempt investors with unbelievable returns. He reported moderate (albeit, suspiciously consistent) returns to his investor.

All is not sad within the investment profession as there are quite a number of success stories to come out of the field. Locally, Nigel Chanakira founded his financial services firm Kindgom before he hit 30. But while not vastly documented,Kingdom did face many challenges during it’s start up.

Institutional investors such as Old Mutual and the National Social Security Authority did not have the appetite to invest in his dream. But Chanakira was not the man to take no for an answer and through strategic alliances and commendable head hunting he surrounded himself with an inspired team to build what is today a financial empire known as Afrasia Kingdom.

To complement this local success, Tawanda Nyambirai, a lawyer by profession has been able to setup and grow TN Holdings Limited which is the parent company of TN Bank, TN Grill and TN Harlequin before the demerger of the group and subsequent re-listing of the units separately.

This rise, shows that even those not on the investment banker route have an opportunity to redefine their goals and possibly go the other route. Both individuals may have not been able to breakthrough to established entities but rather they braved up and took it upon themselves to establish what they have today.

In my opinion, it is very difficult to define what an investment banker is. There are many routes of specialisation that one can take. Others are in commodities, others in futures and other in speculative platforms such as even the weather. Many students grill themselves in every specialisation and often kill the passion out of their systems. This need not be the case though hard work towards an education cannot be substituted.

Locally, there is not a lot to talk about on the investment banking platform. Most banks deliver the service quietly as the masses are still not keen to join in. Another factor, is that in Zimbabwe, it is very expensive to even partake of the service as many institutions are still quite targeted. Unfortunately to add most locals are stuck on the pre dollarization interest rates which have compromised their opinion of real US dollar return.

Globally, economies believe in their systems, which is why when one bank coughs all the other may catch a cold. First world countries have systems so inter dependant that every citizen is somehow concerned about the running of investment banks as their life policies may be bench marked against them and so forth.

Referring back to my opening question of what it takes to be an investment banker, it really is true that there is a lot and a few (excuse the misplacement), that's involved when one looks at being an investment banker. Some charm their way all through to retirement in the field. Some will work their socks off to make it in the field. A contradictory conclusion indeed, but a conclusion all the same.