source: sidbi
The job roles of investment bankers and financial advisors differ based on client distinction. The purpose, job roles and other details vary in both cases. Financial advisors take responsibility when it comes to managing individual finances. At the same time, investment bankers act as bridges between capital markets and corporations.
Read along to learn more about their job descriptions and other differences.
Who Is an Investment Banker?
Financial professionals who deal with corporate offices and governments in case of giving stocks or borrowing money are generally known as investment bankers. They provide client guidance regarding legal documents and share advice based on those. Moreover, they give advice on the risks associated with specific projects.
The following factors fall under their job role:
- Creating financial models for clients based on interest rates, corporate growth rates etc.
- Analysing and creating budgetary models to support the acquisitions.
- Keeping a keen eye on the stock market while meeting the client's preferences.
- Following revised guidelines regularly for corporate and individual financial planning methods.
- Staying updated with changing modifications from SEBI, RBI, and other statutory governmental agencies.
Who Is a Financial Advisor?
People from financial backgrounds helping with the monetary planning of individuals go by the name of a financial advisor. These plans may include getting loans, retirement planning, investment options, tax planning etc. They review clients' expenses, salary descriptions and other financial backgrounds to curve out a monetary chart depending on these factors. A financial advisor's responsibilities are enormous because the client's accounting panorama rests on his hands.
In short, the financial advisor is responsible for the following elements:
- Client’s current financial picture
- Making a planner based on the above
- Asserting the perfect asset for the client
- Minimising tax liability
- Inheritance management
- Keeping the planner updated with the time
Investment Banker Vs Financial Advisor - What Is the Difference?
| Sub Headings | Investment Banker | Financial Advisor |
| Job Roles | Manages investment procedure, including monetary risks, merger and acquisition process and other services that help finish these transactions. | Focuses on providing clients with the best financial advice that meets their needs depending on factors like current salary structure, income prospects, retirement planning, various loans etc. |
| Client Stature | The clients of investment bankers are usually big corporations and governmental institutions. | There is no certain specification for their clients. It can be anyone from average people to retired individuals. |
| Services | Has different departments for underwriting, sales and trading, equity research, asset management, mergers and acquisitions, etc. | They concentrate on your income structure, investment risk factors, financial planning, etc., to come up with the most suitable choice. |
| Fee Structure | Comprises of monthly fees, closing fees and the amount of equity earned throughout the deal. It might also depend on their services. | Mostly they work on commissions from the third party where the clients get their investments. |
Types of Investment Banker:
The vast arena of investment banking can be divided into various types from where investment bankers work. Following is a list of investment banks where people from this field works:
- Bulge Bracket Investment Bankers: It is one of the biggest investment banks where you can get any service. They function internationally and have a greater prominence compared to others investment firms. Furthermore, they have internal divisions: trading, advisory and retail. They carry different responsibilities focusing on equity research, report issuance and financing.
- Elite Boutique Investment Bankers: These are smaller to bulge brackets but the second most popular firms with minor dominance and wealth management. Their expertise lies in giving the best financial advice, but they work with specific banking services. Moreover, compared to their international and national presence, they have less global importance than bulge brackets.
- Mid-market Investment Bankers: Financial institutions offering a complete range of services, including restructuring deals, raising equity etc., are middle-market investment banks. Their expertise is more specific than elite boutique banks, and generally, it is particular sectors or industries. Moreover, despite restricted regional eminence, their services remain similar to bulge bracket banks. Even their deal often goes from low to higher level.
- Regional Boutique Investment Bankers: These are the minor financial institutions limited to regional firms. Hence they have a short circle of specific zonal clients, and their deal size remains restricted to regional limits.
Types of Financial Advisors
The arena of financial advising is vast enough to break it down into smaller pieces. Different advisors focus on other investment options based on their expertise.
- Financial Planner: Helps strategically build clients' monetary charts based on their present financial situation and future goals.
- Investment Representatives: They are usually bank employees focusing mainly on selling investment-related products of their organisation.
- Investment Advisor: Unlike the former, the investment advisor introduces the client to the various investment options in multiple assets.
- Mutual Fund Representative: Recommending and selling mutual funds is their primary concern.
- Personal banker: As the name suggests, these people are generally bank employees selling financial services.
- Fee-only financial advisor: These people depend on client fees for their earnings. Hence, they ensure that the client gets the best financial options that suit their needs and match their economic structure.
- Commission-earning financial advisor: Unlike fee-only financial advisors, they don't charge any fees from clients but instead, sell financial products by taking third part commissions.
- Registered Investment Advisors: They are one of the top and best advisors out there. Numerous investment advisor representatives work under them with a higher designation that proves their expertise.
Which One Is Better Financial Advisor or Investment Banker?
Financial advisors and investment bankers play a significant role in looking after monetary planning and other financial matters. However, certain depending factors like target clients, purposes, job roles, etc., marks their difference. Since they carry unique expertise in their respective domains, the governing factors make them dissimilar. Hence depending on these factors the pros and cons of investment bankers and financial advisors varies.
The differences between an investment banker and a financial advisor thus have more dissimilarity when it comes to practicality. Even though their work looks the same, when it comes to researching, analysing and providing services to the clients, they vary in diverse aspects. While a financial advisor considers your personal decorum, investment bankers ensure that your company profits financially. However, both make sure that you gain profit and have a smooth progression economically.
FAQs on Financial Advisors vs Investment Bankers
Are financial advisors bank employees?
Many banks have financial advisors who suggest and sell investment options to clients. They also provide financial strategies to the consumer to opt for the right one.
Whom to consult to get home loans?
Financial advisors deal with individual monetary planning. They can assist you in applying for a home loan with minor risk factors that match your budgetary limit.
Do banks offer financial advisors?
Financial advisors work with financial institutions as well as independently.
When should I hire an investment banker before selling my business?
Selling a company can be a time consuming and tedious task for many. Having a proficient investment banker for this is advisable to ensure a successful outcome. Hence if you are planning to sell it within 6 to 12 months you should start looking for one immediately. If it is in the next 1 to 5 years or so, you have enough time to hire one.
For what purposes should I hire an investment banker?
You can look for an investment banker while receiving attractive offers from an unsolicited company, if you have too many financial things to handle, an internal transition or expansion of ownership group etc.
